Is Paper Money Just Paper Money? Experimentation and Variation in the Paper Monies Issued by the American Colonies from 1690 to 1775

Abstract

The British North American colonies were the first western economies to rely on legislature-issued paper monies as an important internal media of exchange. This system arose piecemeal. In the absence of banks and treasuries that exchanged paper monies at face value for specie monies on demand, colonial governments experimented with other ways to anchor their paper monies to real values in the economy. These mechanisms included tax-redemption, land-backed loans, sinking funds, interest-bearing notes, and legal tender laws. The structure and performance of these mechanisms are explained and assessed. This was monetary experimentation on a grand scale.

Colonial New Jersey Paper Money, 1709–1775: Value Decomposition and Performance

“…For a given emission of bills, redemption was legislated to take place over a window of years. A multi-year redemption system was used to keep the amount of annual redemption payments within historically New Jersey, however, legislated no mechanisms to determine which bills would be redeemed in which years within the redemption window legislatively designated for those bills (Grubb 2015 New Jersey bills in circulation each year (M i ) and the amounts redeemed (RED i ) each year as shown in Farley Grubb (2015, pp. 15-16, 24).…”

“…In 1719, the legislature moved to enforce tax payments. The bills were eventually redeemed in 1724 (Grubb 2015;Kemmerer 1940, pp. 107-13).…”

“…NJ paper money act disallowance of a paper money act passed by the New Jersey assembly. New Jersey did not succeed in emitting new paper money until 1755 (Grubb 2015;Kemmerer 1940, pp. 211-21).…”

Colonial Virginia's paper money regime, 1755–74: A forensic accounting reconstruction of the data

“…Budgetary crises caused by wars typically pushed colonies into paper money systems (Grubb 2016). Virginia did not face such a crisis until the Seven Year's War.…”

Common Currency versus Currency Union: The U.S. Continental Dollar and Denominational Structure, 1775-1776

“…The exigencies of war meant that even with the removal of British restrictions, banks were unlikely to form during the Revolution. The Bank of North America, chartered in 1781, was the first successful U.S. bank(Grubb 2016; Hammond 1991, pp. 3-67).4…”