The paper money that funded the American Revolution led to post-war grievances, the most well-known of which was Shays’s Rebellion in backcountry Massachusetts. For years after the war the Boston legislature imposed taxes, falling mainly on those least able to pay, for the full payment in specie of the highly-depreciated notes called Continentals held mostly by well-to-do legislators and bankers.As a further aggravation, the war was fought mostly by those on whom the taxes fell, while the elites stayed home.(See the Nobel-worthy Shays's Rebellion: The American Revolution's Final Battle by Leonard L. Richards)
Petitions for redress having been ignored by the legislature for several years, town leaders in western Massachusetts organized marches, beginning in August 1786, to shut down the courts, demanding that the state constitution be revised. Eventually, through force of arms, the government put a halt to the uprising while mischaracterizing it as a refusal of the poor to pay their just taxes.
Shays’s Rebellion became a propaganda ploy to lift George Washington from his retirement at Mount Vernon to lend his prestige as father of his country to serve as president of the Constitutional Convention in Philadelphia. Meeting in secrecy from May 25, 1787 to September 17, 1787, representatives from the various states formed a new federal charter in violation of the agreement to amend the existing one, the Articles of Confederation.
The result was a constitution with enough loose language and new powers that Alexander Hamilton and subsequent Hamiltonians exploited into the document today that is largely ignored or corrupted through political double-talk. Thus, for example, we have a central bank with a monopoly on the issue of fiat money the rest of us are forced to use, while the Constitution prohibits states issuing “any Thing but gold and silver Coin a Tender in Payment of Debts.” (Article 1 Section 10)
Today, people don’t know or care enough to protest government's fake money, but in early 1786 Thomas Paine was one of those who did. The author ofCommon Sense andThe American Crisis essays, who as a soldier in the Continental army lifted the spirits of fellow soldiers and civilians alike with the opening words of his first essay, These are the times that try men’s souls, understood the theft that the Continental Congress had committed with its paper emissions.
As part of his essay Dissertations on Government, etc. , published in February, 1786, Paine included a scathing condemnation of paper money that is Austrian School-consistent in most ways. (“The pretense for paper money has been, that there was not a sufficiency of gold and silver. This, so far from being a reason for paper emissions, is a reason against them.”)
In honor of his upcoming birthday on January 29 and the publication of Common Sense on January 10, 1776, I present Paine’s insightful essay on paper money.
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I shall enumerate some of the evils of paper money and conclude with offering means for preventing them.
One of the evils of paper money is, that it turns the whole country into stock jobbers. The precariousness of its value and the uncertainty of its fate continually operate, night and day, to produce this destructive effect. Having no real value in itself it depends for support upon accident, caprice and party, and as it is the interest of some to depreciate and of others to raise its value, there is a continual invention going on that destroys the morals of the country.
It was horrid to see, and hurtful to recollect, how loose the principles of justice were left, by means of the paper emissions during the war. The experience then had, should be a warning to any assembly how they venture to open such a dangerous door again.
As to the romantic, if not hypocritical, tale that a virtuous people need no gold and silver, and that paper will do as well, it requires no other contradiction than the experience we have seen. Though some well-meaning people may be inclined to view it in this light, it is certain that the sharper always talks this language.
There are a set of men who go about making purchases upon credit, and buying estates they have not wherewithal to pay for; and having done this, their next step is to fill the newspapers with paragraphs of the scarcity of money and the necessity of a paper emission, then to have a legal tender under the pretense of supporting its credit, and when out, to depreciate it as fast as they can, get a deal of it for a little price, and cheat their creditors; and this is the concise history of paper money schemes.
But why, since the universal custom of the world has established money as the most convenient medium of traffic and commerce, should paper be set up in preference to gold and silver? The productions of nature are surely as innocent as those of art; and in the case of money, are abundantly, if not infinitely, more so. The love of gold and silver may produce covetousness, but covetousness, when not connected with dishonesty, is not properly a vice. It is frugality run to an extreme.
