Colonial, Continental and Revolutionary Currency

Continental Currency 1779

Continental Currency 1779
Colonial, Continental and Revolutionary Currency

This article on the Colonial, Continental and Revolutionary Currency describes the history of the different types of currency or money used in Colonial America

  • The History of Colonial, Continental and Revolutionary Currency
  • Facts about Colonial, Continental and Revolutionary Currency
  • Stages of development of Colonial, Continental & Revolutionary Currency
  • Colonial currency issued by each of the 13 colonies
  • Continentals - Continental Congress issuing paper money known as Continental currency
  • Cash Crops instead of Currency
Colonial Congress & Government
American Colonies Index

History of the first 13 Colonies, Colonial Government and Congress

Colonial Currency: Colonial, Continental and Revolutionary Currency

Colonial, Continental and Revolutionary Currency
Early American currency went through several different stages of development in the colonial period before the American revolution, during the revolution and following the American Revolutionary War.
Definition of Currency: Currency is any form of money used as legal tender and a basis for trade.

Colonial Currency
The Definition of Colonial currency: Colonial currency relates to the paper money issued in North America whilst under the rule of Great Britain prior to the American Revolution War, from 1690 to 1774.

Continental Currency - Continentals
The Definition of Continental currency: Continental currency was paper money that was issued by the authority of the Continental Congress during the American Revolutionary War

Revolutionary Currency - The Continentals
Revolutionary money was referred to as 'Continentals' - the paper money issued by the Continental Congress. Coins were so scarce during the period of the American Revolution the 'Continentals' (Revolutionary currency) was the only money in circulation. Anyone refusing to accept the money was branded a traitor.

 

American Revolution - Sons of Liberty

Revolutionary Currency

 

Colonial, Continental and Revolutionary Currency
The history of Colonial, Continental and Revolutionary Currency (Continentals) is very interesting. The early explorers and colonists hoped to find gold and silver in America, just had the Spanish had done in South America. No gold or silver was found in Colonial America but there were many other valuable raw materials such as iron ore, cotton, timber and tobacco. Without the raw materials of gold and silver it was not possible to mint many coins in the thirteen colonies. Foreign coins like the Spanish dollar were widely circulated together with English and French currencies. So the early Americans Americans were forced to use English, Spanish and French money. Silver or gold coins were referred to as 'Hard Currency'.

Colonial, Continental and Revolutionary Currency - Types of Colonial Currency
The thirteen colonies were therefore in the situation where they could print paper money (which did not have the backing of and gold reserves) or engage in trade using raw materials in exchange for goods that were scarce in the colonies. There were therefore 3 common types of currency in the 13 colonies:

  • Commodity currency - Raw materials were exchanged for other goods - no currency or money changed hands
  • Hard Currency or money (gold and silver coins - also called specie)
  • Paper money or currency that was printed in America

Colonial, Continental and Revolutionary Currency - Commodity Currency
Commodities were merchandise that were traded with England rather than bought and sold. The premise of Triangular Trade was that the different colonies would trade goods that they had in abundance in exchange for those goods which were scarce in their own region. Mercantilism revolves around trade. Exports are goods sent for sale outside a colony or country. Imports are goods brought into a colony or country. The farming system of Plantations were based on 'Cash Crops'. Cash crops, as opposed to subsistence crops, were specialized crops such as cotton, rice, sugar, tobacco and indigo that were grown by planters to be sold for profits and not used for personal use on the plantations. Triangular Trade together with the policy of Mercantilism, provided a “favorable balance of trade” so that gold and silver would not flow out of England to purchase raw materials and food from the colonies. As the Colonists brought in much more than they sent out so, the balance of trade was in England's favor. England also prospered because the raw materials from the colonies were used to make different products in England and finished goods have a higher value than raw materials.

Colonial, Continental and Revolutionary Currency - Paper Money
The 13 colonies were short of currency. Colonial governments therefore started to issue paper money to facilitate economic activity in the American colonies. The paper money (paper bills) issued by the governments of the colonies were known as "bills of credit" and were usually issued to pay debts, such as war debts.

