In the American Colonies, there was a chronic shortage of gold and silver coins. However, the native people would honor the gifts the colonists gave them, such as muskets and knives, horses and domesticated animals, with wampum (shells strung together to form belts, bracelets, etc.), and the colonists could spend that wampum with the Indians for food and pelts; and so wampum also became an accepted form of money. In most of the colonies, wampum was legal tender and one could pay taxes with it. What would become money generally was up in the air until Benjamin Franklin attended an Iroquois Nation powwow when he was a young man. He was very inspired by the separation of powers he found in their governance, which was an inspiration for our republic. While he was there, a brave came into the camp laden down with wampum, which he proceeded to give to the chief who distributed it to all the chiefs of the tribes and clans. The chief recognized the question Ben Franklin had and explained to him that in Indian culture, wampum is not money, but is used to make flags and belts to commemorate and remember all the events and gifts that are given during the year. “Of course, there always has to be enough wampum to make all the ceremonial mementos we use to honor our gifts to each other.” Ben Franklin realized in that instant that “there always has to be enough money for all the transactions the people want to make.” He became a major advocate of fiat paper money, called Colonial Scrip, and attributed the prosperity the colonists enjoyed to its use.

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When Franklin was in England representing the colonists, he was dismayed to discover the unemployment and poverty and almshouses and debtors prisons there. It was explained to him that there was a population explosion and too many people without enough work. He wrote: “There is abundance in the Colonies, and peace is reigning on every border. It is difficult, and even impossible, to find a happier and more prosperous nation on all the surface of the globe. Comfort prevails in every home. The people, in general, keep the highest moral standards, and education is widely spread… We have no poor houses in the Colonies; and if we had some, there would be nobody to put in them, since there is, in the Colonies, not a single unemployed person, neither beggars nor tramps.”

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This was not the case in England, which had the Bank of England and a debt-based monetary system in place – and where debtors who could not afford to pay their debts were often thrown in jail. There was plenty of poverty in the streets of London and elsewhere. Here, Franklin explains the difference between England and her colonies: 

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“In the colonies, we issue our own paper money. It is called ‘Colonial Scrip.’ We issue it in proper proportion to make the goods pass easily from the producers to the consumers. In this manner, creating ourselves our own paper money, we control its purchasing power and have no interest to pay to anyone… You see, a legitimate government can both spend and lend money into circulation, while banks can only lend significant amounts of their promissory bank notes, for they can neither give away nor spend but a tiny fraction of the money the people need. Thus, when your bankers here in England place money in circulation, there is always a debt principal to be returned and usury to be paid. The result is that you have always too little credit in circulation to give the workers full employment. You do not have too many workers, you have too little money in circulation, and that which circulates, all bears the endless burden of un-payable debt and usury.”

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Soon enough, however, the Bank of England had Parliament impose restrictions on the Colonies’ issuance of Colonial Scrip. The first law was enacted in 1751, with more restrictive measures in place by 1763. Colonial Scrip became illegal tender, and the British Parliament declared that all taxes could only be paid in coin. Poverty and unemployment began to plague the colonies just as it had in England, because the operating medium had been cut in half and there were insufficient quantities of money to pay for goods and work. Indeed, this was the cause of the Revolutionary War, and not the Stamp Act or a tax on tea, as is taught in all history textbooks.

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“The Colonies would gladly have borne the little tax on tea and other matters had it not been the poverty caused by the bad influence of the English bankers on the Parliament, which has caused in the Colonies hatred of England and the Revolutionary War.” – Benjamin Franklin

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One of the first Acts of the Continental Congress was to issue Continentals as the currency of the Colonies. It was the issuing of the Continentals that gave tangible evidence that the Colonies were united, and Continentals financed the Revolution. What is not taught in conventional history is that the British counterfeited more than twice the amount (perhaps 8 times) authorized by the Congress and after the War the currency lost its value until it was practically worthless. When it came time to write the Constitution, there was a general sense that coin was much more reliable than paper scrip and so the relevant paragraph reads: Congress shall have the authority “To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures”. To this day Congress issues the coins, debt free.

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Updated: Jun 10, 2019 Original: Oct 27, 2009

Committees of Correspondence

History.com Editors

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The Committees of Correspondence were the American colonies’ means for maintaining communication lines in the years before the Revolutionary War. In 1764, Boston formed the earliest Committee of Correspondence to encourage opposition to Britain’s stiffening of customs enforcement and prohibition of American paper money. The following year, New York formed a similar committee to keep the other colonies notified of its actions in resisting the Stamp Act. In 1773, the Virginia House of Burgesses proposed that each colonial legislature appoint a committee for intercolonial correspondence. The exchanges that followed built solidarity during the turbulent times and helped bring about the formation of the First Continental Congress in 1774.

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Committees of Correspondence were the American colonies’ first institution for maintaining communication with one another. They were organized in the decade before the Revolution, when the deteriorating relationship with Great Britain made it increasingly important for the colonies to share ideas and information. In 1764, Boston formed the earliest Committee of Correspondence, writing to other colonies to encourage united opposition to Britain’s recent stiffening of customs enforcement and prohibition of American paper money. The following year New York formed a similar committee to keep the other colonies notified of its actions in resisting the Stamp Act. This correspondence led to the holding of the Stamp Act Congress in New York City. Nine of the colonies sent representatives, but no permanent intercolonial structure was established. In 1772, a new Boston Committee of Correspondence was organized, this time to communicate with all the towns in the province, as well as with “the World,” about the recent announcement that Massachusetts’s governor and judges would hereafter be paid by–and hence accountable to–the Crown rather than the colonial legislature. More than half of the province’s 260 towns formed committees and replied to Boston’s communications.

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In March 1773, the Virginia House of Burgesses proposed that each colonial legislature appoint a standing committee for intercolonial correspondence. Within a year, nearly all had joined the network, and more committees were formed at the town and county levels. The exchanges that followed helped build a sense of solidarity, as common grievances were discussed and common responses agreed upon. When the First Continental Congress was held in September 1774, it represented the logical evolution of the intercolonial communication that had begun with the Committees of Correspondence.