Summary
Highlights
Studying cultures, whether past or present, can be facilitated by understanding commonalities like money. While we perceive modern money as complicated, 18th-century money was bewilderingly complex, with ancient and new forms constantly changing and coexisting. Money needs to be a medium of exchange, a store of value, easily identifiable, and transportable.
Money serves as a medium of exchange, a store of value, and must be easily identifiable and transportable. Gold and silver coins historically fulfilled these criteria best, being easily weighed, judged for purity, and broken down into increments. They represented the ultimate standard for money in Great Britain and the colonies during the 18th century.
The gold guinea was the most valuable coin, used for large transactions. Silver coins like the crown (equivalent to a hundred-dollar bill) and the shilling (like a twenty-dollar bill) were common for moderate transactions. Smaller copper token coins, such as half-pennies and farthings, were used for daily transactions, despite their metal value being less than their face value.
The American colonies faced a severe coin shortage. Britain made it illegal to export gold and silver to the colonies, and a trade imbalance further drained silver from the colonies. This led to a reliance on foreign coins, most notably the Spanish milled dollar (piece of eight), which was often physically cut into smaller pieces to create change, highlighting its value based on weight and purity rather than its form.
To address the coin shortage, Massachusetts began minting its own coins, like the pine tree shilling, in 1652. These coins were intentionally underweight to keep them in the colonies but became widely circulated. Counterfeiting and 'clipping' (shaving off bits of metal from coins) were rampant problems. Milling on the edges of coins was introduced to combat clipping.
Barter systems were prevalent, especially with Native Americans trading furs for goods. Within the colonies, informal credit systems using IOUs and ledgers allowed for transactions without physical coins. Commodity money also emerged, with tobacco receipts in Virginia and Maryland serving as a form of currency, redeemable in tobacco. Early Native American wampum also functioned as currency, though its value fluctuated with the commodity it represented.
Massachusetts pioneered government-issued paper money in the Western world in 1690, following a failed military campaign to pay soldiers. Initially, it was a one-time issue redeemable in silver from future taxes. However, the government continued issuing more, causing its value to depreciate. This led to complications, with merchants being forced to accept it at par and eventually the creation of multiple types of paper money (old tenor, middle tenor, new tenor), all trading at different values.
Great Britain intervened to stabilize Massachusetts' currency by withdrawing paper money and importing British copper and Spanish silver coins. Despite this, Massachusetts eventually printing paper money again, prompting Britain to completely outlaw its use. This only partially solved the problem, as other colonies continued to issue their own fluctuating paper currencies, creating an incredibly complex monetary landscape.
The 17th and 18th centuries were periods of intense monetary experimentation, similar to today with Bitcoin and other innovations. The distributed ledger system of Bitcoin shares parallels with the localized ledger bartering system, offering a "trustless" solution to verified transactions. The historical struggles with currency stability and innovation offer valuable insights into today's financial landscape, as societies continue to adapt and create new forms of money.