Published online by Cambridge University Press: 03 March 2009
Paper money, a major component of the colonial money supply, was critical to the economic policies of the colonial legislatures. Why did the state legislatures relinquish the power to issue money to the new federal government through the ratification of the Constitution? Hostility between states with radically different philosophies regarding paper money raised concerns about the viability of the union, and it was this fear which led to the clause in the Federal Constitution that prohibited state paper money issues.
1 Van Horn Brock, Leslie, “The Currency of the American Colonies 1700–1764” (Ph.D. diss., University of Michigan, 1941);Google ScholarYoder, Paton W., “Paper Currency in Colonial Pennsylvania” (Ph.D. diss., Indiana University, 1941);Google ScholarSchweitzer, Mary M., Custom and Contract: Household, Government, and the Economy of Colonial Pennsylvania (New York, 1987), chap. 4;Google ScholarCalomiris, Charles W., “Institutional Failure, Monetary Scarcity, and the Depreciation of the Continental,” this Journal, 48 (03. 1988), pp. 47–68;Google Scholar and Smith, Bruce D., “Some Colonial Evidence on Two Theories of Money: Maryland and the Carolinas,” Journal of Political Economy (12 1985), pp. 1178–211.CrossRefGoogle Scholar
2 Risjord, Norman. Chesapeake Politics 1781–1800 (New York, 1978).Google Scholar For similar approaches, see Jensen, Merrill, The New Nation (New York, 1950);Google Scholar and Nevins, Allan, The American States (New York, 1924).Google Scholar
3 Beard, Charles A., An Economic Interpretation of the Constitution of the United States (New York, 1913);Google ScholarBrown, Robert E., Charles Beard and the Constitution (Princeton, 1956);CrossRefGoogle Scholar and McDonald, Forrest, We the People (Chicago, 1958).Google Scholar For a more sophisticated economic analysis, see McGuire, Robert A. and Ohsfeldt, Robert L., “An Economic Model of Voting Behavior over Specific Issues at the Constitutional Convention of 1787,” this Journal, 46 (03. 1986), pp. 79–112.Google Scholar
4 Charles Calomiris and others have argued convincingly that state issues of paper money held their value when acceptable for payment of taxes, no matter what the purpose for which they were issued. See Calomiris, “Institutional Failure.” However, it should be noted that state governments tended to change the rate at which paper money would be acceptable for payment of taxes after they had depreciated, and that occurred with greater frequency when issued for reasons of public finance than for development.Google Scholar
5 Weiss, Roger W., “The Issue of Paper Money in the American Colonies, 1720–774,” this Journal, 30 (12. 1970), pp. 782–83.Google Scholar
6 Yoder, “Paper Currency”; Schweitzer, Custom and Contract;Google Scholar and McCusker, John J., Money and Exchange in Europe and America, 1600–1775 (Chapel Hill, 1978).CrossRefGoogle Scholar
7 “John Witherspoon”. “Essay on Money as a Medium of Commerce. with Remarks on the Advantages and Disadvantages of Paper admitted into general Circulation” (Philadelphia, 1786).Google Scholar
8 Schweitzer, Custom and Contract.Google Scholar
9 Lemon, James, The Best Poor Man's Country (Baltimore, 1972);Google Scholar and Schweitzer, Custom and Contract.Google Scholar
10 Schweitzer, Custom and Contract.Google Scholar
11 Schweitzer, Mary M., “Economic Regulation and the Colonial Economy: The Maryland Tobacco Inspection Act of 1747,” this Journal, 40 (09 1980), pp. 551–69;Google ScholarBrock, “Currency of the American Colonies”; and McCusker, Money and Erchange.Google Scholar
12 Bezanson, Anne, Prices and Inflation During the American Revolution (Philadelphia, 1951);Google Scholar and Calomiris, “Institutional Failure.”Google Scholar
13 Foner, Eric, Tom Paine and Revolutionary America (New York, 1976).Google Scholar
14 Barton, William, “The True Interest of the United States, and particularly of Pennsylvania, Considered, with respect to the advantages resulting from a State Paper-Money: with some observations on the subject of a Bank. and on Agriculture. Manufactures, and Commerce” (Philadelphia, 1786).Google Scholar
15 Votes and Proceedings of the House of Delegates of the State of Maryland, Jan. 5, 1787;Google Scholar and [Pelatiah Webster], “An Essay on Credit, in which the Doctrine of Banks is Considered” (Philadelphia, 1786).Google Scholar
16 Anonymous, , “Cool Thoughts on the Subject of the Bank” (Philadelphia, 1786);Google ScholarWitherspoon, “Essay on Money”; and Webster, “Essay on Credit.”.Google Scholar
17 Witherspoon, “Essay on Money”; and Webster, “Essay on Credit.”Google Scholar
18 Calomiris, “institutional Failure”; and Greene, Jack P. and Jellison, Richard, “The Currency Act of 1764 in Imperial-Colonial Relations, 1764–1776,” William and Mary Quanerly (Oct. 1961), pp. 485–518.Google Scholar
19 See Risjord, Chesapeake Politics.Google Scholar
20 Madison, James to Jefferson, Thomas, Aug. 12, 1786,Google Scholar in Boyd, Julian, ed., The Papers of Thomas Jefferson (Princeton, 1950–1983), vol. 10, pp. 231–32.Google Scholar
21 Feer, Robert A., “Shays' Rebellion and the Constitution: A Study in Causation,” The New England Quarterly (Sep. 1969), pp. 388–410.Google Scholar
22 The vote on paper money was relatively unified. See Madison's, James notes on the Constitution Convention in Benton, Wilbourne E., ed., 1787: Drafting the U.S. Constitution (College Station, 1986);Google Scholar and McGuire and Ohsfeldt, “An Economic Model of Voting Behavior.”Google Scholar
23 “Dissent of the Minority of the Convention” and pamphlets of “Centennial.” in McMaster, John B. and Stone, Frederick D., eds., Pennsylvania and the Federal Constitution, 1787–1788 (Philadelphia, 1888):Google ScholarMartin, Luther, “The Genuine Information delibered to the Legislature of the State of Maryland” (Philadelphia, 1788);Google Scholar Anonymous, “The Government of Nature delineated, or an Exact Picture of the New Federal Constitution” (Carlisle, 1788):Google Scholar and Risjord, Chesapeake Politics.Google Scholar
24 Sylla, Richard, Legler, John B., and Wallis, John J., “Banks and State Public Finance in the New Republic: The United States, 1790–1860,” this Journal, 47 (06 1987), pp. 391–404.Google Scholar
25 Records of the Bank of North America, at the Historical Society of Pennsylvania, Philadelphia. Doerflinger, Thomas M., A Vigorous Spirit of Enterprise (Chapel Hill, 1986).Google Scholar
26 Levi Hollingsworth Business Records, Historical Society of Pennsylvania. Philadelphia; Farley Grubb, “The Transition from Colonial Currency to U.S. Dollars: A Market-Revealed Analysis” (University of Delaware Working Papers); and Forge and Furnace Account Books, Historical Society of Pennsylvania, Philadelphia.Google Scholar
27 Address of Governor Thomas Muffin to the legislature, Dec. 1794, Archives of Pennsylvania, ser. 4, vol.4, p. 353; and Accounts of Treasury, State of Pennsylvania, 1790–1796.Google Scholar
28 Wilkinson, Norman, Land Policy and Speculation in Pennsylvania, 1779–1800 (Harrisburg, 1979).Google Scholar