THE
HISTORY OF PAPER MONEY
IN THE
PROVINCE OF MASSACHUSETTS BEFORE THE REYOLUTION,
WITH AN ACCOUNT OF
TIlE LAND BANK AND THE SILVER BANK.
Read before the American Statistical Association at Boston, May, 1874.
BY
E. H. DERBY.
THE NEW ENGLAND NEWS COMPANY,
Nos. 37 & 41,, COURT ST., BOSTON, MASS.
1874.




Entered, according to Act of Congress, in the year 1874, by E. HI. DERBY, in the Office
of the Librarian of Congress, at Washington.
THE
HISTORY OF PAPER MlONEY
IN THE PROVINCE OF MASSACHUSETTS BEFORE THE REVOLUTION, WITH AN ACCOUNT OF THE LAND
BANK AND THE SILVER BANK.
THE colonists of Massachusetts, when they sought an asylum
on the rugged coast of New England, took with them a very
small supply of gold and silver. A few years after they landed,
- as the elder Winthrop writes, — the scarcity of money was so
great that their land and cattle fell to one-fourth of their previous
value. The colonists sent most of their masts, fur, and fish to
England to purchase supplies of tools and clothing, or to Virginia
for corn; and, as these proved insufficient, their coin followed.
They were soon obliged to resort to wampum, the Indian currency, and to constitute their peas, barley, and coin legal tenders
at specific rates; and, although these were somewhat inconvenient
for the ladies to use when they went a-shopping, they were easily
divisible into small change.
When the vessels of the colonists reached the West Indies,
they found there silver which had been circulated by the Spaniards or by the buccaneers; arid, in 1652, had the courage to set
up a mint, and coin a large number of pine-tree shillings. The
tradition is, that the profits of the mint were so great that the
mint-master paid as dower for his daughter, when she married,
her weight in shillings; and that the maiden carried down the
scale for a large amount of her father's coin.




3
But the home government soon interposed its veto. King
Charles the Second complained that the royal prerogative was
invaded.  Thomas Temple, a friend of the colony, tried to convince him that the pine-tree on the shilling was the royal oak,
but with indifferent success. The mint was soon interdicted, if
not stopped; and the colony, restricted in its foreign trade, forbidden to manufacture, and exhausted by its long struggle with
France, found its currency deficient.
Soon after the failure of an expedition to Quebec, in 1690,
which cost it ~50,000, it made its first emission of paper money,
to the amount of ~40,000, in bills of credit. At first, they were
not favorably received; and the inscription upon them of "Honi
soit qui mal y pense" seems to deprecate censure. These bills
were signed by a committee composed of Penn Townsend, Adam
Winthrop, and Timothy Thornton.   To smooth their way, it
was provided that their amount should not exceed four-fifths of
the cost of the expedition; that they should be receivable for all
taxes and duties, should be paid within a year, and be received by
the Treasury at an advance of five per cent. The bills were duly
redeemed, and some parties made profits from the premiums by
repeated payments into the provincial Treasury.
Annual issues were made; and for thirteen years, during which
the above safeguards were observed, there was but slight depreciation. But the war with France continued, and apparent success
encouraged the Province to risk a future loss for a present relief,
and the original precautions were discontinued.  I)uring the
interval between 1703 and 1711, the periods for payment were
extended from one to six years; the issues were increased; public
confidence was shaken; and the bills, although made legal tenders
by the acts of the Province, began to depreciate, and complaint
was made of the scarcity of money.
Various efforts for relief were made.  A land bank was proposed, to furnish currency, and build a bridge across Charles
River; but this was frowned down as a South-Sea bubble, or




