The History of Money in America

When we want to study a different culture  whether it's a study of a culture that's on   the other side of the world or people that  are living two or three hundred years ago   we want to find similarities or we want to find  common ground between those people so we can   get to know them better food is a great way  to do that another great way is with money   we use money every day so it's  this wonderful common ground   and the study of what's going on with money in the  18th century is fascinating it helps us understand   what our life is like today when we look at money  in the 18th century we live in very complicated   times and money is a complicated matter it's  seemingly influx it's changing as we watch it   so we're worried about new kinds of money showing  up in different parts of the world or is our money   going to change is it going to get worth more or  less so we have lots and lots of things changing   with our money the question is was money simpler  in the 18th century? could we go back two or three   hundred years and and live in a much simpler  time where we wouldn't have to worry about what   was going on with money? Well the truth is is that  money's always been very very complicated whether   we lived in roman times or in the 18th century and  in the 18th century it's bewilderingly complicated   there are all kinds of money and it's changing  rapidly through the time period through the   17th and 18th century we have new introductions  of different kinds of money showing up we have   ancient sorts of money being used as well as brand  new ideas for money so money is very complicated   and there's so much to learn it's a fascinating  story so our first question really is is what is   money? Let's define money really quickly first and  money has some attributes to it uh generally it's   a medium of exchange it's some item that we can  use to exchange in a non-direct barter situation   we don't always have something you know I have  a chicken and you have a chair and and we need   to exchange them what if I don't need a chair well  we need some sort of medium to exchange this it's   also really handy if it has value in and of itself  a store of value so that the money is usable in   the future over a period of time money also really  needs to be something that we can identify easily   and we can identify it against something that is  a counterfeit of it so we can easily tell what is   money and what's fake money money also needs to be  the right size it needs to be transportable can't   be huge and it can't be tiny we don't want to lose  it in our pocket and we want to be able to hold   enough wealth in our hands that we can actually do  something with it so what's the item or items that   meet these criteria the best what can we identify  what can we hold in our hands and transport   what can we break down into various increments  throughout history really for thousands of years   gold and silver coins have been used as sort of  that ultimate standard they meet all the criteria   they're easily identifiable we can weigh  them we can almost judge their purity just by   the look and the feel these coins really  do everything we need them to do for money so what's the standard by which all money  in the 18th century was judged by what's the   ultimate money in Great Britain and in  the English colonies in this time period so the most valuable coin and that is the golden  guinea that's being traded mostly in Great Britain   a few of these probably show up in North America  but this is the ultimate coin worth 21 shillings   this is about the size of a quarter a little  thinner than a quarter and it would be equivalent   to let's say a thousand dollar bill in your pocket  something like that it's a very very expensive   coin to be carrying around these are great for  large transactions but most people are using   a smaller coin most of the other coinage is either  silver or a little bit of copper but here we have   the major silver coin of the time period this is a  silver crown this coin is almost exactly the same   size as our silver dollar in the time period  this might be more like a hundred dollar bill   this is being used a great deal in moderate  sized transactions you might get paid in crowns   soldiers sometimes the sign-on bonus would be  a silver crown we have smaller silver coinage   really the one that sort of is the basis for all  these silver coins all coinage really rather up   or down is the shilling so the shilling again is  almost exactly or is exactly the same size and   weight as a golden guinea this is like the 20  bill of the time period and it would take five   shillings to make up one of these crowns or if  you were going to be trading shillings for guineas   21 shillings to the guinea again we need smaller  coinage than that though that's too big we can't   do transactions with just say 20 bills so we  have smaller coinage there was the six pence   which is half a shilling this is generally the  smallest silver coin that's in circulation again   maybe it's a ten dollar bill or so then we have  the smaller coinage now it's not necessarily   precious metal these are token coinage our golden  guinea our silver crown our silver shilling   they have exactly that certain quantity of gold or  silver the value in those coins is in the gold and   the silver that's the face value of the item  itself when we have token coinage that means   they're actually worth more than the quantity of  metal that's