Commissary notes were financial certificates issued by the departments of the quartermaster and commissary-general on behalf of the Continental Army during the American Revolution. Due to the rapid depreciation of the Continental currency, the Continental Congress authorized soldiers to provide commissary notes as compensation for impressed supplies. [1] However, the widespread use of these certificates further contributed to the trend of currency devaluation. Although distinct from the paper currency issued by the Continental Congress, commissary notes were accepted during state tax collections. Consequently, a large portion of the nearly worthless Continental notes remained in circulation despite Congressional attempts to improve credit through a reduction in the money supply. [2]
Given the revolutionary army’s lack of supplies when compared to the British, the Continental Congress recognized the need to impress certain goods and, in late 1776, allowed General George Washington to seize necessary supplies. Although the federal government did not initially endorse the states’ use of impressments, it later gave state governments great liberties to demand goods and services from local populations. [3] The departments of the quartermaster and commissary-general, who were in charge of executing the impressments, experimented with multiple forms of payment. Congress originally authorized the army to fund impressments either with in-kind payments or with the paper Continental currency. However, the high levels of depreciation within the first few years of the war caused Congress to attempt to reimburse impressed goods with a new kind of promissory certificate that carried no interest rates. [4] These so-called commissary notes began as hand-written documents but, as they became more popular, they were eventually mass-printed. [5]
As the war continued, commissary notes were issued at both the Continental and state levels, especially as necessary supplies became scarce. In 1778, the government of Virginia issued warnings against people who bought specific goods, such as wheat, for the specific purpose of resale and authorized additional impressments, a trend soon followed in Maryland, Pennsylvania and New York. [6] As the war escalated, the states further resorted to the use of impressments, with Virginia appointing local commissioners to conduct impressments on the county level. Moreover, later campaigns, including Yorktown, were largely funded with commissary notes rather than with other types of bills. [7] Nevertheless, not all necessary goods were impressed since people who gave desired goods, such as beef, rum or clothing, to the troops received more favorable payments for their donations. [8]
Although scholars have not reached a consensus as to whether commissary notes were circulated as money, these notes undoubtedly were used for certain financial transactions. Indeed, Congress had to accept these certificates as legal payments when the states collected taxes. [9] Although comprehensive state-by-state data on the distribution of commissary notes are not available, the overall nominal value of these notes eventually equaled the total value of Continental currency in circulation. As a result, these notes both increased the rate of deflation and, since they were often given to the state as taxes, much of the nearly worthless Continental currency remained uncollected. [10] Despite the fact that Congress had stopped issuing Continental bills in 1779, the use of commissary notes thwarted attempts to combat inflation through a reduction in the money supply. High levels of depreciation continued throughout the war even as Congress attempted to consolidate the money supply under a new system in which older financial instruments, including bills, certificates and even lottery tickets, were bundled together and marked with new denominations that were set at fractions of their original total face values. [11]
As they did not pay any interest, the first commissary notes became essentially worthless and were largely removed from circulation by the states. [12] Nevertheless, in 1780, quartermaster general Timothy Pickering approved a new wave of commissary notes that carried six percent interest rates under the terms that states provide a portion of the supplies purchased with the notes to the army. However, many states failed to comply and commissary notes once again contributed to currency depreciation, with the Continental Congress issuing a letter to the state governments in 1781 stating that “[commissary notes] continue to obstruct every plan which hath been devised for restoring public credit and supporting the war.” [13]
After the war, commissary notes were included with other debts to be paid by the American government, but many of these notes were eventually redeemed by the states. [14] In Massachusetts, for instance, the terms of a loan act passed in 1781 stipulated that commissary notes could be redeemed for up to one half of their face value. [15] Overall, the high levels of depreciation during the war, in part caused by the glut of commissary notes, illustrated the dangers of allowing individual states to issue their own currencies and financial instruments, and prompted the authors of the United States Constitution to give the sole responsibility of issuing coinage and currency to the central government. [16]
The Specie Payment Resumption Act of January 14, 1875 was a law in the United States that restored the nation to the gold standard through the redemption of previously-unbacked United States Notes and reversed inflationary government policies promoted directly after the American Civil War. The decision further contracted the nation's money supply and was seen by critics as an exacerbating factor of the so-called Long Depression, which struck in 1873.
