Currency Act
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The Currency Act of 1764 is an Act of the Parliament of Great Britain (citation 4 Geo. III c. 34) which prohibited the American colonies from issuing paper currency of any form. Additionally, Britain had coined almost no silver or copper between 1760 and 1816 and discouraged any American attempts to do so. The colonies were continuously running trade deficits with Britain and shipping gold and silver to Britain was the only way to balance the excess of imports over exports.[1] British merchants engaged in credit sales to the colonies, but the severe British financial crisis of 1762 to 1772 caused British merchants to call in colonial debts.[2] The credit crisis of 1772 caused the bankruptcy rate to double. The inability to provide liquidity by the issuing of paper currency made the monetary contraction more severe. New York City property values and the importation of slaves both fell by one-half.
This Act offset the economy of the colonies and was widely opposed. It hurt trade by removing the circulating medium and went a considerable way in creating the dissatisfaction in the Colonies that eventually led to the American Revolution. Some, such as Benjamin Franklin and Peter Cooper, believed this to be the primary cause of the Revolutionary War.
The colonies created their own money, called Colonial Scrip, before this happened. This money was government-issued fiat currency and had little or no inherent value, as Colonial Scrip was not backed by a Gold or Silver Standard. Some Colonies, such as Pennsylvania and New York, were responsible and issued only enough notes to keep trade healthy, thus keeping the notes at par with gold. Other Colonies had different systems with less discretion and had inflation issues. The Currency Act is not actually one of the Intolerable Acts, although they are closely related.
It has been said that the Currency Act of 1764 was the result of Benjamin Franklin's testimony to the British Board of Trade in which he explained the benefits of Colonial Scrip, which allowed the government instead of private banks to have the benefit of money creation, thus lowering the tax burden on the people. This was a complete reversal from the established British school of economics in which the Government borrowed hard money (gold and silver) from private banks at interest, and it was viciously opposed by the British banking interests for this reason.
Parliament gave permission, in some cases, for colonies to issue limited amounts of paper currency.[3] In 1770, the Province of New York was permitted to issue 120,000 pounds of paper currency.
Franklin and many others thought this Act to be the true cause of the American Revolution. Peter Cooper, Vice President of the New York Board of Currency during the 1800s, apprentice of Secretary of the US Treasury from 1801-14 Albert Gallatin, and founder of Cooper Union College, believed that taking away the circulating medium of exchange was a much greater cause for the American Revolution than any other act by Parliament:
After Franklin had explained…to the British Government as the real cause of prosperity, they immediately passed laws, forbidding the payment of taxes in that money. This produced such great inconvenience and misery to the people, that it was the principal cause of the Revolution. A far greater reason for a general uprising, than the Tea and Stamp Act, was the taking away of the paper money.[1]
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[edit] Other Acts
There was also a Currency Act in 1751 which limited the amount of currency the American colonies could produce.
The Gold Standard Act of the United States (1900) is sometimes called the "Currency Act."
[edit] See also
[edit] References
- Nash, Garby, The Urban Crucible, The Northern Seaports and the Origins of the American Revolution, 1986, ISBN 0674930584
- Laumitz-Schurer, Leopold, Loyal Whigs and Revolutionaries, The making of the revolution in New York, 1765-1776, 1980, ISBN 0-8147-4994-1
[edit] Footnotes
[edit] External links
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