inside here even though there's a   good quantity of copper in our copper half pennies  and our copper farthings it's not actually worth   a full half a cent or a quarter of a cent in  these circumstances there's generally about   half the amount of copper so they aren't  precious metals per se but they still are readily   identifiable because of the metal and again we  have enough weight there that we can really tell   yes this is a full-size coin somebody hasn't taken  some off so that our coin isn't worth as much so these are the most common coins that you're  going to be doing daily transactions with if   you go to the tavern to buy a drink  it might cost you a single half penny if you're getting an entire meal well then  it might cost you maybe four pence and you   would pay with eight half pennies and if  you had an even smaller transaction then   a farthing which is a half the size of a half  penny would be that common daily small change in the 17th and 18th century in Great  Britain and in the British colonies it   was a huge problem they did not have  enough coinage it wasn't enough to do   daily transactions with there's a great Cotton  Mather quote and he says "silver in New England is   like the water of a swift running river  it's always coming and is fast going away   it's very difficult to do transactions in  Colonial America because there just weren't   any coins really flowing through the economy  and we have other authors that talk about   the lack of coinage in Joseph Plum Martin's  book in his memoir of being a revolutionary   war soldier and how almost the entire war  he saw no coinage whatsoever being traded   with people everyone was using something else  other than these coins that I've shown you here there are a number of factors that have  to do with why there's a shortage of   coinage and in the colonies the greatest  factor is that it was illegal to export   silver and gold coinage from  Great Britain to the colonies it's almost hard to explain why that would be true  but the great Britain they wanted that coinage be   to be flowing through the economy in Great  Britain and they didn't want the coinage to   leave the country so they made it illegal to  export it was not illegal to export small coinage   the copper coins or coins from other countries  but it was illegal to export something like this   British crown to the colonies we also have this  problem of a trade imbalance the colonies wanted   lots of finished goods from Great Britain and they  didn't have enough raw material flowing out to pay   for that and so there would be a flow of silver  from the colonies out to Great Britain to pay for   the items that the colonists wanted so there was  a extreme lack of coinage because there was a lack   of British coinage available for commerce in the  colonies other coins came in to meet that demand the most popular one is the Spanish milled  dollar or the pillar dollar also known as the   piece of eight or pieces of eight this silver coin  becomes really the most common coin that shows up   anywhere in the colonies and it is very useful  in that it's almost exactly the same size not   quite but almost exactly the same size as the  British crown it's slightly lighter in weight   and slightly greater in its fineness so it's a  little bit more silver in it and it's generally   traded at instead of five shillings at four and  a half shillings this coin gets used in many many   transactions and since there's a lack of small  coinage this is the coin they actually take and   divide it up into pieces so the little pie pieces  little pieces of eight that's part of this coin   and because the value of this coin isn't in its  circular shape or the design on the front of it   but it's actually in its weight and purity of  metal if we divide it into pieces those pieces   are still worth exactly what they weigh so these  pieces these little pie pieces end up being used   as smaller currency like a shilling or some  other smaller piece of money in the time frame   and we see this being referenced in various works  from 1701 people talking about these being cut up   into pieces all the way up into the 19th century  America this coin still being used as currency in   fact this coin was legal tender until the 1850s  in the united states it would be something like   today if we didn't have a one or a five dollar  bill and we would take our 20 dollar bill and rip   a section of it off and give it to the teller I  it's just really interesting just to think about   the idea of being able to divide up your money  like that so it's not only this Spanish milled   dollar that's being used for money in our economy  but coins from almost all over the world and   certainly all over Europe we have French ecus and  French smaller coinage being used in our economy   we have German thalers as well as basically every other country  small change is showing up and it's   being used whenever possible because  there just is nothing else available so this seems to be a good solution  for the lack of coinage in the colonies   but it certainly creates some problems  each and every one of these coins is   a little different in size nobody has  exactly the same standard we can weigh   each individual coin but it's a little harder  to understand the purity in each and every coin   in 1702 Sir Isaac Newton was brought in to help  solve this problem he was the head of the mint   in Great Britain in that early 18th century time  period and he got together all the coinage in   