Currency in Colonial America

In modern day society, currency is an imperative part of our everyday living. From purchasing groceries to paying bills, it is integrated into practically every aspect of our culture. It is hard to imagine life without currency as a means of competitive exchange. However, in Colonial America, there were several different types of money used in numerous ways. One means of currency was not dominant over any other until well after the American Revolutionary War. The question arises, how did colonists handle fiscal transactions without a bank system in place? They did so in 3 different forms: Native American wampum, trading goods, and early forms of paper money such as “tobacco notes”. A fully functioning society is dependent upon a strong and opportunistic economy. Currency in Colonial America plays an integral part in forming the structure of society as we know it today. Currency is defined as circulation as a medium of exchange, a common article for bartering, or paper money in circulation. Dating back to as early as 950 B.C., gift exchange was a glorified practice by the wealthy social class. Native Americans adopted a form of this barter system, which was modified by colonists into one of the earliest forms of banking in America. The most popular form of currency among Native Americans was small beads made from clam shells, called wampum. The word "wampum" comes from the Narragansett word for white shell beads. It was widely used for an informal money system, storytelling, a memory aid, and record keeping. Other uses included marriage ceremonies and in some cases, for religious purposes.

Wampum’s use of money undoubtedly came about as an extension of its desirability for ornamentation. Beads of it were strung together in short lengths of about 18 inches or much longer ones of about 6 feet. Colonists adopted this system from the Native Americans and began accepting wampum as currency. In 1637 the colonists declared it legal tender for smaller transactions: four white beads or two blue beads equaled an English penny. Colonists increased its production immensely causing inflation. In turn, wampum’s fiscal value plummeted. In 1661, counterfeit wampum had become so rampant that it was hardly ever used again. Another means of exchange among colonists in early America was trading goods and services. This practice became prevalent due to a lack of a consistent form of currency exchange. Early forms of fiscal tender included iron nails, animal skins, wheat, corn, indigo, coal, or cattle. Without a set standard in place, colonists exchanged what was readily and easily available to them. Many exchanged portions of their harvests from personal cash crops to provide means to acquire the goods they desired. Merchants thrived in these times, as they had the tools and skills necessary to produce what was in high demand from the colonists in their area. The problem with this format of exchange was that it creates a double standard. Trading on a barter system is very subjective. Without providing a good or service that is in high demand, it makes trading with others extremely difficult.

The foundation of modern day American currency practices was put in place with the earliest form of paper money called “tobacco notes”. These were certificates attesting to the quality and quantity of tobacco deposited in public warehouses. It was by far the most stable source of currency in the Chesapeake colonies because it could almost always be exchanged for gold or silver. It was the main source of income for colonists, especially in Virginia and Maryland. Virginia went as far as to declare it legal tender for all colonists in 1727. However, with the printing press in full production, counterfeiting was quite simple. This was exploited often, as one could print a note without any fiscal security to back it up. Toward the end of the Revolution, the paper continental note was all but worthless as a store of value or medium of exchange. America’s currency system has evolved in part due to ingenuity of its people. Without logical thinking and intellectual government progress, our country could still be the unorganized union it once was. The United States of America has come a long way since 1775, when in North Carolina seventeen different forms of currency were accepted. Without Native American wampum, trading goods, and early forms of paper money such as “tobacco notes”, our current way of life would not be possible. Banking institutions, as well as systems of credit, would not exist without the foundation that was laid by colonists in our early days as a nation.

Bibliography

"currency." Merriam-Webster Online Dictionary. 2007. http://www.merriam-webster.com [accessed September 15th, 2007].

Glyn Davies. A History of Money from Ancient Times to the Present Day, 3rd ed. (Cardiff: University of Wales Press, 2002)

Herman E Kroos. Documentary History of Banking and Currency in the United States, v. 1 (NY 1983) p.5

Bibliography: "currency." Merriam-Webster Online Dictionary. 2007. http://www.merriam-webster.com [accessed September 15th, 2007]. Glyn Davies. A History of Money from Ancient Times to the Present Day, 3rd ed. (Cardiff: University of Wales Press, 2002) Herman E Kroos. Documentary History of Banking and Currency in the United States, v. 1 (NY 1983) p.5