|This article is part of a series about the|
| American Revolution|
The Currency Act is one of many 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."
From their origin, the colonies struggled with the development of an effective medium of exchange for goods and services. After depleting the vast majority of their monetary resources through imports, the first settlers strained to keep money in circulation. They could not find a suitable medium of exchange in which the value did not depreciate. The colonists generally employed three main types of currency. The first was commodity money, using the staple of a given region as a means of exchange. The second was specie, or gold or silver money. Lastly, paper money (or fiat money), issued in the form of a bill of exchange or a banknote, mortgaged on the value of the land that an individual owned.
Each year, the supply of specie in the colonies decreased due to international factors. The dearth of specie rendered it ineffective as a means of exchange for day-to-day purchases. Colonists frequently adopted a barter system to acquire the goods and services they required. Essentially, this method proved to be ineffective and a commodity system was adopted in its place. Tobacco was used as a monetary substitute in Virginia as early as 1619.A major shortcoming of this system was that the quality of the substitutes was inconsistent. The poorer qualities ended up in circulation while the finer qualities were inevitably exported. This commodity system became increasingly ineffective as colonial debts increased.
In 1690, Massachusetts became the first colony to issue paper currency. This currency was employed as a means to finance its share of the debt from King William's War. Other colonies quickly followed suit, and by 1715 ten of the thirteen had resorted to the issuance of paper currency. Economist Stanley Finkelstein highlights the advantage of paper currency, "that unless it is backed by specie it is cost-free currency". The paper currency depreciated quickly because the colonies printed more than what was taxed out of circulation. By 1740, Rhode Island bills of exchange were only four percent of face value and those of Massachusetts was eleven percent.The money supply was growing at a much faster rate than that of the overall colonial economy, which led to hyperinflation and the corresponding reduction in purchasing power per unit of money. British merchants were forced to accept this depreciated currency as a repayment of debts. This led to the Currency Act of 1751.
The first Act, the Currency Act 1751 (24 Geo. II c. 53), restricted the issue of paper money and the establishment of new public banks by the colonies of New England.These colonies had issued paper fiat money known as "bills of credit" to help pay for military expenses during the French and Indian Wars. Because more paper money was issued than what was taxed out of circulation, the currency depreciated in relation to the British pound sterling. The resultant inflation was harmful to merchants in Great Britain, who were forced to accept the depreciated currency from colonists for payment of debts.
The Act limited the future issue of bills of credit to certain circumstances. It allowed the existing bills to be used as legal tender for public debts (i.e. paying taxes), but did not allow their use for private debts (e.g. for paying merchants).
The Currency Act 1764 (4 Geo. III c. 34) extended the 1751 Act to all of the British colonies of North America. Unlike the earlier Act, this statute did not prohibit the colonies from issuing paper money, but it did forbid them from designating future currency issues as legal tender for public and private debts. This tight money policy created financial difficulties in the colonies, where gold and silver were in short supply.Benjamin Franklin, a colonial agent in London, lobbied for repeal of the Act over the next several years, as did other agents. The act arose when Virginia farmers continued to import during the French and Indian War. Virginia issued £250,000 in bills of credit to finance both public and private debts. This legislation differed from the 1751 act in that it prohibited the colonists from designating paper currency for use as payment for any debts, public or private. Parliament did not, however, prohibit the colonists from issuing paper money. The Act was put into place as a hedge against risks associated with economic fluctuations and uncertainty.
The colonial government of the Province of New York insisted that the Currency Act prevented it from providing funds for British troops in compliance with the Quartering Act. As a result, in 1770, Parliament gave permission (10 Geo. Ill c. 35) for New York to issue £120,000 in paper currency for public but not private debts.Parliament extended these concessions to the other colonies in 1773 (13 Geo. III c. 57) by amending the Currency Act 1764, permitting the colonies to issue paper currency as legal tender for public debts. According to historian Jack Sosin, the British government had made its point:
After nine years, the colonial agents had secured a paper currency for the provinces. But the Americans had tacitly, if not implicitly, acknowledged the authority of Parliament. And in the final analysis this was all the imperial government wanted.
The Currency Acts created tension between the colonies and the mother country, and were a contributing factor in the coming of the American Revolution. In all of the colonies except Delaware, the Acts were considered to be a "major grievance".When the First Continental Congress met in 1774, it issued a Declaration of Rights, which outlined colonial objections to certain Acts of Parliament. Congress called on Parliament to repeal the Currency Act of 1764, one of seven Acts labeled "subversive of American rights".
