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The fifth reason is, "That debtors, in the Assemblies, make paper money with fraudulent views." This is often said by the adversaries of paper money, and, if it has been the case in any particular colony, that colony should, on proof of the fact, be duly punished. This, however, would be no reason for punishing other colonies, who have not so abused their legislative powers. To deprive all the colonies of the convenience of paper money, because it has been charged on some of them, that they have made it an instrument of fraud, is as if all the India, bank, and other stocks and trading companies were to be abolished, because there have been, once in an age, Mississippi and South Sea schemes and bubbles.
The sixth and last reason is, "That in the middle colonies, where the paper money has been best supported, the bills have never kept to their nominal value in circulation; but have constantly depreciated to a certain degree, whenever the quantity has been increased." If the rising of the value of any particular commodity, wanted for exportation, is to be considered as a depreciation of the values of whatever remains in the country; then the rising of silver above paper to that height of additional value, which its capability of exportation only gave it, may be called a depreciation of the paper. Even here, as bullion has been wanted or not wanted for exportation, its price has varied from 5s. 2d to 5s. 8d. per ounce. This is near ten per cent. But was it ever said or thought on such an occasion, that all the bank bills, and all the coined silver, and all the gold in the kingdom, were depreciated ten per cent 1 Coined silver is now wanted here for change, and one per cent is given for it by some bankers; are gold and bank notes therefore depreciated one per cent?
The fact in the middle colonies is really this. On the emission of the first paper money, a difference soon arose between that and silver; the latter having a property the former had not, a property always in demand in the colonies, to wit, its being fit for a remittance. This property having soon found its value by the merchants bidding on one another for it, and a dollar thereby coming to be rated at eight shillings in paper money of New York, and 7s. 6d. in paper of Pennsylvania, it has continued uniformly at those rates in both provinces now near forty years, without any variation upon new emissions; though in Pennsylvania the paper currency has at times increased from £15,000 the first sum, to £600,000, or near it. Nor has any alteration been occasioned, by the paper money, in the price of the necessaries of life, when compared with silver. They have been for the greatest part of the time no higher than before it was emitted; varying only by plenty and scarcity, according to the seasons, or by a less or greater foreign demand. It has indeed been usual, with the adversaries of a paper currency, to call every rise of exchange with London a depreciation of the paper; but this notion appears to be by no means just; for, if the paper purchases every thing but bills of exchange at the former rate, and these bills are not above onetenth of what is employed in purchases, then it may be more properly and truly said, that the exchange has risen, than that the paper has depreciated. And, as a proof of this, it is a certain fact, that, whenever in those colonies bills of exchange have been dearer, the parchaser has been constantly obliged to give more in silver, as well as in paper, for them; the silver having gone hand in hand with the paper, at the rate above mentioned; and therefore it might as well have been said, that the silver was depreciated.
There have been several different schemes for furnishing the colonies with paper money, that should not be a legal tender, viz.
1. To form a bank, in imitation of the Bank of England, with a sufficient stock of cash to pay the bills on sight.
This has been often proposed, but appears impracticable, under the present circumstances of the colony trade; which, as is said above, draws all the cash to Britain, and would soon strip the bank.
2. To raise a fund by some yearly tax, securely lodged in the Bank of England as it arises, which should (during the term of years for which the paper bills are to be current) accumulate to a sum sufficient to discharge them all at their original value.
This has been tried in Maryland; and the bills so funded were issued without being made a general legal tender. The event was, that, as notes payable in time are naturally subject to a discount proportioned to the time, so these bills fell at the beginning of the term so low, as that twenty pounds of them became worth no more than twelve pounds in Pennsylvania, the next neighbouring province; though both had been struck near the same time, at the same nominal value, but the latter was supported by the general legal tender. The Maryland bills, however, began to rise as the term shortened, and towards the end recovered their full value. But, as a depreciating currency injures creditors, this injured debtors; and, by its continually changing value, appears unfit for the purpose of money, which should be as fixed as possible in its own value; because it is to be the measure of the value of other things.