4
John-Law scheme, and the Assembly authorized more bills of
credit.
The Council, which had voted down the project, was ready to
favor a loan; and a loan of ~50,000, in notes of the Province at
five per cent, renewable for thirty years, was sanctioned in 1714,
and the amount was loaned to private citizens.
Governor Dudley, who had become unpopular from his opposition to the bank, was superseded by Gov. Shute.
One loan did not suffice to relieve the Province, or supply it
with a circulating medium. Specie disappeared, and new complaints arose as to its scarcity; and, in 1717, a new loan of
~100,000 was made to the citizens in bills of credit, secured by
mortgages to trustees appointed by the Province, the rate of
interest being five per cent.
Under the influence of increasing currency and deferred payments, the bills of credit continued to fall, and silver rose to six
shillings in coin for twelve in paper.
Counterfeits also made their appearance, and large expenses
were incurred by the Province for improved paper and engraving.
Litigation increased, and the current opinion of the day was,
that the country would be ruined unless members should be sent
to the legislature who would vote for more emissions of paper
money.
A plan of a land bank was again presented, but was opposed
by the solid men of Boston. The Assembly then voted a new
issue of ~100,000, in bills to be loaned at five per cent to private citizens; but Gov. Shute refused his assent to this measure,
and a compromise was at length effected, by which half that
amount was issued in loans, in 1720, redeemable in six to ten
years. Gov. Shute is now recalled, and replaced by Gov. Dummer, upon whose accession Judge Sewall informs us that "the
weight of depreciation had become intolerable oppression."
About this time, Madam Knight made her memorable journey
from Boston to New York, seated on a pillion behind the post



5
rider. In her journal, she describes the manners of Rhode Island
and Connecticut, and of the Indian tribes through which she
passed. She also gives a vivid description of the way in which
the country trade was conducted; the trader's first question to
his customer being, "How do you pay?" - the price of a penknife varying from  sixpence to a shilling, as the payment was
made in specie, bills, by barter, or credit.
In 1726, James Taylor writes that the emissions of bills of
credit for the preceding ten years have amounted to ~397,000,
of which more than half are still outstanding; while silver coin
has risen from 133, in 1710, to 283:
The historian, Douglas, estimates the bills of credit outstanding in 1728 at ~314,000.  InSthe same year, Gov. Burnet succeeds Gov. Dummer, and announces to the Province his instructions to give his assent to no acts authorizing bills of credit, until
they shall be approved in England.
The rage for bills of credit now pervades other colonies; and
the Logan of that day - who seems less partial to paper money
than his namesake in the senate of the United States- writes
from Pennsylvania to England, that " popular frenzy will not stop
until the credit of this Province is as bad as that of New England, where an ounce of silver is worth twenty shillings in
paper."  Depreciation keeps pace with the growth of the currency. Public confidence is gone; but the call is not for gold or
silver, but for more paper money, as it is now at Washington.
The paper dollar passes for one-third of its nominal value.
The ~300,000 represent but ~100,000, and some of the bills are
for a penny only.
With a view to the relief of the public, the assembly provided that the bills of credit shall be a legal tender for debts by
simple contract only, and not for bonds under seal. They also
repealed the act which allowed the premium of five per cent on
payments into the Treasury of the Province. It is due to the
British governors of the Province to say that, for more than half




6
a century, they strenuously opposed the issue of bills of credit;
and their opposition to them led to disaffection, and often to their
recall, as letters were addressed to the Board of Trade and influential men in England, suggesting that they were not acceptable
to the Province.  In 1729, Gov. Burnet is recalled, and his successor, Gov. Belcher, arrives, and assumes the government.  He
is instructed to allow no issue of bills in excess of the amount
required to meet the annual charges of government, then ranging
from ~30,000 to ~40,000 a year; but more bills are swanted, and
the Assembly sends repeated requests to the king to modify these
instructions.  The king conl4antly refuses; even reproves the
Assembly for the favor it has shown to such pernicious measures.
From 1729 to 1741, there is an incessant struggle between the
governor and the Assembly.  Silver is now at more than three
for one; and, in 1731, he gives a reluctant assent to the issue of
bills to the amount of ~76,500, which are barely equivalent to
the charges of the Province.  Rhode Island now issues ~100,000,
which circulate in Massachusetts; and private individuals put
their own notes in circulation, and thus swell the current.
In 1737, bills of a new tenor are issued, containing express
promises for payment at the specific rate of six shillings and
eight pence the ounce of coin. These are issued to meet the
public charges, but soon fall to a large discount.  In 1739, the
legislature of Massachusetts, " in one of their lucid intervals," as
it is termed by the historian, Douglas, admit, in an act to prohibit the circulation of the bills of other provinces, the serious
errors into which they have fallen.
This act recites "that the emission of great quantities of bills
of public credit, without provision for their redemption, has
stripped us of our money, and brought them into contempt, to
the great scandal of the government; that the Province has fixed
their value and time of redemption in 1742; and, as this may be
frustrated by the circulation of bills of other provinces without
such security, the same is prohibited in this province."