Robert Morris, Jr. was an English-born merchant and a Founding Father of the United States. He served as a member of the Pennsylvania legislature, the Second Continental Congress, and the United States Senate, and he was a signer of the Declaration of Independence, the Articles of Confederation, and the United States Constitution. From 1781 to 1784, he served as the Superintendent of Finance of the United States, becoming known as the "Financier of the Revolution." Along with Alexander Hamilton and Albert Gallatin, he is widely regarded as one of the founders of the financial system of the United States.
A scrip is any substitute for legal tender. It is often a form of credit. Scrips have been created and used for a variety of reasons, including exploitative payment of employees under truck systems; or for use in local commerce at times when regular currency was unavailable, for example in remote coal towns, military bases, ships on long voyages, or occupied countries in wartime. Besides company scrip, other forms of scrip include land scrip, vouchers, token coins such as subway tokens, IOUs, arcade tokens and tickets, and points on some credit cards.
The Currency Act or Paper Bills of Credit Act is one of several Acts of the Parliament of Great Britain that regulated paper money issued by the colonies of British America. The Acts sought to protect British merchants and creditors from being paid in depreciated colonial currency. The policy created tension between the colonies and Great Britain and was cited as a grievance by colonists early in the American Revolution. However, the consensus view among modern economic historians and economists is that the debts by colonists to British merchants were not a major cause of the Revolution. In 1995, a random survey of 178 members of the Economic History Association found that 92% of economists and 74% of historians disagreed with the statement, "The debts owed by colonists to British merchants and other private citizens constituted one of the most powerful causes leading to the Revolution."
The history of the United States dollar began with moves by the Founding Fathers of the United States of America to establish a national currency based on the Spanish silver dollar, which had been in use in the North American colonies of the United Kingdom for over 100 years prior to the United States Declaration of Independence. The new Congress's Coinage Act of 1792 established the United States dollar as the country's standard unit of money, creating the United States Mint tasked with producing and circulating coinage. Initially defined under a bimetallic standard in terms of a fixed quantity of silver or gold, it formally adopted the gold standard in 1900, and finally eliminated all links to gold in 1971.
A Demand Note is a type of United States paper money that was issued between August 1861 and April 1862 during the American Civil War in denominations of 5, 10, and 20 US$. Demand Notes were the first issue of paper money by the United States that achieved wide circulation and they are still in circulation today, though they are now extremely rare. The U.S. government placed the Demand Notes into circulation by using them to pay expenses incurred during the Civil War including the salaries of its workers and military personnel.
The Confederate States of America (1861-1865) started with an agrarian-based economy that relied heavily on slave-worked plantations for the production of cotton for export to Europe and to the northern US. If classed as an independent country, the area of the Confederate States would have ranked as the fourth-richest country of the world in 1860. But, when the Union began its blockade of Confederate ports in the summer of 1861, exports of cotton fell 95 percent and the South had to restructure itself to emphasize the production of food and munitions for internal use. After losing control of its main rivers and ports, the Confederacy had to depend for transport on a weak railroad system that, with few repairs being made, no new equipment, and destructive raids, crumbled away. The financial infrastructure collapsed during the war as inflation destroyed banks and forced a move toward a barter economy for civilians. The Confederate government seized needed supplies and livestock. By 1865, the Confederate economy was in ruins.
The Confederate States dollar was first issued just before the outbreak of the American Civil War by the newly formed Confederacy. It was not backed by hard assets, but simply by a promise to pay the bearer after the war, on the prospect of Southern victory and independence. As the Civil War progressed and victory for the South seemed less and less likely, its value declined. After the Confederacy's defeat, its money had no value, and both individuals and banks lost large sums.
