USA > Massachusetts > Suffolk County > Professional and industrial history of Suffolk County, Massachusetts, Volume II > Part 17
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To show the financial conditions under which business was carried on at that time the following extract is given from a diary of the period : " They give the title of a merchant to every trader who rates his goods according to the time and specie they pay in, namely, pay, money, pay in money, and trusting. Pay means grain, pork, beef, or any other commodity exchanged at the prices set by the General Court. Money is pieces of S reals, Boston or Bay shillings or good hard money, as some- times silver coin is called, also wampum, namely, Indian beads, which serves as change. Pay as money, means the commodities such as grain, pork, beef, etc., only at a rate one-third cheaper than that set by the General Court; and trust is the purchase for payment at the end of an agreed upon period. When the buyer comes to ask for a commodity, before the merchant answers that he has it he says ' Is your pay ready? Perhaps the buyer replies, ' Yes.' . What do you pay in? ' says the mer- chant. The buyer having answered, then the price is set. If he wants a 6 penny knife, in pay it is 12 pence; if in pay as money, 8 pence ; if in hard money its price is its own value, 6 pence."
But besides these complications growing out of these different meas- ures of value, to which paper money added a fresh uncertainty, there was the difficulty of determining the true value even of hard money, for the foreign coins which came into circulation, together with the Pine Tree money, as the Boston mintage was called, were washed,
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clipped, filed, and in various other ways made to lose a considerable part of their value by unscrupulous holders of them. The General Court enacted stringent laws to prevent these frauds. It was ordered that any one found guilty of the crime of debasing the coins in use should stand in the pillory and have one of his cars cut off; and at another period the crime was made one warranting a capital punish- ment. But in every store and in every family it was customary in the early years of the last century to keep a pair of scales to ascertain the value of all gold and silver coin before it was taken or passed.
Although the emissions of paper money were tolerably extensive from 1100 onward, bringing about such a debasement of the currency as to increase the price of labor to quite double its ordinary proportions, there was still a belief on the part of the people that their condition would be a great deal better if they had more money. As a writer speaking of the time (1:14) says: " At this period there were three different views as to finance held by different sections of the people. One adopted the rule in regard to money, that nothing is useful but what is honest, ex- pressing in their views of paper currency the conclusion that this should be abolished and no currency allowed except that of the precious metals ; a second, both numerous and respectable, was made up of those who believed that it was desirable to form a bank and issue money based on real estate; a third favored a system of loaning by the province to the people on interest, payable annually, and applicable when applied to the liquidation of the public charges."
The hard money advocates, while having a great deal in current ex- perience to sustain their contention, seem never to have had a popular following. They were looked upon as theorists, whose opinions were entitled to very little weight in the every day affairs of life. The ad- vocates of a bank were decidedly influential, and for a time seemed to have a fair chance of carrying their project to a successful ending. But they were opposed in this by Governor Dudley, who, while advocating the banking method some years previous, had at the time we refer to (1:1t - 15) come to the conclusion that notes of this kind should be issued by the government rather than by corporations.
Shortly after the arrival of Governor Shute, in the fall of 1:16, the General Court passed an order: "That there be an additional loan of $100,000." The reasons assigned for this enactment was the heavy debt incurred in the French War, that most of the silver money had been sent to pay debts contracted in England, and that there was then
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a scarcity of province bills. The new loan was to be committed to the care of county treasurers, and was to be proportioned to each county according to its taxes, to be loaned out in mortgages on real estate of double the value of the sum borrowed, each loan not to exceed £500, nor be under £25, to be at ten years at five per cent. interest per annum. The profits upon this were to pay the expenses of the government, and the bills issued were to be returned at the end of the period and burned.
It will be seen from the above that the action of the provincial gov- ernment on this occasion was closely analogous to that which the Farm- ers' Alliance has repeatedly petitioned Congress to take. There was a scarcity of money; debts could not well be paid, and on this account the government advanced money to the farmers upon their land at what was then a low rate of interest, giving them ten years in which to make good the advances made. This might seem to be a highly desirable arrangement, but as-a matter of fact its effect upon the currency system of Boston and colony was exceedingly pernicious. There was a sudden depreciation in the value of paper currency, so that on the basis of sil- ver it sold for not much more than half its value.