However, according to historians Jack Greene and Richard Jellison, the currency debate was no longer really a "live issue" in 1774, due to the 1773 amendment of the Act. The controversy's most important impact was psychological, in that it helped convince many colonists that Parliament did not understand or care about their problems. Colonial leaders came to believe that they, rather than Parliament, were better suited to legislate for the colonies.
The Stamp Act of 1765 was an Act of the Parliament of Great Britain which imposed a direct tax on the British colonies in America and required that many printed materials in the colonies be produced on stamped paper produced in London, carrying an embossed revenue stamp. Printed materials included legal documents, magazines, playing cards, newspapers, and many other types of paper used throughout the colonies, and it had to be paid in British currency, not in colonial paper money.
The House of Burgesses was the elected representative element of the Virginia General Assembly, the legislative body of the Colony of Virginia. With the creation of the House of Burgesses in 1642, the General Assembly, which had been established in 1619, became a bicameral institution.
The Intolerable Acts were punitive laws passed by the British Parliament in 1774 after the Boston Tea Party. The laws were meant to punish the Massachusetts colonists for their defiance in the Tea Party protest in reaction to changes in taxation by the British to the detriment of colonial goods. In Great Britain, these laws were referred to as the Coercive Acts.
Quartering Act is a name given to two or more Acts of British Parliament requiring local governments of the American colonies to provide the British soldiers with housing and food. Each of the Quartering Acts was an amendment to the Mutiny Act and required annual renewal by Parliament. They were originally intended as a response to issues that arose during the French and Indian War and soon became a source of tensions between the inhabitants of the Thirteen Colonies and the government in London, England. These tensions would later lead toward the American Revolution.
The American Colonies Act 1766, commonly known as the Declaratory Act, was an Act of the Parliament of Great Britain, which accompanied the repeal of the Stamp Act 1765 and the changing and lessening of the Sugar Act. Parliament repealed the Stamp Act because boycotts were hurting British trade and used the declaration to justify the repeal and save face. The declaration stated that the Parliament's authority was the same in America as in Britain and asserted Parliament's authority to pass laws that were binding on the American colonies.
The Province of Massachusetts Bay was a crown colony in British America which became one of the thirteen original states of the United States from 1776 onward. It was chartered on October 7, 1691 by William III and Mary II, the joint monarchs of the kingdoms of England, Scotland, and Ireland. The charter took effect on May 14, 1692 and included the Massachusetts Bay Colony, the Plymouth Colony, the Province of Maine, Martha's Vineyard, Nantucket, Nova Scotia, and New Brunswick; the Commonwealth of Massachusetts is the direct successor. Maine has been a separate state since 1820, and Nova Scotia and New Brunswick are now Canadian provinces, having been part of the colony only until 1697.
The Townshend Acts were a series of British acts of Parliament passed during 1767 and 1768 relating to the British colonies in America. They are named after Charles Townshend, the Chancellor of the Exchequer who proposed the program. Historians vary slightly as to which acts they include under the heading "Townshend Acts", but five are often listed:
The Stamp Act Congress, also known as the Continental Congress of 1765, was a meeting held in New York, New York, consisting of representatives from some of the British colonies in North America. It was the first gathering of elected representatives from several of the American colonies to devise a unified protest against new British taxation. Parliament had passed the Stamp Act, which required the use of specially stamped paper for legal documents, playing cards, calendars, newspapers, and dice for virtually all business in the colonies starting on November 1, 1765.
The Sugar Act 1764, also known as the American Revenue Act 1764 or the American Duties Act, was a revenue-raising act passed by the Parliament of Great Britain on 5 April 1764. The preamble to the act stated: "it is expedient that new provisions and regulations should be established for improving the revenue of this Kingdom ... and ... it is just and necessary that a revenue should be raised ... for defraying the expenses of defending, protecting, and securing the same." The earlier Molasses Act 1733, which had imposed a tax of six pence per gallon of molasses, had never been effectively collected due to colonial evasion. By reducing the rate by half and increasing measures to enforce the tax, the British hoped that the tax would actually be collected. These incidents increased the colonists' concerns about the intent of the British Parliament and helped the growing movement that became the American Revolution.
