Constructing Confidence: The Politics of Paper Money in British North America, 1690 - 1750

Jack Votava, Northwestern University

Beginning with Massachusetts in 1690, colonial assemblies in British New England regularly emitted unsecured local paper money in response to acute scarcity of metal specie. Such currencies were not only one of the first prominent tests of state-backed fiat currency, but shaped the everyday lives of colonists, state capacities in New England, and the relationship between the colonies and metropole. However, a crucial puzzle remains: how were these currencies made legitimate to colonists, and cemented as a stable store of value? This puzzle is particularly urgent in light of the overwhelmingly mercantilist logic of the time, which emphasized the sole legitimacy of metallic money – a logic which would eventually win out as the early American republic crushed debtor revolts and denounced the “rage for paper money” (Federalist No. 10) as a wicked populist project. In this paper, I examine how these early paper monies were made politically and socially legitimate through original archival work examining merchant’s ledgers, political assembly records, letters, and pamphlets. I argue that the role of prominent merchant-creditors as proto-banks formed a lifeblood of the colonial economy and it was the cultural and economic backing of these elites, combined with paper money’s integration into the existing credit economy, which shaped the popular understanding of colonial paper money. I then show that these results have implications for understanding the stability and politics of fiat money more generally and provide qualifying evidence for several prominent theories of money and the state.

No extended abstract or paper available

 Presented in Session 180. Dollars, Debt, and Financial Risk