That one bad act of this kind is productive of a long train of sad con- sequences is made evident by the address which was sent to the gov- ernor of the province by the House of Representatives in March of 1721. " Your Excellency, " it said, " was pleased to acquaint us that you lately assembled some of the principal gentlemen and merchants of Boston with a view to publie good, that they might propose or re- ceive schemes for the relief of this people under their grievance for want of a good medium of trade. If these gentlemen when assembled did agree upon any method and had laid the same before the House, it had been very readily received and due consideration had thereon, but none such as yet hath been shown forth. Last session a bill for cmit- ting £100,000 to help the inhabitants to pay their public debts passed the House, but stopped in the Council. We feel it our duty to do all we ean this session to promote such an object. We agree with Your Excellency that if a new emission should depreciate the bills ont it would be pernicious. To prevent this a bill was passed the present and last session to hinder buying and selling, bartering or exchanging silver money or bullion at higher rates or prices than hitherto stated by act of Parliament. Our judgment is that had such an act been made by Mas- sachusetts when they first issued paper bills, they had to this day been equal in value and credit to silver money. We, therefore, think that
Dana Low
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passing it now would prevent depreciation of bills and bring them up to what they once were."
It will thus be seen that our forefathers entertained ideas closely an- alogous to those that have been held by representatives of the farming classes in the West, that it is possible by simple legal enactments to create value where value does not exist under the ordinary laws of trade. In other words, they seemed to suppose that it was possible to issue as much paper money as the printing presses could turn out, and if by statute it was enacted that the buying and selling of silver money or bullion was prohibited, then this paper money would have the same value as silver and would in no way depreciate as the result of its ex- cessive quantity.
In 1722 it was found that the small coin, as well as the large, was ex- ceedingly scaree, and for this reason the General Court ordered that there should be an emission of £500 in bills of one, two and three pen- nies each. The form of the first of these bills was round, the second square, and the third rectangular.
For some time past the authorities of England had insisted through the representative of the home government, Governor Shute, that there should be a redemption made of as many as possible of the outstanding bills of credit. This brought the governor into constant conflict with the representatives of the people, and on this account great opposition was raised to the payment of his salary, so much so that the governor in despair decided to leave the colony for England.
The amount of paper outstanding as given in the report of James Taylor, treasurer, in May, 1:25, was £202,088 18s. 2d. The value of this paper money and the steady decrease that took place in it can best be judged by giving its estimated worth in silver at various periods, these being the several figures by which it was required that all debts contracted in bills of credit should be settled. In 1710 bills were worth at the rate of Ss. for an ounce of silver; in 1214, 9s. ; in 1412, 10s .; in 1:18, 11s. ; in 1:20, 12s .; in 1221, 13s .; in 1222, 14s .; in 1223, 15s .; in 1227, 11s. ; in 1128, 18s .; in 1:29, 22s. ; in 1430, 20s .; in 1931, 19s .; in 1232, 20s. ; in 1733, 23s. ; in 1434, 24s .; in 1739, 29s. ; in 1243, 28s. ; in 1245, 31s. ; in 1246, 40s. ; in 1251, 60s.
During this period the people of Massachusetts had to contend not only with depreciation, due to their own excessive paper currency, but the colony was flooded with paper money coming from Connecticut, Rhode Island and New Hampshire, the issues of these provinces find-
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ing their way in large amounts across the border line, and, as it was said, having for their reason for existence the opportunity that was afforded by them of purchasing goods at Boston, which was the chief town, at lower rates than would otherwise be possible.
The distressful state of financial affairs in Boston was made an object lesson and warning to other American communities. James Logan, writing on the subject from Pennsylvania to the Proprietors in 1229, in referring to the bills that were issued there, said: " 1 dare not speak one word against it. The popular frenzy will never stop till their credits will be as bad as they are in New England."
But as if this superabundance of currency were not sufficient, a number of merchants and others of Boston, in order, as they said, to supply the deficiency of a medium for trade, engaged in 1433 in a pro- ject of issuing paper money to the value of £110, 000. This was known as the Private Bank, and the bills that it issued were redeemable in ten years in silver at the rate of nineteen shillings an ounce. There is this to be said in favor of these Private Bank bills, that while they were in circulation they were a better medium of exchange than the govern- ment bills of credit. They depreciated in value during the interval between their issue and redemption, but almost invariably commanded a premium equivalent to about thirty-three and one-third per cent. over the government issue.