3. To make the bills carry an interest sufficient to support their value.
This too has been tried in some of the New England colonies; but great inconvenience was found to attend it. The bills, to fit them for a currency, are made of various denominations; and some very low, for the sake of change; there are of them from .£10 down to 3d. When they first come abroad, they pass easily, and answer the purpose well enough for a few months; but, as soon as the interest becomes worth computing, the calculation of it on every little bill, in a sum between the dealer and his customers in shops, warehouses, and markets, takes up much time, to the great hinderance of business. This evil, however, soon gave place to a worse; for the bills were in a short time gathered up and hoarded; it being a very tempting advantage to have money bearing interest, and the principal all the while in a man's power, ready for bargains that may offer; which money out on mortgage is not . By this means numbers of people became usurers with small sums, who could not have found persons to take such sums of them upon interest, giving good security; and would therefore not have thought of it; but would rather have employed the money in some business, if it had been money of the common kind. Thus trade, instead of being increased bj' such bills, is diminished; and, by their being shut up in chests, the very end of making them (viz. to furnish a medium of commerce) is in a great measure, if not totally, defeated. *
* I understand that Dr. Franklin is the friend who assisted Governor Pownall in drawing up a plan for a general paper currency for America, to be established by the British government . See Pownall's Administration of the Colonies, 5th edition, pp. 199, 208. — B. V.
The paper money first issued by the colonial Assemblies was made a legal tender. The excessive issues in some of the colonies caused a great depreciation in the value of the bills, and thus produced mischievous consequences. To remedy the evil, an act of Parliament was passed, prohibiting the colonies from issuing any more paper money, which should be a legal tender. At the same time that this act removed one difficulty, it raised up another. In the fluctuating state of things in the colonies, the credit of the bills could not be sustained in any degree, unless the people were required to take, them at their actual value. It then became a matter of importance, that Parliament should provide some means for giving stability to a paper currency in the colonies. Governor Pownall,
VOL. II. 45 DD
On the whole, no method has hhheno been formed to establish a medium of trade, in Ken of money, equal, in Jjj its advantages, to bills of credit, funded on sufficient taxes for discharging h, or on land security of double the value for repaying i t at the end of the term, and in the mean time made a General Legal Texdek. The experience of now near half a century in the middle colonies, has convinced them of it among themselves, by the great increase of their settlements, numbers, buildings, improvements, agriculture, shipping, and commerce. And the same experience has satisfied the British merchants, who trade thither, that it has been greatly useful to them, and not in a single instance prejudicial .
It is therefore hoped, that, securing the full discharge of British debts, which are payable here, and in all justice and reason ought to be fully discharged here, in sterling money, the restraint on the legal tender within the colonies will be taken off; at least for those colonies that desire it, and where the merchants trading to them make no objection to it .
in conjunction with Dr. Franklin, proposed a plan for this object . Speaking of this proposal, Governor Pownall says. "So far am I from assuming any merit in the invention or framing' of it, that I desire it may be considered as founded on what hath been actually practised in Pennsylvania, by the good sense and good policy of the Assembly of that province, with success and with benefit to the public ; that the particular proposal, as it is now formed, and applied to the present exigencies of America and Great Britain, was drawn up some years ago, in conjunction with a friend of mine, and of the colonies. It was, by us, jointly proposed to government, under successive administrations, in the years 1764,1765, 17<ifl, during which time the publication was suspended."
The principal outlines of this plan were, that bills of credit to a certain amount should be printed in England, for the use of the colonies; that a loan-office should be erected in each colony to issue bills, take securities, and receive the payments; that the bills should be issued for ten years, bearing interest at five per cent, one tenth part of the sum borrowed to be paid annually, with the interest; and that they should be a legal tender.— Editor.