3. To make the bills carry an interest sufficient to support their value.
This too has been tried in some of the New England colonies; but great inconveniencies were found to attend it. The bills, to fit them for a currency, are made of various denominations, and some very low, for the sake of change; there are of them from 10l. down to 3d. When they first come abroad, they pass easily, and answer the purpose well enough for a few months; but as soon as the interest becomes worth computing, the calculation of it on every little bill in a sum between the dealer and his customers, in shops, warehouses and markets, takes up much time, to the great hindrance of business. This evil, however, soon gave place to a worse; for the bills were in a short time gathered up and hoarded; it being a very tempting advantage to have money bearing interest, and the principal all the while in a man's power, ready for bargains that may offer; which money out on mortgage is not. By this means numbers of people became usurers with small sums, who could not have found persons to take such sums of them upon interest, giving good security; and would therefore not have thought of it; but would rather have employed the money in some business, if it had been money of the common kind. Thus trade, instead of being increased by such bills, is diminished; and by their being shut up in chests, the very end of making them (viz. to furnish a medium of commerce) is in a great measure, if not totally defeated.
On the whole, no method has hitherto been formed to establish a medium of trade, in lieu of money, equal in all its advantages, to bills of credit—funded on sufficient taxes for discharging it, or on land-security of double the value for repaying it at the end of the term; and in the mean time, made a GENERAL LEGAL TENDER. The experience of now near half a century in the middle colonies has convinced them of it among themselves; by the great increase of their settlements, numbers, buildings, improvements, agriculture, shipping, and commerce. And the same experience has satisfied the British merchants, who trade thither, that it has been greatly useful to them, and not in a single instance prejudicial.
It is therefore hoped, that securing the full discharge of British debts, which are payable here, and in all justice and reason ought to be fully discharged here in sterling money; the restraint on the legal tender within the colonies will be taken off; at least for those colonies that desire it, and where the merchants trading to them make no objection to it[56].
FOOTNOTES:
[55] The best account I can give of the occasion of the Report, to which this paper is a reply, is as follows. During the war there had been a considerable and unusual trade to America, in consequence of the great fleets and armies on foot there, and the clandestine dealings with the enemy, who were cut off from their own supplies. This made great debts. The briskness of the trade ceasing with the war, the merchants were anxious for payment, which occasioned some confusion in the colonies, and stirred up a clamour here against paper-money. The board of trade, of which lord Hilsborough was the chief, joined in this opposition to paper-money, as appears by the report. Dr. Franklin being asked to draw up an answer to their report, wrote the paper given above. B. V.
[56] I understand that Dr. Franklin is the friend who assisted governor Pownall in drawing up a plan for a general paper-currency for America, to be established by the British government. See Governor Pownall's Administration of the Colonies, 5th Edition, p. 199, and 208. B. V.
[To the Freemen of Pensylvania, on the Subject of a particular Militia-Bill, rejected by the Proprietor's Deputy or Governor.]
Philadelphia, Sept. 28, 1764.