In 1434 Governor Belcher, who had been appointed chief magistrate of the colony of Massachusetts, said in his address to the General Court : "I must observe to you to what a low ebb our bills of credit are re- duced, which carry in the face of them these words, 'in value equal to money.' And yet 16s. in these bills will not at this day purchase 5s. lawful money. It will then become the wisdom of the Legislature to search into this matter, and to apply a speedy remedy, for next to the defence of the province I take this to be an affair of the greatest con- sequence. I should also think it prudent to look carefully into the several loans of the province, and after so many years' indulgence to the borrowers, to order them to be paid in without more delay. For a sacred observation of the terms of the several acts by which the bills have been issued, must have a natural tendency to support their credit. I think it would be an instance of the wisdom and justice of this gov- ernment not to suffer an emission of any sort of notes or bills for the future but such as will instantly and at all times honestly and truly command the value expressed in them. 1 look upon the land and
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commerce of the country to be but one joint interest, and should be always equally encouraged. And it is with much concern Imention to you the decaying state of the trade of the province. While our im- portations are so exceeding as constantly to leave us a large balance in arrear to our friends abroad, it is impossible we should carry on a gainful trade or have among us gold and silver, the only valuable medium of commerce. Happy would it then be for the province if the Legislature would establish some large premiums to encourage the cultivation of the lands, as on hemp and other naval stores, and our English grain. Something of this kind may gradually bring the balance of trade in our favor, which will, of course, fix the standard of money among us."
In spite of these valuable suggestions, the General Court could not make up its mind to adopt an heroie course; but in 1332 it decided upon a half-way measure. Perceiving that with all of its vigilance and exertions it could not restore the credit of their notes, the General Court resolved to have others made, differently expressed. Thus on February 4 of that year it was voted to make an emission of £18,000 in bills of the current form, and £9,000 in a different form. The first sum was to be recalled in a year, and the last in 1142. As a sinking fund for bills of these amounts, the people were allowed to pay their taxes in hemp at four pence a pound, and flax at six pence, to the treasurer, or in money, both hard and paper, if they could. As the conditions of the £9,000 differed from these preceding bills of credit, it caused them to be denominated new tenor, and the others old tenor. The new tenor notes stated :
" This bill of 20s., due from the Province of Massachusetts Bay, in New England, to the possessor thereof, shall be in value equal to 3 ounees of coined silver, Troy weight, of sterling alloy, or gold coin at the rate of 4 pounds 18s. per ounce: and shall be accordingly accepted by the Treasurer and receivers subordinate to him in all payments (the duties of import and tonnage of shipping and incomes of the Light House only excepted) and for any stock at any time in the treasury."
A reason why these notes were not to be received for the excepted duties was because such duties were ordered to be paid in hard money, with which the notes were to be redeemed. As the act authorizing the issue of these bills limited the preceding ones in the payment of like taxes, the merchants complained bitterly that this was a breach of public faith, and the dissatisfaction thus engendered tended to injure
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both classes of bills. Thus, though the government set the new tenor bills at one for three of the old, the people passed them at one for four.
In 1:41 Mr. Thomas Hutchinson, afterwards governor, and then a leading member of the General Court, brought forward a proposition which he believed would have the effect of setting the currency ques- tion upon a satisfactory basis. This was to hire 220,000 ounces of silver, or gold equivalent, for ten years at four per cent., in England on the credit of the province. This was to be used for the redemption of the outstanding bills of credit and to provide a guarantee for the colony. Although this plan was urged with great force and with much clearness of reasoning, it did not at the time receive the support needed to secure its adoption.
Instead of thus turning toward hard money, the minds of the people seem to have been infected by the mania for a larger emission of paper money, and the powers of the General Court falling under parliament- ary restraints and the unwillingness of the chief executive, instructed from England, to sanction large issues of bills, a petition was presented in the spring of 1:40 to the Legislature, signed by John Colman and three hundred and ninety-five others, for authority to issue £150,000, to be loaned in notes on land security and payable in twenty years by various articles of merchandise. Another petition presented to the Legislature by Edward Hutchinson and one hundred and six partners, was for the issue of £120,000, by them redeemable in fifteen years with silver at 220s. an ounce, or gold, pro rata. The latter plan was similar to the Private Bank referred to above, and its bills were denominated merchants' notes. It was promoted chiefly to oppose the Colman Bank, which was called the Land Bank, while the Hutchinson combina- tion went popularly under the name of the Specie Bank.