western Europe to judge their purity their weight  and their consistency and then we have this equal   weights and measures we can really decide  what one coins are worth against the other one of the solutions for the colonies would be  to mint their own money to create their own coins   unfortunately the right to mint coins that was a  royal prerogative only the king of Great Britain   could give someone the right to create coins and  he did not do that especially for somebody like   Massachusetts the English civil war changed  that and the king was gone from Great Britain   Massachusetts decided to grab up that right so in  1652 they created their own mint to mint their own   pine tree shillings oak tree shillings they  had their own coins now they did not mint a   massive quantity of these coins and they  were undersized they were meant to trade   at the same rate as in English shilling  but they only had three quarters as much   silver in their coin they did this because they  didn't want the coins to leave the colonies they   wanted all those pine tree shillings to stay  in Massachusetts but they ended up being traded   all over the colonies and down into the Caribbean  these pine tree shillings became so popular that   they were almost as popular second only to  the pieces of eight trading in the colonies   there was another great problem in  the colonies as well as Great Britain   and that was counterfeiting there were  likely at times as many counterfeit coins   in the economy as there were genuine coins and not  only counterfeiting but clipping they would take   little bits of the coins off the value was in the  silver so if you could still manage to trade the   coin off as full value but keep some of the silver  for yourself you would be that much the richer   the clipping can be as simple as filing off  the edge of your coin you can even gather up   your coins all together in a bag in a leather  bag and shake them really hard and it'll create   dust in the bottom of it and all the coins look  almost exactly like they did when they started   and you've got a little bit of silver in the  bottom of your bag so you can melt it down and   make your own coins they tried to solve the  problem of clipping by creating the milling   on the edge of the coin that's why we see coins  even today with all those ridges around we would   know if someone cut off a piece of our coin if  those little ridges were gone and some of them   are very very complicated the piece of eight  has some very heavy milling around the edge   and this wonderful crown actually has words  embossed in the edge of the coin that way   they could really tell whether or not someone was  cheating them on their coin was it all there? We   have other solutions for not enough coinage in the  colonies especially early on but truly all through   the 17th and 18th century barter is a solution to  this problem now we have direct barter situations   especially with trading with Native Americans  trade with Native Americans for pelts and for   deerskins those sorts of things that's a very  very big industry in North America and these   these hides and furs are being exported used  locally and being exported to Europe the Native   Americans were not interested in coinage it didn't  not do them any good so they were interested in   direct barter items mostly clothing firearms  ammunition axes knives and cooking implements   those are the items and they would directly  trade their hides for the items they needed there are other barter situations going on in  the 17th and 18th century with the colonists and   they would be barter situations where you would be  trading with your neighbor or a local store owner   and there isn't enough coinage and so you would  do an IOU a credit situation and you're bartering   in a way but you have this sort of medium  of exchange it isn't the coin itself but   the writing down in a ledger of this trade  that's going on this transaction you might   do this with a ledger you might do it with a  simple note of hand I owe you know somebody 15   shillings for the purchase of firewood but  generally there were ledgers in the time period   so a store owner or anyone who's doing any kind of  business would have a ledger that would keep track   of all these transactions and how much they might  owe somebody or how somebody else might owe them   now this was kept in a currency in a amount  that related to the English coinage they was   kept in pounds shillings and pence but the amount  wasn't as much as a silver coin it was generally   a value about two-thirds the value of a silver  coinage so if you actually went to fulfill your   debt to someone that you had on  account and you came to them with an   actual piece of silver well it would be worth  more than what was written down in the book   sort of like if you came to a situation today  and you had cash money you might get a discount   rather than paying in some other manner that  was very very true in the 17th and 18th century we have wonderful examples of these account  books in the 18th century one of them is the   diary of Matthew Patton and this has to do with  all his business transactions going on and we see   all sorts of transactions that Matthew Patton  does over the years sometimes with regular coinage   sometimes with other kinds of currency  and many many transactions that are   credit transactions people owing him money him  owing other people money he keeps track of this   in his account book and he probably also has  