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Is Paper Money just Paper Money/ Experimentation and Local Variation in the Fiat Paper Monies Issued by the Colonial Government of British North America, 1690-1775: Part I

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  • Farley Grubb

    ()
    (Department of Economics, University of Delaware)

Abstract

The British North American colonies were the first western economies to rely on legislative-issued fiat paper monies as their principal internal media of exchange. This system arose piecemeal. It was monetary experimentation on a grand scale. In the absence of banks and treasuries that exchanged local fiat monies at fixed rates for specie monies (outside monies) on demand, colonial governments experimented with other ways to anchor their fiat monies to real values in the economy. These mechanisms included tax-redemption, interest-bearing notes, land-backed mortgage loans, sinking funds, and legal tender laws. The structure and performance of these mechanisms are explained.

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Bibliographic Info

Paper provided by University of Delaware, Department of Economics in its series Working Papers with number 12-07.

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Length: 73 pages
Date of creation: 2012
Date of revision:
Handle: RePEc:dlw:wpaper:12-07.

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Web page: http://www.lerner.udel.edu/departments/economics/department-economics/
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Keywords: Adam Smith; barter; bearer bonds; Benjamin Franklin; bills of credit; colonial America currency substitution; fiat currency; interest-bearing money; legal tender; paper money; quantity theory of money; sinking fund; specie money; tax-redemption.;

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  1. Farley Grubb, 2008. "Creating Maryland's Paper Money Economy, 1720-1739: The Role of Power, Print, and Markets," NBER Working Papers 13974, National Bureau of Economic Research, Inc.
  2. Farley Grubb, 2008. "Testing for the Economic Impact of the U.S. Constitution: Purchasing Power Parity across the Colonies versus across the States, 1748-1811," Working Papers 08-11, University of Delaware, Department of Economics.
  3. Smith, Bruce D, 1985. "Some Colonial Evidence on Two Theories of Money: Maryland and the Carolinas," Journal of Political Economy, University of Chicago Press, vol. 93(6), pages 1178-1211, December.
  4. Alvin Rabushka, 2008. "Introduction to Taxation in Colonial America
    [Taxation in Colonial America]
    ," Introductory Chapters, Princeton University Press.
  5. Grubb, Farley, 2004. "The circulating medium of exchange in colonial Pennsylvania, 1729-1775: new estimates of monetary composition, performance, and economic growth," Explorations in Economic History, Elsevier, vol. 41(4), pages 329-360, October.
  6. Wicker, Elmus, 1985. "Colonial Monetary Standards Contrasted: Evidence from the Seven Years' War," The Journal of Economic History, Cambridge University Press, vol. 45(04), pages 869-884, December.
  7. Farley Grubb, 2003. "Creating the U.S. Dollar Currency Union, 1748–1811: A Quest for Monetary Stability or a Usurpation of State Sovereignty for Personal Gain?," American Economic Review, American Economic Association, vol. 93(5), pages 1778-1798, December.
  8. Farley Grubb, 2012. "Chronic Specie Scarcity and Efficient Barter: The Problem of Maintaining an Outside Money Supply in British Colonial America ," Working Papers 12-08, University of Delaware, Department of Economics.
  9. Officer, Lawrence H., 2005. "The quantity theory in New England, 1703-1749: new data to analyze an old question," Explorations in Economic History, Elsevier, vol. 42(1), pages 101-121, January.
  10. Sheridan, Richard B., 1960. "The British Credit Crisis of 1772 and The American Colonies," The Journal of Economic History, Cambridge University Press, vol. 20(02), pages 161-186, June.
  11. Farley Grubb, 2011. "State Redemption of the Continental Dollar, 1779-1790," NBER Working Papers 17209, National Bureau of Economic Research, Inc.
  12. Bruce D. Smith, 1985. "American Colonial Monetary Regimes: The Failure of the Quantity Theory and Some Evidence in Favour of an Alternative View," Canadian Journal of Economics, Canadian Economics Association, vol. 18(3), pages 531-65, August.
  13. West, Robert Craig, 1978. "Money in the Colonial American Economy," Economic Inquiry, Western Economic Association International, vol. 16(1), pages 1-15, January.
  14. Bennett T. McCallum, 1990. "Money and Prices in Colonial America: A New Test of Competing Theories," NBER Working Papers 3383, National Bureau of Economic Research, Inc.
  15. Farley Grubb, 2011. "The Continental Dollar: Initial Design, Ideal Performance, and the Credibility of Congressional Commitment," NBER Working Papers 17276, National Bureau of Economic Research, Inc.
  16. Harris, Ron, 1994. "The Bubble Act: Its Passage and Its Effects on Business Organization," The Journal of Economic History, Cambridge University Press, vol. 54(03), pages 610-627, September.
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Cited by:
  1. Farley Grubb, 2012. "Chronic Specie Scarcity and Efficient Barter: The Problem of Maintaining an Outside Money Supply in British Colonial America," NBER Working Papers 18099, National Bureau of Economic Research, Inc.

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