However fit [bitterly declared Franklin in the pamphlet, to which we have just referred], a particular Thing may be for a particular Purpose, wherever that Thing is not to be had, or not to be had in sufficient Plenty, it becomes necessary to use something else, the fittest that can be got, in lieu of it.
In America, this undoubtedly was a paper currency, even though issued as real, and not representative, money. At times, in the history of the Colonies, it worked much pecuniary loss and debasement of morals, but, makeshift as it was, it was the best makeshift that the situation of the Colonies allowed; and, when New England petitioned for the Act of Parliament, depriving it of the legal-tender quality within her limits, it was only, Franklin contended, because the close intercourse between the four provinces, of which she was constituted, and the large supply of hard money, derived by her from her whale and cod fisheries, took the sting out of the act. But, when the act was afterwards extended to the other colonies, it became a real grievance, and, as such, was stated by Franklin, in his examination before the House of Commons, to be one of the causes, which had lessened the respect of the Colonies for Parliament. "It seems hard therefore," he said in the paper just mentioned, "to draw all their real Money from them, and then refuse them the poor Privilege of using Paper instead of it." In the same essay, the circumstances, in which the need for a paper currency in the Colonies originated, are stated in his perspicuous manner: "The Truth is, that the Balance of their Trade with Britain being generally against them, the Gold and Silver is drawn out to pay that Balance; and then the Necessity of some Medium of Trade has induced the making of Paper Money, which could not be carried away."
In his capacity as colonial agent, Franklin earnestly strove to secure the repeal of the British legislation, forbidding the use of paper money in the Colonies as a legal tender, and he even enlisted for this purpose the aid of a large body of London merchants, engaged in the American trade, but his efforts met with slight success. Some of the members of the Board of Trade, who had united in recommending the restraint upon colonial paper money, were, it was said, at the time in the state of mind of Soame Jenyns, who had laughingly declared, when he was asked as a member of the Board to concur in some measure, "I have no kind of objection to it, provided we have heretofore signed nothing to the contrary."[45] Worse still, Grenville threw out the chilling suggestion in the House of Commons that Great Britain should make the paper money for the Colonies, issue it upon loan there, take the interest and apply it as Parliament might think proper.[46] This suggestion, and the interest excited by it led to a letter from Franklin to Galloway in which he said that he was not for applying again very soon for a repeal of the restraining act. "I am afraid," he remarked, "an ill use will be made of it. The plan of our adversaries is to render Assemblies in America useless; and to have a revenue independent of their grants, for all the purposes of their defence, and supporting governments among them."
These comments were followed by the suggestion that the Pennsylvania Assembly might be petitioned by the more prominent citizens of Pennsylvania to authorize a moderate emission of paper money, though without the legal-tender feature; the petition to be accompanied by a mutual engagement upon the part of the petitioners to take the money in all business transactions at rates fixed by law. Or, perhaps, Franklin said, a bank might be established that would meet the currency needs of the community. In any event, should the scarcity of money continue, they would rely more upon their own industrial resources, to the detriment of the British merchant, and by keeping in Pennsylvania the real cash, that came into it, would, in time, have a quantity sufficient for all their occasions. The same thought, tinged with a trace of resentment, emerges in one of his letters to Lord Kames:
As I think a scarcity of money will work with our other present motives for lessening our fond extravagance in the use of the superfluous manufactures of this country, which unkindly grudges us the enjoyment of common rights, and will tend to lead us naturally into industry and frugality, I am grown more indifferent about the repeal of the act, and, if my countrymen will be advised by me, we shall never ask it again.[47]
The relations sustained by Franklin to the Continental paper currency we have already seen. There was an apparent element of inconsistency in his suggestion that it should bear interest; for interest-bearing bills, he had contended in his Remarks and Facts Concerning American Paper Money, were objectionable as currency, because it was tedious to calculate interest on one of them, as often as it changed hands, and also because a distinct advantage was to be gained by hoarding them.
The Continental bills depreciated so rapidly that in 1777 the price of a bushel of salt at Baltimore was nine pounds. Three years later, the price of a yard of cassimere in America was $300, and of a yard of jean and habit cloth $60. Inflated as the bills were, Franklin with his cheerful habit of mind was not at a loss to say a good word for them. There was some advantage to the general public, at any rate, he wrote to Stephen Sayre, in the facility with which taxes could be paid off with the depreciated paper. Congress, he wrote to Dr. Cooper, had blundered in not earlier adopting his suggestion that the interest on the bills should be paid in real money.
The only Remedy now [he said] seems to be a Diminution of the Quantity by a vigourous Taxation, of great nominal Sums, which the People are more able to pay, in proportion to the Quantity and diminished Value; and the only Consolation under the Evil is, that the Publick Debt is proportionably diminish'd with the Depreciation; and this by a kind of imperceptible Tax, everyone having paid a Part of it in the Fall of Value that took place between his receiving and Paying such Sums as pass'd thro' his hands.
In this same letter, Franklin declared that it was a mystery to foreign politicians how America had been able to continue a war for four years without money, and how it could pay with paper that had no previously fixed fund appropriated specifically to redeem it. "This Currency, as we manage it," he said, "is a wonderful Machine. It performs its Office when we issue it; it pays and clothes Troops, and provides Victuals and Ammunition; and when we are obliged to issue a Quantity excessive, it pays itself off by Depreciation." The paper he subsequently wrote to Thomas Ruston had really operated as a tax, and was perhaps the most equal of all taxes, since it depreciated in the hands of holders of money, and thereby taxed them in proportion to the sums they held and the time they held them, which generally was in proportion to men's wealth.
All this, of course, was but making the best of a pis-aller. Franklin in a sense held a brief for paper money all his life, because, during almost his whole life, his country had to put up with paper money, whether she wanted to do so or not. When the Revolutionary War was over, he could be less of an advocate, and more of a judge with respect to such money; and the change is neatly illustrated in the words that he wrote from Philadelphia to the Duc de la Rochefoucauld in 1787. "Paper money in moderate quantities has been found beneficial; when more than the occasions of commerce require, it depreciated and was mischievous; and the populace are apt to demand more than is necessary."