A Collection of Essays and Fugitiv Writings / On Moral, Historical, Political, and Literary Subjects

by Noah Webster

The advantages the colonies had derived from bills of credit, under the British government, suggested to Congress, in 1775, the idea of issuing bills for the purpose of carrying on the war. And this was perhaps their only expedient. Money could not be raised by taxation; it could not be borrowed. The first emissions had no other effect upon the medium of commerce, than to drive the specie from circulation. But when the paper substituted for specie, had, by repeated millions, augmented the sum in circulation, much beyond the usual sum of specie, the bills began to lose their value. The depreciation continued in proportion to the sums emitted, until seventy, and even one hundred and fifty nominal paper dollars, were hardly an equivalent for one Spanish milled dollar. Still from the year 1775 to 1781, this depreciating paper currency was almost the only medium of trade. It supplied the place of specie, and enabled Congress to support a numerous army; until the sum in circulation amounted to two hundred millions of dollars. But about the year 1780, specie began to be plentiful, being introduced by the French army, a private trade with the Spanish islands, and an illicit intercourse with the British garrison at New York. This circumstance accelerated the depreciation of the paper bills, until their value had sunk almost to nothing. In 1781, the merchants and brokers in the southern States, apprehensiv of the approaching fate of the currency, pushed immense quantities of it suddenly into New England, made vast purchases of goods in Boston, and instantly the bills vanished from circulation.

The whole history of this continental paper is a history of public and private frauds. Old specie debts were often paid in a depreciated currency, and even new contracts for a few weeks or days were often discharged with a small part of the value received. From this plenty and fluctuating state of the medium, sprung hosts of speculators and itinerant traders, who left their honest occupations for the prospect of immense gains, in a fraudulent business, that depended on no fixed principles, and the profits of which could be reduced to no certain calculations.

To increase these evils, a project was formed to fix the prices of articles, and restrain persons from giving or receiving more for any commodity than the price stated by authority. These regulating acts were reprobated by every man acquainted with commerce and finance; as they were intended to prevent an effect without removing the cause. To attempt to fix the value of money, while streams of bills were incessantly flowing from the treasury of the United States, was as ridiculous as an attempt to restrain the rising of water in rivers amidst showers of rain.

Notwithstanding all opposition, some States framed and attempted to enforce these regulating acts. The effect was, a momentary apparent stand in the price of articles; innumerable acts of collusion and evasion among the dishonest; numberless injuries done to the honest; and finally a total disregard of all such regulations, and the consequential contempt of laws and the authority of the magistrate.

During these fluctuations of business, occasioned by the variable value of money, people lost sight, in some measure, of the steady principles which had before governed their intercourse with each other. Speculations followed and relaxed the rigor of commercial obligations.

Industry likewise had suffered by the flood of money which had deluged the States. The prices of produce had risen in proportion to the quantity of money in circulation, and the demand for the commodities of the country. This made the acquisition of money easy, and indolence and luxury, with their train of desolating consequences, spread themselves among all descriptions of people.

But as soon as hostilities between Great Britain and America were suspended, the scene was changed. The bills emitted by Congress had long before ceased to circulate; and the specie of the country was soon drained off to pay for foreign goods, the importations of which exceeded all calculation. Within two years from the close of the war, a scarcity of money was the general cry. The merchants found it impossible to collect their debts, and make punctual remittances to their creditors in Great Britain; and the consumers were driven to the necessity of retrenching their superfluities in living and of returning to their ancient habits of industry and economy.

This change was however progressiv and slow. In many of the States which suffered by the numerous debts they had contracted, and by the distresses of war, the people called aloud for emissions of paper bills to supply the deficiency of a medium. The depreciation of the continental bills, was a recent example of the ill effects of such an expedient, and the impossibility of supporting the credit of paper, was urged by the opposers of the measure as a substantial argument against adopting it. But nothing would silence the popular clamor; and many men of the first talents and eminence, united their voices with that of the populace. Paper money had formerly maintained its credit, and been of singular utility; and past experience, notwithstanding a change of circumstances, was an argument in its favor that bore down all opposition.

Pensylvania, although one of the richest States in the union, was the first to emit bills of credit, as a substitute for specie. But the revolution had removed the necessity of it, at the same time that it had destroyed the means by which its former credit had been supported. Lands, at the close of the war, were not rising in value; bills on London could not so readily be purchased, as while the province was dependent on Great Britain; the State was split into parties, one of which attempted to defeat the measures most popular with the other; and the depreciation of continental bills, with the injuries which it had done to individuals, inspired a general distrust of all public promises.

Notwithstanding a part of the money was loaned on good landed security, and the faith of that wealthy State pledged for the redemption of the whole at its nominal value, yet the advantages of specie as a medium of commerce, especially as an article of remittance to London, soon made a difference of ten per cent. between the bills of credit and specie. This difference may be considered rather as an appreciation of gold and silver, than a depreciation of paper; but its effects, in a commercial State, must be highly prejudicial. It opens the door to frauds of all kinds, and frauds are usually practised on the honest and unsuspecting, especially upon all classes of laborers.