Chapter II Pages: 20-21

The close of the War of the Revolution found the finances of the country in almost hopeless confusion, and affairs had improved but little by 1790. There was no mint, and but little specie, and much of the trade, especially in the interior, was carried on by barter. All the coins in circulation were foreign, and many were badly worn and mutilated.

The commonest coin was the Spanish "milled dollar," or "piece of eight," which was obtained in trade from the West Indies; after the Revolution this coin, with its subdivisions, was the recognized unit of account. The coins of Great Britain were in limited circulation in all the states, and reckoning was often in pounds, shillings, and pence; but because of the limited supply of English coins, and from other causes, the value of the pound and shilling differed materially in the different states. Hence it was often necessary, in business transactions, to name the state of exchange. The principal gold coins in use, other than the British pieces, were the French guinea and pistole, the Portuguese moidores and johannes, or "Joe," and the Spanish doubloon and pistole; but the number of these was small. The silver coins in circulation, besides British pieces and the Spanish dollar, were chiefly the crown and livre of France. The copper coins were principally those of Great Britain. The supply of fractional currency was inadequate to the demand, and silver pieces were often cut into halves and quarters in order to make change.

In 1785 Congress adopted as the currency basis the silver dollar, on a decimal system, as exemplified in the Spanish dollar; and by 1790, in making exchanges, the value of all coins was quite generally referred to this standard. The system of reckoning in shillings and pence, however, persisted in some places and with some people. The equivalent of the dollar in New England and Virginia was 6 shillings; in South Carolina, 32 1/2 shillings; in Georgia, 5 shillings; and in the four other colonies, 7 1/2 shillings.

In addition to specie, there was a large amount of paper money in circulation. During the Revolution, and in the succeeding years of the Continental period, both the Confederation and the individual states had made large issues of paper money, and, being unable to redeem it, had refunded now and then by new issues. This was never worth its face value, and stead-ily depreciated from the date of issue. In march, 1780, the Continental currency had fallen to such a point that one dollar in silver was worth 65 dollars in paper. "Not worth a continental" came to be the phrase used for anything practically worthless. There can be no doubt that this paper money had much to do with the demoralization of industry during the Continental period. A contemporary writer and close observer of the times__Peletiah Webster, of Philadelphia says: "We have suffered more from this cause than from any other cause of calamity. It has killed more men, perverted and corrupted the choicest interests of our country more, and done more injustice, than even the arms and artifices of our enemies." And again he says: "If it saved the state, it has violated the equity of our laws, corrupted the justice of our public administration, enervated the trade, industry, and manufactures of our country, and gone far to destroy the morality of our people." M. de Warville, in his travels in America in 1788, inveighed against the paper money of Rhode island and New Jersey in tones no less uncertain. As a climax to the whole, Congress even refused to accept its own paper money in payment of postage.

In Virginia the lack of specie was supplied largely by paper currency called "tobacco money." This was a genuine asset currency, the notes being simply the public warehouse receipts for the tobacco placed therein. They circulated freely in the state, according to the known value of the tobacco.

In 1790 there were but three banks in the United States: The Bank of North America, established in the city of Philadelphia; the Bank of New York; and the Bank of Massachusetts, in Boston. Of these three, the first-named is the only one which had at any time a direct relation with the Federal Government.