notes of hand and he'll wait for some of these   debts to be paid off months sometimes years   is very very interesting to see all these sorts  of transactions going on within the community   now these sorts of barter transactions really  only work face to face you really have to know   the person that you're doing your commerce  with or your transaction if you're going to   be taking a note of hand so these sorts of things  really only work in a very very small community another possible solution for the lack of  currency is commodity money commodity money   is based on individual commodities the greatest  example is tobacco receipts in the 18th century   the colonial governments of Virginia and Maryland  created warehouses where people would bring their   tobacco it would be judged and it would be  weighed taken into a common store and then the   individual was given a receipt for that tobacco  that tobacco could be then reclaimed by anyone   with that receipt and those receipts traded in  the community as money and when someone wanted   to send a large quantity of tobacco off to say  England then they would he would collect a certain   number of receipts he could go to the warehouse  fill his ship up with tobacco and off it would   go to Great Britain these tobacco receipts were  immediately redeemable not in gold or silver but   were redeemable in pounds of tobacco sometimes we  have other kinds of commodity money corn money and   something that was being used very very early in  the colonies was Native American money or wampum   being made out of little pieces of shell and  strung into necklaces or belts and this was used   as currency up into the middle of the 17th century  when it was kind of phased out or made illegal to   be used as standard currency in the colonies this  commodity money certainly had a problem in that   the value of it was based upon the commodity  itself the receipt was for so many pounds of   tobacco not in some other value say worth so many  dollars or worth so much silver so the value of   that receipt could change over time it was like  investing in a particular commodity you certainly   had a problem if you held this any amount of time  and the value of that commodity went up or down so we have British coinage we have coins  coming from all over the world we have   coins that we're cutting up we have counterfeit  coins we have lightweight coins we also have   barter transactions and credits and debits and  account books we have commodity money if all that   isn't complicated enough then we have one of the  most fascinating developments in currency here in   17th century New England in Massachusetts  we have the development of paper money   paper money really doesn't happen in all  of western Europe or in the western world   until 1690 Massachusetts this is fascinating no  government issued paper money happens before that   in the western world why Massachusetts in 1690  there's a fascinating story that has to do with   a failed military campaign the government of  Massachusetts sent a military force to take over   Quebec and they believed that they would win this  a little military engagement and come home with   plenty of money plenty of money to pay for the  troops and the sailors and all this military gear   turns out that they were sent back with their  tail between their legs they lost the engagement   and what happened was there were a bunch of rowdy  soldiers and sailors that wanted paid in 1690   the government of Massachusetts without enough  funds to pay them decided to resort to issuing   paper money they decided that they would do a  one-time issue of 7,000 pounds of paper currency   to pay off these soldiers and sailors and that  it would be redeemable in silver in the future   from taxes that were collected say a year or  two in the future this did not work out so well   for Massachusetts almost immediately they had to  change their law and the amount and they changed   the amount to forty thousand pounds because  seven thousand pounds was not enough to make this   strange new paper money more acceptable to  the people it was redeemable or you could pay   for your taxes with this paper money and they  would even give you a bonus or more value for   your paper money than you would if you used silver  coinage now this caused a lot of strange problems   because this paper money isn't immediately  redeemable for silver coinage its value   begins to drop within the commercial community  the government tries to attack this problem by   forcing the the merchants to take the  paper at its par value with silver   but that does not hold it's not something that  was very very enforceable so the value of this   paper money continues to drop the other problem is  is that the government goes back on their word and   they continue to issue more paper money in the  future so more and more paper money begins to flow   in the economy this causes the actual silver  money to disappear making the shortages of   coinage even more no one's going to start to use  their silver coinage if they've got paper money   that is continuing to devalue if your paper money  loses value over time you're going to use that   get rid of it as quickly as possible and if your  silver coinage holds its value you will keep that   back as a store of value and continue to use  the paper money as that medium of exchange   this causes problems with all the surrounding  colonies so there's an advantage in the the   colony of Massachusetts when they start to use  this