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Benjamin Franklin and Adventures with Paper Currency - Part 2

Paper Currency as a Substitute for Money

Between the late 18th and early 20th centuries, banks backed their issuances of paper currency — bank notes — with reserves of gold and silver coins. Under normal conditions, bank notes were convertible at face value on demand into money. Today, gold and silver backing and convertibility conditions have been removed. Now, paper currency only circulates based on the force of the Federal government through legal tender laws.

Benjamin Franklin’s life spans most of the first age of paper currency in the colonies and the United States of America. Arguably, he is its most interested party and ardent defender. He did not create the first paper currency in America, nor was he yet born when it was first used.

Temporary Paper Currency in the Colonies

Early experiments with paper currency began in 1690 in New England. Until the first two decades of the 18th century in the Carolinas, New York, and New Jersey, they used paper currency for limited emergency wartime exercises that were temporary in design. In the 1720s, colonial legislatures started issuing paper currency. The goal was to make it a permanent fixture within their colonies. Pennsylvania was an active leader and the most successful colony in this movement, with no small thanks to Benjamin Franklin.

Permanent Paper Currency in the Colonies

It is the birth of the permanent peacetime paper currency that Franklin was able to benefit. No other American was involved over as long a period of time with so many different facets of colonial paper currency as Benjamin Franklin — certainly no other American with such a preeminent stature in science, statesmanship, and letters.

Franklin arrived in Philadelphia the year paper currency was first issued by Pennsylvania (1723), and soon became a keen observer and commentator on colonial currency. He wrote pamphlets, treatises, and letters about paper currency. He designed and printed paper currency for various colonies. He entertained ideas about and proposed alternative monetary systems.

Lobbying Paper Currency for the United States

As an assemblyman for the colony of Pennsylvania, he was involved in the debates during the 1740s and 1750s over management of its paper currency. As a lobbyist for various colonies to the British court, he dealt with conflicts over colonial paper currency arising between Britain and her colonies in the 1760s and 1770s. Finally, at the end of his life, as one of the preeminent Founding Fathers at the 1787 Constitutional Convention, he participated in constitutionally ending the first age of paper currency (Continentals) and helped usher in the second age of paper currency in America.

Benjamin Franklin is arguably the preeminent authority on paper currency in America in this period.

posted by Don Marchand @ 9:45 AM