The Tea Act 1773 was an Act of the Parliament of Great Britain. The principal objective was to reduce the massive amount of tea held by the financially troubled British East India Company in its London warehouses and to help the financially struggling company survive. A related objective was to undercut the price of illegal tea, smuggled into Britain's North American colonies. This was supposed to convince the colonists to purchase Company tea on which the Townshend duties were paid, thus implicitly agreeing to accept Parliament's right of taxation. Smuggled tea was a large issue for Britain and the East India company, since approximately 86% of all the tea in America at the time was smuggled Dutch tea.
Virtual representation refers to the idea that the members of Parliament, including the Lords and the Crown-in-Parliament, reserved the right to speak for the interests of all British subjects, rather than for the interests of only the district that elected them or for the regions in which they held peerages and spiritual sway. Virtual representation was the British response to the First Continental Congress in the American colonies. The Second Continental Congress asked for representation in Parliament in the Suffolk Resolves, also known as the first Olive Branch Petition. Parliament claimed that their members had the well being of the colonists in mind. The Colonies rejected this premise.
Early American currency went through several stages of development during the colonial and post-Revolutionary history of the United States. Because few coins were minted in the thirteen colonies that became the United States, foreign coins like the Spanish dollar were widely circulated. Colonial governments sometimes issued paper money to facilitate economic activities. The British Parliament passed Currency Acts in 1751, 1764, and 1773 that regulated colonial paper money.
The Molasses Act of March 1733 was an Act of the Parliament of Great Britain, which imposed a tax of six pence per gallon on imports of molasses from non-English colonies. Parliament created the act largely at the insistence of large plantation owners in the British West Indies. The Act was not passed for the purpose of raising revenue, but rather to regulate trade by making British products cheaper than those from the French West Indies. The Molasses Act greatly affected the significant colonial molasses trade.
The Boston Tea Party was a political and mercantile protest by the Sons of Liberty in Boston, Massachusetts, on December 16, 1773. The target was the Tea Act of May 10, 1773, which allowed the British East India company to sell tea from China in American colonies without paying taxes apart from those imposed by the Townshend Acts. American Patriots strongly opposed the taxes in the Townshend Act as a violation of their rights. Demonstrators, some disguised as Native Americans, destroyed an entire shipment of tea sent by the East India Company.
The crisis of 1772, also known as the credit crisis of 1772 or the panic of 1772, was a peacetime financial crisis which originated in London and then spread to other parts of Europe, such as Scotland and the Dutch Republic. Alexander Fordyce, a partner in the banking house Neal, James, Fordyce and Down in London, had lost £300,000 shorting East India Company stock. On 8 June 1772, Fordyce fled to France to avoid debt repayment, and the resulting collapse of the firm stirred up panic in London. Economic growth at that period was highly dependent on the use of credit, which was largely based upon people’s confidence in the banks. As confidence started ebbing, paralysis of the credit system followed: crowds of people gathered at the banks and requested debt repayment in cash or attempted to withdraw their deposits. As a result, twenty important banking houses went bankrupt or stopped payment by the end of June, and many other firms endured hardships during the crisis. At that time, the Gentleman’s Magazine commented, "No event for 50 years past has been remembered to have given so fatal a blow both to trade and public credit".
The Thirteen Colonies made wide use of credit. Credit was used for domestic and overseas goods, as well as a method of repayment. Credit allowed colonists to defer their payments for goods and services until a later time, which was a more favourable payment option than cash or barter. Institutions accepted credit despite its risks, including that of the inability of a debtor to repay.
The American Revolutionary War inflicted great financial costs on all of the combatants, including the United States of America, France, Spain and 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.
The constitutional history of opposition to taxation is sufficiently interesting to be abstracted from broader contexts. Key action occurred in the Colony of Virginia in the decade before 1776. A particular protest document, arguably the most eloquent and most effective among many colonial protests, merits special attention.
The Boston Non-importation agreement was a boycott which restricted importation of goods to the city of Boston. This agreement was signed on August 1, 1768, by more than sixty merchants and traders. After two weeks time, there were only sixteen traders who did not join the effort.
The grievances/complaints was a section from the Declaration of Independence where the colonists listed their former problems with the British government but specifically King George. The United States Declaration of Independence contains 27 grievances against the decisions and actions of British King George III. Historians have noted the similarities with John Locke's works and the context of the grievances. Historical precedents such as Magna Carta and the Bill of Rights 1689 had established the principle that the King was not to interfere with the Rights of Englishmen held by the people. In the view of the American colonies, the King had opposed the very purpose of government by opposing laws deemed necessary for the public good.