of the public debts and the clergy's salaries) were appropriated toward the sinking and discharging the bills of credit, and the remaining fourth part of the said duties were to be disposed of by order of the General Assembly, for the contingencies of the government.

The next Act, July 5, 1707, provides for an additional emission of paper currency, "for satisfying the debts due by the public on account of the late invasion; for finishing the fortifications about Charles Town; to revive the several Acts therein mentioned; and to call in the former bills of credit." By this Act, not only £8,000 in new bills were issued for payment of the public debts, but the old bills which were outstanding were exchanged for new bills, and were by that means continued current, and made a tender in all payments. This Act was made of force for two years, but was continued for four years, by an Act passed July 12, 1707. This date was shortly extended for another year; and then "to the end of the next session of the General Assembly." By another Act passed February 14, 1707, entitled "an Act for the better enabling the Governour to raise a force against our public enemies, and to raise money to defray the charges of the same, by establishing bills of credit," a further sum of £3,000 was issued in bills of credit, £2,000 of which was to exchange part of the old bills, which were too large, and the other £1,000 was to remain in the treasury, to answer the emergencies of the govern

ment.

A very short time after passing this Act, on April 24, 1708, an Act was passed for raising a further sum of £5,000 in bills of credit, to be ready in the public receiver's hands to answer all emergencies; it provided a fund to sink them, and the duties imposed by the former Acts were continued to July 12, 1714, and from thence to the end of the next session of the General Assembly. On the 1st day of March, 1710, an Act was passed for raising the sum of £3,000 in small bills, for sinking £1,000 of the former bills; and £2,000 to be applied in the payment of the debts due from the public.

The next emission of paper bills of credit was said to be in consideration of the great expense the Province had been at in building fortifications, and for assisting the inhabitants of North Carolina against the Tusquerora Indians, who were then at war with them, with twenty white men and such Indians as could be raised. On these considerations an Act passed November 10, 1711, "for raising the sum of £4,000, by laying sundry additional duties on liquors and other goods and merchandises, for carrying on an expedition against

the northern Indians, enemies to the Crown of Great Britain, and for aiding and assisting the inhabitants of North Carolina, who are now actually invaded by the said Indians."

The Bank Act of June 7, 1712, was "an Act for raising the sum of £52,000, by stamping and establishing new bills of credit, and putting the same out to interest, in order to call in and sink the former bills of credit." From the year 1703 to the time of passing this Act, by the various emissions of bills of credit at the several times hereinbefore mentioned, there had been issued £29,000, which, either by a partial application of the funds appropriated for sinking them, by the exchanging old bills for new, or by bills lost or destroyed by accident, were, at the time of passing this Act, reduced to £16,000, exclusive of the Tusquerora bills, amounting to £4,000.

In the preamble of the Bank Act it is declared "that the public debts, occasioned by the vast charges to which the Province for several years past had been subject and liable.

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were become at last so greatly burthensome and considerable, that there was no hope or probability that the same could be discharged in any tolerable time, by the public duties and incomes of this Province; and that it was also impracticable (especially at that time) to discharge and defray the same by the ordinary method of imposing a tax on the estates, stocks, and abilities of the inhabitants of the Province, without pressing too hard upon them"; therefore £16,000 was issued for exchanging the old bills; £32,000 to be let out at interest, payable in 12 years, at such a rate as would sink both principal and interest at the end of that term; £4,000 was also directed to be issued for the contingencies of the government. These together with the Tusquerora bills made a total of £56,000. This was 9 years from the date of the first issue.

In 1715 a new series of emissions begins. By an Act of August 27, a further sum of £30,000 in bills of credit were stamped and issued; and it was provided by this Act, that in order to strengthen the currency of the bills newly issued, a fund should be provided for sinking the same by a tax; and accordingly, on the same day there was passed an "Act to raise the sum of £30,000 on the real and personal estates of the inhabitants of this Province, in order to sink the sum of £30,000 in bills of credit."

But within a year another Act was passed, to continue the currency of £30,000 in bills of credit, and also to stamp the sum of

66

£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 ISSUES
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 CREDIT'

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.)