A shortage of money was a problem for the American colonies. England did not supply its colonies with sufficient coinage and prohibited them from making their. The early settlers brought coins from Europe but they went quickly back there to pay for supplies. Without enough money, the colonists had to barter for goods or use primitive currency such as Indian wampum, nails, and tobacco. In time, some Spanish, Portuguese and French coins appeared in the colonies as a result of trade with the West Indies. The most famous of these was the Spanish Dollarwhich served as the unofficial national currency of the colonies for much of the 17th and 18th centuries. With its distinctive design and consistent silver content, the Spanish dollar was the most trustworthy coin the colonists knew. InMassachusetts challenged England’s ban on colonial coinage. The colony struck a series of silver coins, including the Pine Tree Shilling.
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Money, or the lack thereof, was a persistent problem in colonial America. The colonists were under the control of Great Britain, where the legal tender was both gold and silver, known as a bimetallic system. Yet British coins circulated only rarely in the colonies. The colonists had an unfavorable balance of trade with the mother country, meaning that the value of the goods they imported from England greatly exceeded the value of the goods exported back. Most specie that flowed into the colonies through trade quickly flowed back to England in payment for these goods. Nor did the colonists have access to specie through any domestic gold or silver discoveries. In order to have a functioning economy, the colonists were forced to turn to other commodities for use as money. Spanish coins, from trade with the West Indies and Mexico, circulated freely in the colonies as legal tender. While goods were officially valued in British pounds, in their day-to-day transactions colonists more commonly used the Spanish dollar as their unit of account. From to , wampum — the shells prized by local Native American tribes — were legal tender in Massachusetts. This promoted the development of the colony by facilitating trade, but the British did not approve of this monetary system and ended the practice in Throughout the seventeenth century, colonists further south in Virginia and North Carolina employed tobacco leaves as commodity money. In an effort to address the problem of durability, they later substituted tobacco warehouse receipts for the actual tobacco. These receipts were like promissory notes: they recorded the value of tobacco stored in warehouses for later sale. Since the bearer of the receipt had a claim on that exact amount of tobacco, the receipts circulated like currency. But tobacco receipts were not easily divisible, and the supply of both tobacco and wampum in circulation could fluctuate widely, making them inadequate stores of value. Lacking a viable commodity to use as money, local colonial governments of the eighteenth century instead turned to paper money. Paper money could take one of two forms. Commodity-backed paper money was similar to the tobacco warehouse receipts. The value of the paper was directly equivalent to and convertible into a specific amount of some asset, such as gold or silver. But since the lack of gold and silver was precisely the problem in the colonies, colonists instead turned to the one asset they held in abundance: land. During the eighteenth century, several colonial governments created land offices whose purpose was to issue paper money backed by real estate. Colonists could take out loans using their land as collateral, receiving paper notes of the land office in return. These notes circulated in the local economy as currency. Borrowers could pay back their loans plus interest with the paper money or with harder-to-attain gold or silver. Failure to pay resulted in the foreclosure of their land, which could then be sold to pay off the loan. In the mid-Atlantic colonies of Pennsylvania, New York, New Jersey, Delaware, and Maryland, where land offices were most successful, the interest from these loans provided colonial governments with adequate funds for the day-to-day costs of government administration, lessening and sometimes even eliminating the necessity of taxation.
English Colonial Expansion
Demonstrating comprehension, Making connections, Making economic decisions, Questioning and critical thinking skills. This lesson also meets national standards of learning for social studies. Officials of the Virginia Company established the colony at Jamestown to make a profit. They expected the colonists to find marketable natural resources, develop industries or produce an agricultural product that would succeed in making money for the colony and its investors in England. After finding no precious metals and failing at such endeavors as glassmaking and silk production, John Rolfe finally succeeded by growing a sweet variety of tobacco which was all the rage in England. Because growing tobacco also required a lot of hard work and labor, more people human resources were needed to work in the fields. Economics of Tobacco Worksheet. Tobacco Period Quotes.
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English Colonial Expansion
Early American currency went through several stages of development during the colonial and post-Revolutionary history of the United States. Because few coins mobey minted in the thirteen colonies that became the United States, foreign coins like the Spanish dollar were widely circulated. Colonial governments sometimes issued paper coloyn to facilitate economic activities. The British Parliament passed Currency Acts in, and that regulated colonial paper money. During the American Revolutionthe colonies became independent states. Freed from British monetary regulations, they issued paper money to pay for military expenses. The Continental Congress also issued paper money during the Revolution, known as Continental currencyto fund the war effort. Both state and Continental currency depreciated rapidly, becoming practically worthless by the end of the war. This depreciation was caused by the government printing large amounts of currency in order to meet the demands of war. In addition, British counterfeit gangs added to the problem. Only a few counterfeiters were caught and hanged. There were three general types of money in the colonies of British America : specie coins wat, paper money and commodity money. Commodities such as tobaccobeaver skins, and wampum served as money at various times and places. Cash in the colonies was denominated in pounds, shillings, and pence. All colonial pounds were of less value than the British pound sterling. One by one, colonies began to issue their own paper money to serve as a convenient medium of exchange. Inthe Province of Massachusetts Bay created «the first authorized paper money issued by any government in the Western World «. Other colonies followed the example of Massachusetts Bay by issuing their own paper currency in subsequent military conflicts. The paper bills issued by the colonies were known as » bills of credit «. Bills of credit were usually fiat money : they could not be exchanged for a fixed amount of gold or silver coins upon demand. The governments would monye retire the currency by accepting the bills for payment of taxes. When colonial governments issued too many bills of credit or failed to tax them out of circulation, inflation resulted.
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