Early American currency went through several stages of development during the colonial and post-Revolutionary history of the United States. John Hull was authorized by the Massachusetts legislature to make the earliest coinage of the colony, the willow, the oak, and the pine tree shilling in 1652.
The First Report on the Public Credit was one of four major reports on fiscal and economic policy submitted by Founding Father and first US Treasury Secretary Alexander Hamilton on the request of Congress. The report analyzed the financial standing of the United States and made recommendations to reorganize the national debt and to establish the public credit. Commissioned by the US House of Representatives on September 21, 1789, the report was presented on January 9, 1790, at the second session of the 1st US Congress.
Money is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular country or socio-economic context. The main functions of money are distinguished as: a medium of exchange, a unit of account, a store of value and sometimes, a standard of deferred payment. Any item or verifiable record that fulfils these functions can be considered as money.
The Legal Tender Cases were two 1871 United States Supreme Court cases that affirmed the constitutionality of paper money. The two cases were Knox v. Lee and Parker v. Davis.
Greenbacks were emergency paper currency issued by the United States during the American Civil War that were printed in green on the back. They were in two forms: Demand Notes, issued in 1861–1862, and United States Notes, issued in 1862–1865. A form of fiat money, the notes were legal tender for most purposes and carried varying promises of eventual payment in coin, but were not backed by existing gold or silver reserves.
The United States dollar is the official currency of the United States and its territories. The Coinage Act of 1792 introduced the U.S. dollar at par with the Spanish silver dollar, divided it into 100 cents, and authorized the minting of coins denominated in dollars and cents. U.S. banknotes are issued in the form of Federal Reserve Notes, popularly called greenbacks due to their historically predominantly green color.
Bills of credit are documents similar to banknotes issued by a government that represent a government's indebtedness to the holder. They are typically designed to circulate as currency or currency substitutes. Bills of credit are mentioned in Article One, Section 10, Clause One of the United States Constitution, where their issuance by state governments is prohibited.
Fiat money is a type of money that is not backed by any commodity such as gold or silver, and typically declared by a decree from the government to be legal tender. Throughout history, fiat money was sometimes issued by local banks and other institutions. In modern times, fiat money is generally established by government regulation.
A Treasury Note is a type of short term debt instrument issued by the United States prior to the creation of the Federal Reserve System in 1913. Without the alternatives offered by a federal paper money or a central bank, the U.S. government relied on these instruments for funding during periods of financial stress such as the War of 1812, the Panic of 1837, and the American Civil War. While the Treasury Notes, as issued, were neither legal tender nor representative money, some issues were used as money in lieu of an official federal paper money. However the motivation behind their issuance was always funding federal expenditures rather than the provision of a circulating medium. These notes typically were hand-signed, of large denomination, of large dimension, bore interest, were payable to the order of the owner, and matured in no more than three years – though some issues lacked one or more of these properties. Often they were receivable at face value by the government in payment of taxes and for purchases of publicly owned land, and thus "might to some extent be regarded as paper money." On many issues the interest rate was chosen to make interest calculations particularly easy, paying either 1, 11⁄2, or 2 cents per day on a $100 note.
In financial transactions, a warrant is a written order by one person that instructs or authorises another person to pay a specified recipient a specific amount of money or supply goods at a specific date. A warrant may or may not be negotiable and may be a bearer instrument that authorises payment to the warrant holder on demand or after a specific date. Governments and businesses may pay wages and other accounts by issuing warrants instead of cheques.
The American Revolutionary War inflicted great financial costs on all of the combatants, including the United States, France, Spain and the Kingdom of Great Britain. France and Great Britain spent 1.3 billion livres and 250 million pounds, respectively. The United States spent $400 million in wages for its troops. Spain increased its military spending from 454 million reales in 1778 to over 700 million reales in 1781.
Banknotes of the United States dollar are currently issued as Federal Reserve Notes. Previous banknote versions that have been issued include Silver Certificates, Gold certificates and United States Notes.