In 1740, a new issue, equivalent to ~5,330 in specie, was made,
to cover the current expenses of the Province, and provision is
made for its redemption in 1742, at the rate of four for one.
While others favor a further issue of. paper, the historian,
Hutchinson, comes forward, at this juncture, as the champion of
a silver currency. He submits a proposition for a loan in England at four per cent, and the importation of the proceeds of the
loan into the Province in specie. At this moment, fifty thousand
pounds in specie would have absorbed the whole circulation of the
Province.  The measure of Hutchinson did not prove acceptable
to the Assembly, but it was the precursor of another, which
finally extinguished the paper money of the Province. Massachusetts can afford to pardon the devotion of this able man to
England, when she takes into account the value of his history,
and the service he rendered her by the restoration of her currency.
But bills of credit had not yet reached their lowest stage of
degradation.  It is true that provincial bills were now selling at
twenty-five per cent; but plans were afloat presaging a still
further decline.
Two new projects were started tending to depress them: a plan
for a land bank, and another for a partnership, termed a silver
bank.
THE LAND BANK.
This prqject originated with John Coleman, who, in 1740, with
his associates, Robert Hale, John Choate, Samuel Adams, and
three hundred and ninety-one associates, published the prospectus
of a Land Bank, or Bank of Manufactures.  This was organized
without a charter, and set in motion against the opposition of the
governor.  Its very name was specious and alluring, as land was
considered the most solid of securities, and a strong desire to
build up manufactures pervaded the Province. The prospectus
of this bank was, that each partner should subscribe for ~100 to
~2,000 of the stock, and pay in a fifth of one per cent on his




8
subscription, and then borrow the residue of his subscription from
thle bank, at three per cent on a loan payable in twenty annual
instalments, the amount to be received by him in the bills of the
bank; and his notes were payable in the productions of the Province; viz., hemp, flax, wool, wax, cordage, iron, linen, leather,
flaxseed, cloth, canvas, copper, tallow, and cord-wood, at prices to
be fixed by the directors, or in bank bills of the bank, payable in
fifteen years. The measure seemed to combine currency with
long loans at low rates of interest, to encourage the farmers and
manufacturers, and to give the debtor the advantage of paying
in his produce or manufactures, or in bank bills, should they deteriorate. But the governor issued his proclamation against the
measure as a delusive and fraudulent scheme.  It came before
the Council to obtain a charter, and was there defeated; and,
after its defeat, its directors undertook to file its articles of association with the secretary of the Province. It was carried into
politics, and obtained a majority of the Assembly; and the Assembly chose its directors members of the Council. The governor, however, had the courage to veto the new councillors, and
to dismiss from office all magistrates and officers of the militia
who took part in the organization or direction of the bank.  He
then appealed to Parliament for an act to prohibit all such institutions. His determined opposition, however, did not deter the
directors from making loans or issuing bills receivable for all
debts due to the bank, to the amount of ~100,000.
THE SILVER BANK.
This was a private partnership, or association, composed of one
hundred and six merchants of Boston and its vicinity. Among
them  we find many familiar names, such as Oxnard, Oliver,
Sewall, Bowdoin, Winslow, and other men of note in the Province, while there were others of inferior repute and credit.
The project was, to subscribe ~150,000, to take notes payable in