paper currency and more and more transactions   are happening with that and so the surrounding  colonies start to issue paper money also   not necessarily for the same reason Massachusetts  did but for certainly for economic benefits   and it creates a way for the government  to fund particular things going on   now each and every government did it a little  bit differently and they would issue more or less   depending on their needs so some colonies printed  a lot of paper money and other ones not so much   the more money that was printed the more quickly  that would devalue the right to mint money is   kept by the sovereign but that didn't count with  paper money that's not minting money and so they   were able to do almost exactly the same thing  as minting money even better by printing their   own but the government back at Great Britain  didn't seem to have any rules to govern this   as the paper money starts to depreciate in  Massachusetts the government tries to fix this   problem by stopping printing of their current  money and to print a new money that would be   worth more at a different discount rate basically  this kind of worked and but then of course we have   the problem of two kinds of paper currency being  traded at the same time as well as all those other   states or colonies money also flowing through the  economy this happened not once but twice so not   only did they create one new kind of paper money  but in a few years after that they created yet a   third paper money they called the first old tenor  money and the second money middle tenor money and   then would they have new tenor money each kind  of paper money traded at a different value in the   marketplace talk about complicated this got so bad  that the government back in Great Britain decided   to attack this they asked the Massachusetts  government to stop or withdraw the paper   money from the economy and that they would bring  coinage into this colony to help re-standardize   all the currency going on so they brought in  tons and tons of British copper coins which   were legal to bring into that economy as well as  Spanish silver coins exported out of Great Britain   to help Massachusetts get their legs under them  and have a true currency again this worked for   a few years and it wasn't very long after that a  year or two that Massachusetts decided to print   more paper money again the government of Great  Britain was very upset by this after they had done   all the work to bring coinage back in and they  really put their foot down and made it illegal for   Massachusetts to use this paper money and that  paper money was immediately withdrawn from   the commerce and they went ahead for decades after  that and just worked with the silver and copper   coinage that was brought in that did not solve the  problem in the other colonies so you can imagine   the very very complex landscape having to do with  all these different kinds of coins and the barter   situation and now multiple multiple kinds of  paper currencies all fluctuating in their value   so we've called this video from barter to bitcoin  isn't it interesting the massive innovations   that were happening and experiments that were  happening in money in the 17th and 18th century   uh British colonies they tried all sorts of  different things and some of them worked better   than others one of the situations we've got here  is with barter or with keeping account books isn't   it interesting that bitcoin is like that account  book of Matthew Patton except the the account book   is kept by everyone all at once it's a distributed  ledger and to deal with the trust problem it's a   trustless system where the account books are sort  of verified by all the people holding them all at   once it's a very interesting experiment and it's  one where we're not sure where it's going to go   is it going to be a true better solution for  money in the future only time will tell truly   as I study money and the experiments with money  happening in the 17th and 18th century I see   all these great parallels going on with what's  happening today with money we really don't have   today anything like what they had in the 18th  century yes they were experimenting with uh paper   currency and with different kinds of coinage they  were experimenting with barter and they didn't   know they were experiments in that time period  they were just doing what they needed to do today   we have people trying to solve different sorts  of money problems and these may or may not work   but everyone is doing what they need to do in  that situation in the 17th and 18th century   they made whatever they had to use as money work  whether it was paper or it was coinage or it was   a barter and we do that same thing today isn't it  interesting though that we can look back into the   17th and 18th century and we can say are some of  the solutions back there uh you know bitcoin is   something like the barter ledger situation is that  the answer is the answer going back to coinage   or some sort of you know gold and silver is it  some mix between the two we just won't know we're   going to have to wait and see how all this works  out and I'm sure it's going to be quite a ride

Channel: Townsends

Views: 396,918

Keywords: townsends, jas townsend and son, reenacting, history, 18th century, 19th century, jon townsend, 18th century cooking, money, gold, silver, coins, silver coins, gold coins

Id: I5INCV7AQTI

Length: 35min 40sec (2140 seconds)

Published: Tue Jul 06 2021