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£15,000 in bills of credit. In the reciting part of this Act it is taken notice, "that by reason of the late troubles and confusions occasioned by the Indian war the tax appointed to be raised by the Act made 27th August, 1715, for sinking the said sum £30,000 in bills of credit lately issued, is therefore repealed and declared void." £15,000 additional issues were sanctioned. The taxation principle again was not forgotten; and an Act was promptly passed for raising £95,000, a large portion of which was to be used in cancelling the outstanding paper. As before, however, no bills were cancelled, and a succeeding act therefore continued them. This Act of December 11, 1717, also stated that "it has been found by experience that the multiplicity of bills of credit had been the cause of the ruin of our trade and commerce, and had been the great evil of this Province; and that it ought, with all expedition, to be remedied." It was therefore the resolution of both Houses of Assembly that the above-mentioned bills of credit, the bank bills excepted, amounting to £54,000, should be sunk on or before the 2d Tuesday in March, 1718. But by an Act passed 20th February, 1718, entitled "an Act for raising the sum of £70,000 on lands and negroes, for defraying the public debts, sinking the public orders, and for calling in and cancelling the sum of £30,000 which is now outstanding in bills of credit, over and besides the bank bills," the last above mentioned is repealed and made void, and a new provision is made for sinking the bills by taxes, to be paid at three periods, with liberty that such taxes might be paid in rice at certain prices, varying with the date of payment.

Toward the latter end of the year 1719, the people of South Carolina threw off the government of the Lords Proprietors, and chose a new Governour and Council, and during those confused times new currency principles were developed. New bills were issued, payable in rice at 30s. per hundred. The old bills of credit were made legal tender in all payments, thus putting them all on an equality. It was also provided, September 21, 1721, that the sum of £4,000 of the said bills of credit, then outstanding, should yearly, and every year, be sunk, called in, and cancelled, by a tax to be raised on lands and slaves, over and above the several sums of money to be yearly raised for the support of the Government. And liberty was given by this Act to all persons to pay their taxes in these paper bills of credit.

The reasons given for this new departure, as they are set down in the preamble, are as follows, to wit: "that it was very uncertain what quantity of bills of credit were then current, many of them being

counterfeited, and they being then so old, that it was absolutely necessary that they should be called in and reprinted. And that by reason of the great floods, many of the inhabitants had lost their crops, and most had suffered so much by the same, that they were rendered incapable to pay the yearly rice tax necessary to be raised for the support of the Government." At this time the total outstanding issues had reached £120,000. The exchange rates in English money were at a heavy premium, about five to one.

After his Majesty had purchased the soil of this Province, the late Governour Johnson was appointed and received from his Majesty several instructions relating to the paper bills of credit. It was first provided that the revenues appropriated to the discharge of old bills of credit should be used for seven years for the purchase and laying out of townships, and for the purchasing of tools, provisions, and other necessaries "for any poor Protestants that shall be desirous to settle in our said Province." This was made law by an Act of August 20, 1731, and was adhered to for several years.

The second instruction of Governour Johnson led to the act of August 20, 1731, for calling in, reprinting, and exchanging all paper bills of credit, the amount then outstanding being £106,500. This act is significant because no fund was appointed or established for the gradual repaying and cancelling of the bills. At this time it took approximately £6 in paper to equal £1 in English money. By 1739 (the date of writing this article) the rate of exchange was seven to one.

92. SUMMARY OF COLONIAL ISSUES1
BY HORACE WHITE

There were three main causes or excuses for the issue of colonial bills of credit: (1) war expenses; (2) loans to individuals; (3) ordinary expenses of government. There were other pretexts. One of the most common was the replacement of old and worn bills, which always left a margin over for general expenses, and sometimes a very large margin.

Colonial bills of credit were of several different kinds, viz., (1) interest-bearing, not legal tender (these were unobjectionable); (2) the same, legal tender for the principal and sometimes for the interest also; (3) non-interest-bearing, legal tender for all purposes; (4) the same, legal tender for future but not for past debts; (5) the 'Adapted from Money and Banking, pp. 83-84, (Ginn & Co., 1895.)

same, not legal tender between private persons, but receivable for all public dues.

Interest-bearing bills were soon abandoned and the tendency in all the colonies was to make the bills legal tender for all purposes. But for the restraints imposed by the mother-country probably all would have been legal tender for all purposes, and the issues would have been much larger in amount than they were.

The usual course of events where bills of credit were issued (but with some variations) was as follows: (1) emission; (2) disappearance of specie; (3) counterfeiting; (4) wearing out of bills; (5) calling in and replacing worn and counterfeited issues with new ones; (6) extending the time for old ones to run, especially those that had been placed on loan; (7) depreciation; (8) repudiation of early issues in part and the emission of others called "new tenor."