9
fifteen years, in silver, at the rate of twenty shillings per ounce
of coin, - or three times its actual value, - and to issue bills for
circulation payable in fifteen years, at the rate of six shillings in
silver for twenty in bills. There is reason to believe that the
great solicitude for these banks sprung from the fact that the
Province hlad pledged itself to redeem  its bills within three
years, under acts of the legislature, and that some of the loans
made by the Province were becoming payable.  Both the Land
Bank and the Silver Bank were opposed by the governor; and so
great was the excitement upon this subject, that rumors were
spread of an insurrection to compel the governor and council to
give their sanction to the banks; and warrants were issued for
the arrest of the ringleaders.
But Gov. Belcher was resolute and obdurate, and arrested the
ringleaders.  The managers of the banks, however, were able, by
misrepresentations abroad, to undermine his power in London,
and effect his removal. They were, however, less successful in
establishing the banks he had done so much to defeat; for, in
1742, Parliament passed acts prohibiting the issue of bills of
credit, bank-notes, or currency, in any of the provinces, by any
association without a charter. The banks fell; and, for twenty
years after their fall, the rash and adventurous men who had
embarked in them were involved in wearisome litigation, while
the bills they had issued carried down with them the bills of the
Province.
The fall of the Land and Silver Banks stopped many similar
projects in the counties of Essex, Plymouth, and Middlesex, and
the adjacent provinces of Rhode Island and New  Hampshire;
but the depreciation still continued; and, in 1740, the Rev. William Cooper draws the attention of the governor, assembly, and
people to " an empty treasury, a defenceless country, and an embarrassed trade."
Gov. Belcher, who, for ten years, while governor of the
Province, so strenuously opposed the paper currency, which




10
finally swept him away, was one of the most distinguished sons
of Massachusetts. Born in Boston, he graduated at Harvard
College, ill 1699, at the early age of seventeen. Inheriting a
large fortune from his father, the most opulent merchant of the
Province, he travelled for six years in Europe. With a fine person, agreeable manners, and many accomplishments, he went
much into society, and made the acquaintance of George the
Second, who subsequently became king of England, and who
conferred on him several appointments. After his arduous contest with the banks and the Assembly, and removal from office in
consequence of misstatements in London, he regained the favor
of the king, and was made governor of New Jersey, where he
was, for fourteen years, a very popular officer, as well as the
founder, of Princeton College. He gave to it his library, at his
decease. Massachusetts owes to him a debt of gratitude which
she might well requite by rearing to him the monument in the
churchyard at Cambridge which his heirs failed to erect, because
his fortune was expended in her service; and New Jersey owes
to him not only her college, but also her escape from a vitiated
currency.
One of the last acts of Gov. Belcher was the dissolution of the
Assembly; and, in his message to them of June, 1741, he tells
them, "The management of the elections made yesterday discovers to me so much of the intentions of your house to support
the fraudulent and pernicious scheme commonly called the Land
Bank, condemned at home by his Majesty and Parliament, that
I judge it derogatory to the king's honor and service, and inconsistent with the peace and welfare of the people, that you sit
longer in General Assembly. I have therefore directed Secretary
Willard to declare this Court dissolved."
The banks had exasperated the governor, and subverted the
government, and finally fell before the omnipotence of Parliament. They were the bitter fruits of a depreciating currency,
and of loans to debtors who l]ad never expected to pay.




11
The new governor, William  Shirley, who, in 1741, superseded
the long-tried and faithful Belcher, showed more deference to the
wishes of the Province and the views of its Assembly. He had
a large family to provide for, and was anxious to conciliate those
upon whom lie depended for his salary; but he was deeply imlpressed, upon his arrival, with. the wretched condition of affairs.
In his first address to the Assembly, he expressed the hope " that
Parliament would soon terminate the miseries accumulated upon
the Province by the depreciation of bills"; observing "that it
was flooded with bills issued either by itself or the adjacent provinces; that Rhode Island alone had issued ~440,000 in bills of
credit, of which ~350,000 were circulating in Massachusetts."
The acts of Parliament to suppress the banks, and prohibiting
the issue of currency by firms or individuals, soon after arrived.
A committee of the Assembly report that ~90,000 in bank-bills,
are still in circulation; and the governor recommends the Assembly to invite the other provinces to appoint commissioners to provide for the extinction of the paper currency; but the other
provinces, who are drawing away the substance of Massachusetts, repeatedly refuse to unite in a Commission. In 1742,
when the time for redeeming the currency approaches, the governor conciliates the Assembly by obtaining from England a remission of the restrictions on the issue of bills, and the Assembly
reward him by a liberal salary.  The state of the Province does
not, however, improve; for, in 1744, the Rev. James Allen speaks,
in his Election Sermon, of the difficulties in which we are involved
" by an unhappy medium, uncertain as the winds, and fluctuating
like the waves of the sea, through the unrighteousness which the
land mourneth."  There were unhappy and uncertain mediums
then, as there are to-day, alike delusive, and alike under the ban
of the clergy.
All further danger from the banks, however, is averted, and
they are referred to as things of the past. In the language of
the day,