But the evils of paper money have no end. Its uncertain and fluctuating value is continually awakening or creating new schemes of deceit. Every principle of justice is put to the rack, and the bond of society dissolved: the suppression, therefore, of paper money might very properly have been put into the act for preventing vice and immorality.
The pretense for paper money has been, that there was not a sufficiency of gold and silver. This, so far from being a reason for paper emissions, is a reason against them.
As gold and silver are not the productions of North America, they are, therefore, articles of importation; and if we set up a paper manufactory of money it amounts, as far as it is able, to prevent the importation of hard money, or to send it out again as fast it comes in; and by following this practice we shall continually banish the specie, till we have none left, and be continually complaining of the grievance instead of remedying the cause.
Considering gold and silver as articles of importation, there will in time, unless we prevent it by paper emissions, be as much in the country as the occasions of it require, for the same reasons there are as much of other imported articles. But as every yard of cloth manufactured in the country occasions a yard the less to be imported, so it is by money, with this difference, that in the one case we manufacture the thing itself and in the other we do not. We have cloth for cloth, but we have only paper dollars for silver ones.
As to the assumed authority of any assembly in making paper money, or paper of any kind, a legal tender, or in other language, a compulsive payment, it is a most presumptuous attempt at arbitrary power. There can be no such power in a republican government: the people have no freedom, and property no security where this practice can be acted: and the committee who shall bring in a report for this purpose, or the member who moves for it, and he who seconds it merits impeachment, and sooner or later may expect it.
Of all the various sorts of base coin, paper money is the basest. It has the least intrinsic value of anything that can be put in the place of gold and silver. A hobnail or a piece of wampum far exceeds it. And there would be more propriety in making those articles a legal tender than to make paper so. . . .
The laws of a country ought to be the standard of equity, and calculated to impress on the minds of the people the moral as well as the legal obligations of reciprocal justice. But tender laws, of any kind, operate to destroy morality, and to dissolve, by the pretense of law, what ought to be the principle of law to support, reciprocal justice between man and man: and the punishment of a member who should move for such a law ought to be death.
When the recommendation of Congress, in the year 1780, for repealing the tender laws was before the Assembly of Pennsylvania, on casting up the votes, for and against bringing in a bill to repeal those laws, the numbers were equal, and the casting vote rested on the Speaker, Colonel Bayard. "I give my vote," said he, "for the repeal, from a consciousness of justice; the tender laws operate to establish iniquity by law." But when the bill was brought in, the House rejected it, and the tender laws continued to be the means of fraud.
If anything had, or could have, a value equal to gold and silver, it would require no tender law: and if it had not that value it ought not to have such a law; and, therefore, all tender laws are tyrannical and unjust, and calculated to support fraud and oppression.
Most of the advocates for tender laws are those who have debts to discharge, and who take refuge in such a law, to violate their contracts and cheat their creditors. But as no law can warrant the doing an unlawful act, therefore the proper mode of proceeding, should any such laws be enacted in future, will be to impeach and execute the members who moved for and seconded such a bill, and put the debtor and the creditor in the same situation they were in, with respect to each other, before such a law was passed. Men ought to be made to tremble at the idea of such a bare-faced act of injustice. It is in vain to talk of restoring credit, or complain that money cannot be borrowed at legal interest, until every idea of tender laws is totally and publicly reprobated and extirpated from among us.
As to paper money, in any light it can be viewed, it is at best a bubble. Considered as property, it is inconsistent to suppose that the breath of an assembly, whose authority expires with the year, can give to paper the value and duration of gold. They cannot even engage that the next assembly shall receive it in taxes. And by the precedent (for authority there is none), that one assembly makes paper money, another may do the same, until confidence and credit are totally expelled, and all the evils of depreciation acted over again. The amount, therefore, of paper money is this, that it is the illegitimate offspring of assemblies, and when their year expires, they leave a vagrant on the hands of the public.
