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Redemption theories and the value of American colonial paper money

Published online by Cambridge University Press:  01 December 2015

Ron Michener
Ron Michener*
Affiliation:
University of Virginia
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Abstract

Before the Revolution American colonies issued paper money known as ‘bills of credit’. The bills issued in the Middle colonies held their value surprisingly well despite large wartime fluctuations in the quantity issued, but those issued in New England depreciated as the quantity in circulation increased. The bills' stable purchasing power in the Middle colonies has often been attributed to the redemption provisions enacted when the bills were issued. Similar provisions in New England supposedly failed because New England failed to enforce them. This article explores the comparative enforcement of redemption provisions in the two regions, and in New York in particular, and concludes that differential enforcement does not explain the disparity between the New England experience and that in the Middle colonies.

Keywords

colonial currencyAmerican coloniesbills of creditredemption theorybacking theory

JEL classification

E31: Price Level • Inflation • Deflation E42: Monetary Systems • Standards • Regimes • Government and the Monetary System • Payment Systems N11: U.S. • Canada: Pre-1913
Type
Articles
Information
Financial History Review , Volume 22 , Issue 3 , December 2015 , pp. 315 - 335
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Copyright
Copyright © European Association for Banking and Financial History e.V. 2015 

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