12
"The Land Bank and the Silver schemes
Were all last winter's noisy themes."
Other events were now at hand to delay the extinction of the
bills, and to carry them still lower in the scale of depreciation.
In 1745, Gov. Shirley planned an expedition to Louisburg, the
great fortress of France on the coast of Cape Breton.  Wm.
Vaughan, of New Hampshire, heartily co-operated with him, and
may, possibly, have suggested the idea.  A force of three thousand militia from Massachusetts, with eleven hundred more from
the contiguous provinces, embarked in a fleet of a hundred sail
of fishermen, with but eighteen cannon, to surprise or besiege a
fortress defended by two hundred cannon and mortars, with walls
forty feet thick at the base, and thirty feet high, and surrounded
by a fosse eighty feet wide. This successful enterprise, guided
by Pepperell, and aided by a few ships under Warren, gave Shirley a great prestige in England, but involved the Province in
large expenses, which were met by depreciating bills. By the
assiduous efforts of Shirley, England was led to consider the
question of indemnity to the Province for the cost of an expedition national in its character, and the most important of the
war. At this period, the Province was in great distress. Its
paper currency exceeded ~2,000,000, and its bills  lad fallen
to eleven in paper for one in silver; and the Assembly, so long
infatuated, began to see its errors, and admitted, in 1746, that
C we have been the means of bringing distress, if not rain, on
ourselves."
Tle reign of paper money had lasted for fifty-nine years. It
began in 1690, became oppressive in 1713, and insupportable at
the close of the first half of the century; and, during this portion'
of the youth and young manhood of the State, its great interests - ship-building, the fisheries, and navigation - had actually
declined; while the progress of population had been reduced onehalf, doubling but once in half a century.  Immense wrong had




13
been done to widows, orphans, and the clergy, and to all salaried
officers. Provincial loans had not relieved the public, while they
had ruined merchants.  The unhappy medium which had led
to such results was denounced alike by the press, the pulpit, and
the Council-chamber.  In the verses of the day,
"The country maids with sauce to market come,
And take their loads of tattered money home."
And well might such verses be heard or read, when it took eleven
bills for one penny each to do the service of a penny in coin.
Again, Thomas Hutchinson proposed that the whole indemnity
should be applied to the extinction of the paper money, and that
the Province should return to specie payments. The governor
urged this plan upon the Assembly, and at length it passed an
act pledging the Province to apply whatever funds it should receive for indemnity to the payment of its bills; and, after such
payment, to return to specie.
The merchants of London urged upon the government of Great
Britain the policy of holding back the money until the necessary
acts were passed in the Province; and Gov. Shirley promised to
urge upon Parliament the prohibition of paper money in all the
provinces.
The necessary acts were passed by the Assembly, and sent out
to England; and the indemnity arrived in Boston, in the shape
of 653,000 ounces of Spanish silver coins, and thirty tons of the
copper coins of England.
But there were still to be delays. A party long opposed to
paper money — including Douglas, the historian, with other
prominent men —urged that it was unsafe to make so great a
change at once as to return from silver at eleven for one to silver
at par by a single step; that we should resume gradually, and
wait for concert of action by the other provinces; insisting that
a sudden change would give a shock to business, and transfer the