Colonial, Continental and Revolutionary Currency - Bills of Credit & Fiat Money
Bills of credit were usually fiat money. What does 'Fiat money' mean? Fiat literally means, let it be done. A Fiat is an order, command, decision, or statute of an authoritative power. The term 'fiat money' is used to mean any money declared by a government to be legal tender. Fiat money were paper notes used as money to finance transactions which were not "backed" by a valuable commodity like gold or silver but were accepted in exchange for goods and services and for the payment of debts and taxes. In Colonial America, fiat money was referred to as Bills of credit - they had no intrinsic value. When colonial governments issued too many bills of credit, or failed to tax them out of circulation, inflation resulted.  This depreciation of colonial currency was harmful to creditors in Great Britain when colonists paid their debts with money that had lost value.

Colonial, Continental and Revolutionary Currency - Bills of Credit & Fiat Money
The Massachusetts Bay Colony issued the first paper money in the American colonies in 1690. The other colonies soon followed in an attempt to meet the high demand for money fueled by trade between the colonies and the scarcity of coin. Bills of credit, fiat money or currency, was therefore issued in all of the 13 colonies. Cash in the colonies was denominated in pounds, shillings and pence, the same as Great Britain, but were of less value than the British pound sterling. In addition, the value varied from colony to colony for example a Massachusetts pound was not equivalent to a Pennsylvania pound. The system of print paper money for currency in the colonies was chaotic. There were no processes in place to ensure consistency between the colonies - some Bills of Credit paid interest, others did not, some prohibited their use to repay debts and only allowed for purchases to be made, some were issued to pay for public debts but not for private use. The British became determined to regulate colonial currency in all of the colonies.

Colonial, Continental & Revolutionary Currency - Britain and Colonial Paper Money
The British government were highly vigilant when overseeing financial matters concerning merchants who were based in Great Britain. Their concerns were with issues involving contracts, debts, and the rates of currency exchange. Their concern regarding these matters led to the passing of various laws and acts regulating the issue of paper money in the American colonies:

  • The 1732 Debt Recovery Act which declared land and slaves to be the equivalent of property for the purpose of satisfying debts owed by colonists to the British
  • The Currency Acts: The Currency Act of 1751 was passed to limit the colonies printing their bills of credit. The Currency Act of 1764 prohibited the issue of any new 'Bills of Credit' and the re-issue of existing currency by the American colonists
  • The Stamp Act Stamps had to be paid with 'hard currency' (silver or gold coins) and not in paper money
  

Colonial America - The Land of the Brave

  

Revolutionary Currency - The Continentals
The Revolutionary war erupted and a form of Revolutionary Currency, paper money, called the Continentals were produced in 1775. The Continental Congress  needed a form of Revolutionary Currency to finance the Revolutionary War.
The paper money was backed by the "anticipation" of tax revenues. The monetary policy of the Continental Congress was not coordinated with the colonies which continued to issue bills of credit. And, without the solid backing of gold and silver coin and the problem of the money being easily counterfeited, the Continentals quickly became devalued. The collapse of the Continentals was inevitable. By May 1781, Continentals had become so worthless that they ceased to circulate as money.

Colonial, Continental and Revolutionary Currency - Benjamin Franklin
The problem of the counterfeiting of Revolutionary Currency was well known to Benjamin Franklin. Benjamin Franklin's printing firm in Philadelphia and in 1739 had printed colonial paper money with nature prints. This form of colonial currency was unique applying raised impressions of patterns cast from actual leaves which had been an effective counterfeit deterrent to paper money. This technique was applied to the Continentals.

Benjamin Franklin printed currency sheet-1779

Benjamin Franklin printed currency sheet - 1779

Colonial, Continental and Revolutionary Currency
In 1782 the Continental Congress appointed Robert Morris to be Superintendent of Finance of the United States. In 1782 Robert Morris was instrumental in the creation of the first financial institution chartered by the United States, the Bank of North America. The Bank of North America was funded in part by specie (gold and silver coin) loaned to the United States by France. Robert Morris helped finance the final stages of the Revolutionary War by issuing paper money in his name, backed by his own money. The Bank of North America also issued notes convertible into specie (gold and silver coin). The escalating inflation and the collapse of the Continental currency prompted the delegates to the Constitutional Convention to include the gold and silver clause into the United States Constitution so that the individual states could not issue bills of credit (fiat money), or "make any Thing but gold and silver Coin a Tender in Payment of Debts."

  

Colonial, Continental and Revolutionary Currency

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Colonial America - The Land of the Brave

 

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