South Carolina, too, as late as 1785, permitted itself to be persuaded to lend among the constituents of its legislature £100,000 in paper bills of the state, which were to pass in payments to the treasury of the state but were not otherwise made legal tender. The state soon perceived that the paper banished more gold and silver than the amount of the bills which were to take their place.... This was done, although its legislature on the pretext of creating a fund to sink former Bills of Credit, and to encourage trade and commerce in July, 1712, had ordered £52,000 in new bills of credit to be stamped and put out at interest in loans. In December, 1717, they passed this statute: "It is found by experience that the multiplicity of the Bills of Credit hath been the cause of the ruin of our trade and commerce, and hath been the great evil of this province, and that it ought with all expedition to be remedied."
Finally, the great Empire State, with all the rest, entered eagerly into the defense of its northern frontier, and in November, 1709, for the first time involved itself in the use of Bills of Credit. In 1770, the legislature of New York passed an Act for emitting £120,000 in Bills of Credit to be put out on loan. Again in April, 1786, the opening year of the final great movement for a closer union of the state, it placed an emission of £200,000 in Bills of Credit with loan officers, to be loaned on mortgage security; and they were made a legal tender in any suit for debt or damages, and the costs of suit. The bills were further to be received for duties to be collected at the Port of New York by the state. Gen. MacDougal, the brave soldier and patriot, though sick unto death, insisted upon being carried to the Senate, that, as the last act of his public life, he might give his voice against the proposal to emit paper money.
In 1780, the United States began repudiation by issuing a new paper dollar equal to forty of their previous issues. After their new constitution was established, all that remained of the bills of the Continental Congress were called in at the rate of one dollar in silver for one hundred dollars impressed on paper.
Mr. Farmer: While you gentlemen were studying Bancroft, I have been reading Horace White upon this question of Government issues of money, and thought I would not give myself away until after you exposed your hands. You've piled up facts, but you've given us a very slight impression of the effect that these money issues had, and therefore I am going to give you the benefit of my explanation which I think throws another and very important light upon the subject.
Mr. White refers to a pamphlet circulated in 1743, which speaks of the Bills of Credit in New England issued on loan "to themselves, members of the legislature and to other borrowers, their friends, at easy and fallaceous Lays, to be repaid at very long Periods; and by their provincial laws made a tender in all contracts, trade and business, whereby currencies, various and illegal, have been introduced which from their continued and depreciated nature in the course of many years, have much oppressed widows and orphans and all other creditors."
The same writer gives special attention to the colony of Rhode Island, which had "defrauded more in a few years than any of the most wicked administrations in the several nations of Europe have done in several centuries. A contract made thirty years ago for £100,000 sterling in value is at present reduced to a nominal 32 shillings."
White says that in addition to legal tender acts there was a great variety of laws to compel people to sell their property at the same price for bills of credit as for silver. The debtor class was not satisfied with forcing depreciated paper upon creditors for past obligations, but insisted that they ought to be able to buy as much property with the paper as with specie. Those who had been forced to take the paper for past debts naturally joined in this demand, and the legislatures agreed with them. Hence we find in nearly all the colonies severe penalties on those who charged more for their goods, lands or services in Bills of Credit than in money. In some cases the penalty was a fine, in others imprisonment, in others confiscation of property offered.
The usual course of events where Bills of Credit were issued was as follows: (1) emission; (2) disappearance of specie; (3) counterfeiting; (4) wearing out of bills; (5) calling in and replacing worn and counterfeited issues with new ones; (6) extending the time for old ones to run, especially those which had been placed on loan; (7) depreciation; (8) repudiation of early issues in part and the emissions of others called "New Tenor."
Dr. Douglas says that Massachusetts had at one time "old tenor, middle tenor, new tenor first, new tenor second." Rhode Island had an indefinite number of tenors.
All sorts of opprobrious epithets were heaped upon them. They were called invidious statutes, old, worn, torn, tattered, shattered, ragged, mutilated, defaced, obliterated, illegible and "unfit to pass."