14
trade to other provinces.  But it was urged, in reply, that "nil
utile quod non honestum "; that honesty was the best policy.
The bills began to rise with the prospect of payment, and the
rate of redemption was advanced ten per cent; viz., to an average
of one in silver for ten in paper. Nearly all the bills were redeemed at once by commissioners, and the residue received in the
same year for taxes, at their fixed value; and thus was the paper
money of Massachusetts happily extinguished, after a trial of
more than half a century in bills of various tenors, payable sometimes in merchandise, and sometimes in silver, at rates varying
from six shillings to sixty shillings per ounce. And the refrain
of the streets rose from plaintive verse to -
"And now, old tenor, fare you well!
No more such tattered rags we'll tell.
Now dollars pass, for they are free;
It is a year of jubilee."
It was, indeed, a year of happiness. There was, it is true, a
momentary pause while the silver was counted out for the paper;
but trade, instead of leaving the Province, at once revived, at the
cost of the adjacent provinces, which had hoped to profit by the
bold act of lMassachusetts.  It became known as'"the hardmoney colony." In the succeeding ten years, it sent out four
expeditions to Nova Scotia, the northern Lakes, and Canada,
each larger than the expedition to Cape Breton. In a single
year, it had ten thousand men under arms, and accomplished this
without once suspending specie payments; and so increased its
wealth and strength, in the quarter of a century which preceded
the Revolution, that it made greater advances than it had done
in the previous half-century, and was able to take the -lead in the
great struggle of the Revolution.
If it was safe for this Province, in 1749, to resume, when depressed by war and by a currency which had fallen to eleven for
one in silver; if resumption then restored prosperity, how can




15
the risk be great for us to resume, when we have, within six
months, seen gold at 107, and exchangeon England, payable in
gold, at seven per cent below par?  And how can a citizen of
this State, with his history open beside him, reconcile himself to
a further and unnecessary depreciation?
With gold at the lowest point for the last ten years, we have
not only seen its change in our favor, - exports exceeding imports, gold accumulating, silver coin returning to its former channels, - but we have also seen freights and navigation improving,
ship-building at the height of prosperity, with wages rising, and
our productions in demand abroad; and now, shall we listen to
the syren songs of those who would wreck us again on the dan:
gerous shoals of paper money?
With the Revolution came another tide of irredeemable paper
money.  Massachusetts yielded to the pressure.  She could not
control the action of the continent; and, in three years, she saw
the paper money decline from par to less than one per cent. The
cause of freedom was nearly lost, not by the lack of patriotism,
or the faltering hearts of its defenders, but by the inefficiency
and disastrous effects of paper money.
The thirteen colonies owed much to the fleets and armies of
France, but more to the supplies and silver circulated by her
troops than to her fleets and armies. The cost of the war was
greatly increased by the depreciation of the bills then so freely
issued.  Massachusetts fought on until her currency became
worthless, and her proportion of the debt incurred during the
war was equal to the value of her property. She resumed specie
payments as soon as the government was re-established, and
zealously maintained them for another half-century; indeed, for
three-fourths of a century, if we exclude the exceptional and disastrous year of 1837.
From 1814 to 1819, when New York and all the States south
and west of New England suspended, M{assachusetts maintained
specie payments, and escaped the losses by depreciation that be



16
fell other States; and it was not until New York opened her
coffers to pay gold, and her great arteries of commerce, to which
nature had contributed so much, that she began to gain upon
Boston; and, since the Southern outbreak, both Massachusetts
and Boston have maintained their credit at the highest point,
and borrowed upon the most favorable terms, by constantly paying the interest and principal of their debts in gold, and are
grateful to President Grant for his resistance of all schemes for
inflation.
In conclusion, let me recognize my obligations to the histories
of Douglas, Hutchinson, Bancroft, and Barry, to the biographical
dictionary of Elliot, and to the very valuable compilation of Dr.
Felt, for aid in the preparation of this essay.
AMERICAN STATISTICAL ASSOCIATION.
A quarterly meeting of this society was held in this city yesterday afternoon, the first vice-president, J. Wingate Thornton,
in the chair.  The recording secretary being absent, John Ward
Dean was chosen secretary pro tem.
E. H. Derby then read a very interesting and carefully-prepared
paper, entitled, "The History of Paper Money in the Province
of Massachusetts Bay," in which he traced the history of paper
money in Massachusetts, from its first issue, in 1690, to the end
of the royal authority, giving instructive accounts of the Land
Bank, the Silver Bank, and other schemes of inflation, with their
disastrous results. He closed with a brief notice of the continental currency in the time of the Revolution, and its several
stages of depreciation.
At the close of the paper, on motion of Mr. Thornton, it was
Voted, That the thanks of the association be presented to Mr. Derby for his
learned and timely history of paper-money issue in New England, drawn from
history for our own instruction.