Seventeen Talks on the Banking Question / Between Uncle Sam and Mr. Farmer, Mr. Banker, Mr. Lawyer, Mr. Laboringman, Mr. Merchant, Mr. Manufacturer

by Charles N. Fowler

Mr. Manufacturer: Good for you, Mr. Merchant, that statement has the right ring to it. The greenback is guilty of every one of the charges that you make from my point of view, and so it must always be with every Government issue of money.

You may go back to the very first Government issue of paper money in this country, and follow the practice down to this very hour, and it has left a trail of dishonesty, disaster, ruin and misery unmatched by any other single cause. In my contention for this statement I am going to rely for my historical facts upon George Bancroft, the greatest American historian of our earlier period.

In the fall of 1690, upon the return of an unsuccessful expedition which Massachusetts had sent out to capture Quebec, the general court, the then legislative power, ordered an issue of "£7,000 ($35,000) of printed bills of equal value with money." And the balance of the cost which was £40,000 or $200,000 was issued the following day.

In July, 1692, within nineteen months of the earliest emission, the first legislature under the new charter which transformed the self-governing colony of Massachusetts Bay into a direct dependency of Great Britain, made "all these bills of public credit current within this province in all payments equivalent to money, excepting specialties and contracts made before the publication" of this new law. Their credit was supported by receiving them in all public payments at a premium of 5 per cent.

Immediately all the coins then in Massachusetts were exported to England and the new stock followed as fast as it came in from abroad. The vain sorrow of the province expressed itself in 1697 by the prohibition of "the export of coin, silver money or bullion." In June, a joint committee of the Council and representatives, to be aided by the advice of merchants and others, was appointed to consider how to revive trade, and find out some suitable medium to supply the scarcity of "money"; and it is to be noted that the word "money" in all colonial legislation was used exclusively for gold and silver coin.

The first issue of Bills of Credit of Massachusetts, after it became a Royal Province, was in November, 1702, for £10,000 in value "equal to money," but to be accepted in all public payments at the advance of 5 per cent.

The passion for borrowing spread like flame on the dry prairie. In November, 1714, Massachusetts ordered £50,000 to be let out by trustees to the inhabitants of the province for five years on real security, at 5 per cent per annum, to be paid back in five annual installments. The Act was a sacrifice of the public interests to borrowers, who were to return their loan only after a lapse of time, sufficient to insure the very great depreciation of the paper in which it was to be paid. Moreover, the borrowers needed an enforcement by law of the circulation of the paper which they borrowed: swiftly, therefore, in December, 1715, under a pretext "to prevent the oppression of debtors" a stringent statute made the bills legal tender for all debts that had been, or should be contracted, between the 30th of October, 1705, and the 30th of October, 1722.

The loan of Bills of Credit by Massachusetts in 1714 was managed at the seat of Government. But why should Boston be favored? "That the husbandry, fishery and other trades of the province might be encouraged and promoted," Bills of Credit on the province to the amount of £100,000 were in 1716 ordered to be distributed to a loan office in each county. But why should borrowers in the smaller townships be forced to travel to their shire towns? Let a public money lender be near every man's door. By the statute of March, 1721, £50,000 were distributed among borrowers in each of the several towns according to its proportion in the last province tax. Again in 1728, £60,000 in Bills of Credit were proportionately loaned among the several towns, even on personal security, at the rate of 6 per cent for six years, after which repayment was to be made in five yearly installments. Of course, "money" disappeared; not even a single penny was to be had; the small change became of paper.

The next development of the colonial system of paper money was a partial repudiation, so far as Massachusetts was concerned. In February, 1737, less than forty-seven years after the first emission of Bills of Credit by Massachusetts, that colony issued £9,000 of a new tenor of which one dollar was to be equal to three of the old, and which, after five years, was to be redeemed at par in silver and gold. When the time of redemption came around they were not paid off, but by a further repudiation four pounds for one was made the rate in exchanging the old tenor for the new.

On the 9th of January, 1739, the general court in Massachusetts made this confession: "The emissions of great quantities of bills of public credit, without certain provision for their redemption by lawful money in convenient time, have already stripped us of all our money and brought them into contempt to the great scandal of the government; for the remedy thereof this province hath fixed the value of their bills in lawful money, and the time of their redemption in 1742 new style."