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The Significance of Unaccounted Currencies

Published online by Cambridge University Press:  03 March 2009

Richard H. Timberlake Jr
Affiliation:
Professor of Finance, College of Business Administration, University of Georgia, Athens, Georgia 30602.

Abstract

This paper uses numismatic sources to estimate the volume of unaccounted currency issued during the middle two quarters of the nineteenth century. “Unaccounted currency” includes any currency issued by private business firms and by municipal and state governments. This money, unlike state bank notes and deposits and federal government currencies, was issued illegally, and not recorded in conventional statistical sources. Exact quantification, therefore, is next to impossible. The principal significance of this phenomenon is the credibility it gives to private competitive issues of money.

Type
Articles
Copyright
Copyright © The Economic History Association 1981

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References

1 United States Constitution, Article I, Section 10.Google Scholar

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4 The following accounts give a comprehensive picture of the nineteenth century monetary system in the United States: Friedman, Milton and Schwartz, Anna Jacobson, A Monetary History of the United States, 1867–1960, NBER (Princeton, 1963),Google ScholarFriedman, and Schwartz, , Monetary Statistics of the United States, Estimates, Sources, Methods (New York, 1970),Google ScholarHammond, Bray, Banks and Politics in America from the Revolution to the Civil War (Princeton, 1957),Google ScholarHepburn, Alonzo Barton, A History of Currency in the United States, revised edition (New York, 1924).Google Scholar

5 For a more detailed analysis of this process, see Timberlake, Richard H. Jr, Origins of Central Banking in the United States, (Cambridge, 1978), pp. 126–31.Google Scholar The phenomenon of unaccounted money—its innovation, existence, and gradual disappearance—would not presuppose that other factors affecting the secular velocity of money were obsent. The “other factors” usually associated with the downward trend in velocity during the nineteenth century include: (1) The shift from agricultural production to manufacturing (rural to urban economy); (2) The increase in the proportion of output passing through markets; (3) The increase in real income over time, with money seen as a “superior” good; and (4) Sophistication in the use of money.

6 Hurst, James Willard, A Legal History of Money in the United States, 1774–1970 (Lincoln, Nebraska, 1973), p. 143.Google Scholar

7 Ibid., p. 141. The Briscoe case questioned whether a bank wholly owned by the state was not simply an agency of the state, and thus was issuing notes as prohibited by the Constitution. In arguing the negative to this question, Justice McLean stated that the notes were issued on the basis of credit the bank granted to its debtors, who were also note holders. In addition, the bank had enough specie reserves to redeem its obligations. The political power of the State of Kentucky thus was not an element in the bank's monetary functions.

8 Dunne, Gerald T., Monetary Decisions of the Supreme Court (New Brunswick, New Jersey, 1960), pp. 3741. By implication, the money-creating powers that the Constitution forbade the states were also forbidden the federal government.Google Scholar

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22 Ibid., pp. 3–5.

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25 Ibid. As far as I can discover, the terms “scrip” and “shinplaster” have almost identical meanings. “Scrip” is defined as “paper money issued for temporary emergency use.” It is influenced by “scrip” and “subscription receipt, and issued as evidence of an obligation to pay.” The term “shinplaster” is “paper currency issued privately.” It is derived from “the comparison of such notes to small squares of brown paper soaked with vinegar or tobacco juice and used by poor people to treat sore legs.” See Webster's Third New International Dictionary (1976).Google Scholar

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32 Muscalus, Transportation Currency: Bank Notes and Scrip Representative of Forty-five Varieties of Transportation Companies (1974).Google Scholar The existing notes found in collections cited here are not necessarily representative of all the notes originally issued. The smaller and fractional denominations received the most wear and tear from handling and thus had lesser chance of survival. Muscalus states at one point that “the actual number of different denominations and varieties of some denominations is much greater than can be assumed from just the titles shown for Mississippi, Georgia and Louisiana.” See Muscalus, Railroad Currency: Bank Notes and Scrip Representative of Over One Hundred Railroads, 1830s to 1900s (1971).Google Scholar

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44 Ibid., p. 71.

45 Ibid., p. 72.

46 A well-understood principle of law enforcement is that a law universally broken cannot be enforced, especially if the “crime” has no victims.Google Scholar

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