(2)

PAPER MONEY AS A MEANS OF WAR FINANCE 93. THE ISSUE OF CONTINENTAL BILLS OF CREDIT1 BY CHARLES J. BULLOCK

Within six weeks after the Continental Congress convened on May 10, 1775, the issue of bills of credit as a means of financing the Revolution was determined upon. Before the close of 1775 Congress issued $6,000,000 of paper money and urged the states to redeem their respective quotas of the bills by imposing taxes. But the states refused to resort to taxation, except for inconsiderable sums, and continued to emit increasing amounts of their own paper. After unsuccessful efforts to raise revenue by such expedients as a lottery and a domestic loan, larger continental issues had to be emitted. In 1777, Congress began to make requisitions upon the states for money that was to be raised by taxes which only the states could impose; but these requests met with such a partial compliance that further issues of paper were placed in circulation. Several years elapsed before the states instituted effective systems of taxation, and little assistance was secured from this source. Loans and subsidies furnished by France brought considerable sums into the federal treasury; but more and more paper was emitted, the amounts of the issues increasing as the depreciation of the currency progressed. By the end of 1779, Congress had issued $241,500,000 of the continental bills of credit; while the states had gradually increased their emissions to more than

Adapted from The Monetary History of the United States, pp. 64-65. (The Macmillan Co., 1900.)

$200,000,000. At the opening of 1781, a dollar in paper was worth less than two cents in specie, and the currency soon afterward sank in value to such an extent that it became practically worthless.

94. EFFECTS OF CONTINENTAL CURRENCY ON DEBTORS AND CREDITORS'

BY DAVID RAMSAY

The aged who had retired from the scenes of active business, to enjoy the fruits of their industry, found their substance melting away to a mere pittance, insufficient for their support. The widow who lived comfortably on the bequests of a deceased husband experienced a frustration of all his well-meant tenderness. The laws of the country interposed, and compelled her to receive a shilling where a pound was her due. The blooming virgin who had grown up with an unquestionable title to a liberal patrimony was legally stripped of everything but her personal charms and virtues. The hapless orphan, instead of receiving from the hands of an executor a competency to set out in business, was obliged to give a final discharge on the payment of 6d. in the pound. In many instances, the earnings of a long life of care and diligence were, in the space of a few years, reduced to a trifling sum. A few persons escaped these affecting calamities, by secretly transferring their bonds, or by flying from the presence or neighborhood of their debtors. A hog or two would pay for a slave; a few cattle for a comfortable house; and a good horse for an improved plantation. A small part of the productions of a farm would discharge the long-outstanding accounts, due from its owner. The dreams of the golden age were realized to the poor man and the debtor, but unfortunately what these gained was just so much taken from others.

95. DEMORALIZING INFLUENCE OF THE CONTINENTAL CURRENCY

BY PELATIAH WEBSTER

The fatal error, that the credit and currency of the Continental money could be kept up and supported by acts of compulsion, entered so deep into the mind of Congress and of all departments of administration throughout the States that no considerations of justice,

'Adapted from History of American Revolution (1789), II, 134–35.

Adapted from Strictures on Tender Acts (1780).

religion, or policy, or even experience of its utter inefficacy, could eradicate it; it seemed to be a kind of obstinate delirium, totally deaf to every argument drawn from justice and right, from its natural tendency and mischief, from common sense, and even common safety.

Congress began as early as January 11, 1776, to hold up and recommend this maxim of maniasm, when Continental money was but five months old. Congress then resolved, that "whoever should refuse to receive in payment Continental bills, &c., should be deemed and treated as an enemy of his country, and be precluded from all trade and intercourse with the inhabitants," &c., i.e., should be outlawed; which is the severest penalty (except of life and limb) known in our laws.

This ruinous principle was continued in practice for five successive years, and appeared in all shapes and forms, i.e., in tender acts, in limitations of prices, in awful and threatening declarations, in penal laws with dreadful and ruinous punishments, and in every other way that could be devised, and all executed with a relentless severity by the highest authorities then in being, viz., by Congress, by Assemblies and Conventions of the States, by Committees of Inspection (whose power in those days were nearly sovereign), and even by military force; and tho' men of all descriptions stood trembling before this monster of force, without daring to lift a hand against it, during all this period, yet its unrestrained energy ever proved ineffectual to its purposes, but in every instance increased the evils it was designed to remedy, and destroyed the benefits it was intended. to promote; at best its utmost effect was like that of water sprinkled on a blacksmith's forge, which indeed deadens the flame for a moment, but never fails to increase the heat and force of the internal fire. Many thousand families of full and easy fortune were ruined by these fatal measures, and lie in ruins to this day, without the least benefit to the country, or to the great and noble cause in which we were then engaged.

It has polluted the equity of our laws; turned them into engines of oppression and wrong; corrupted the justice of our public administration; destroyed the fortunes of thousands who had most confidence in it, and has gone far to destroy the morality of our people.

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