The authorization for the establishment of these two banks was never definitely given, but both began operation. The Land Bank aroused the strenuous opposition of Governor Belcher, who, in July, 1440, issued a proclamation warning all his Majesty's good subjects of the danger they were in and cautioning them against receiving or passing the notes of the Land Bank "as tending to defraud men of their substance and disturb the peace and good order of the people, and give great interruption and bring much confusion into their trade and business." In spite of this strenuous appeal of the governor, the Land Bank propo- sition was taken up with great cordiality by the people in all classes of society.
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Governor Belcher, being assured that part of the military of the colony encouraged the circulation of Land Bank paper, issued, Novem- ber, 1440, a proclamation, in which he said: "I hereby warn all com- missioned officers of the militia from signing or giving any countenance in passing of said notes of hand, directly or indirectly, and as I appre- hend, that if these should obtain a currency. it will reflect great dis- honor on his Majesty's government here, and be very detrimental to the public interests of this province and people, I do hereby declare my firm resolution that, if after this public notice is given, any of the mili- tary officers of this province persist in being in any way concerned in or giving any encouragement whatsoever to the passing of the said notes of hand, and full proof be made thereof to my satisfaction, I will immediately dismiss them from their said offices."
This pledge was kept on a number of notable occasions, and aroused a strong spirit of resistance. Samuel Adams, the father of the patriot of that name, sent in his resignation of the commission he held under the government, and his course was adopted by a number of the jus- lices of the peace and other prominent officials. In order to obtain a clear idea of the character of the banking institution that was at that time receiving great popular encouragement, and that was calling forth the denunciation of the representative of the English government, the following agreement of association of the Land Bank is of value, espe- cially as it has an important bearing on not a few projects that have been brought forward in this country within the last two or three years:
PROVINCE OF MASSACHUSETTS BAY IN NEW ENGLAND.
In order to redress the distressing circumstances which the trade of this province labors under for the want of a medium, other methods having failed, it is proposed to set up a bank on land security, no person to be admitted but such as dwell in this province, and hath a real estate therein.
1. The stock to be one hundred and fifty thousand pounds lawful money; no man to subscribe more than two thousand pounds, and none less than one hundred pounds : the subscriptions not to be binding, unless one hundred thousand pounds be sub- seribed, cach subscriber for one hundred pounds to have one vote, five hundred pounds two votes, one thousand pounds three votes, two thousand pounds four votes, and no person to have more than four votes.
11. Each subscriber shall pay into the hands of the committee forty shillings law- ful money for one thousand pounds, and so in proportion for a greater or less sum, toward the charge of bringing forward the affair.
111. Each subscriber shall make over an estate in lands to the satisfaction of the directors, and shall pay in three per cent. per annum interest for the same in any of the following manufactures, being the produce of this province, viz. . Hemp, fax.
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cordage, bar iron, cast iron, linens, sheep's wools, copper, tanned leather, flax seed, bees-wax, bayberry-wax, sail cloth or canvas, nails, tallow, lumber or cord wood, or logwood brought from New Spain ; whoever pays in any of them shall deliver them to the directors or such as they shall appoint, at stich prices as the directors shall from time to time regulate, or pay in the same in the company's bills.
IV. Every subscriber shall pay annually five per cent. as part of the principal un- til the whole is paid, under the same regulations, and in the same manner, as in the foregoing Article expressed.
V. There shall be twelve directors and a treasurer chosen on such allowances as shall be thought proper, who shall appoint clerks and other attendants as they shall find necessary, and agree with them for their salaries, and as there may be occasion, may dismiss them and choose others; they shall also appoint persons to value the lands taken for securities, who shall be paid by the mortgager. All the said officers to be under oaths, and give security for the faithful discharge of their trust. The appraisers to be under oath.
\'1. No person shall be capable of being a director or treasurer who signs less than five hundred pounds, and if any director or treasurer die, or is removed, the vacancy shall be filled at the next meeting of the company by a major vote of the partners present ; and if any of them be found guilty of fraud in the execution of his office, a major part of the directors, concurring with a major part of the partners, shall put his bond in suit, and he shall be declared no longer a partner.
VIl. All mortgages and bonds shall be made to the directors for the use of the company, except what is given by any director, which shall be made to the rest of the directors; and all mortgages shall be put upon public record, to prevent clandes- tine conveyances, the charge of recording to be paid by the mortgager; and every partner shall be obliged on demand of the directors, or the major part of them, to give such better security as they shall think needful, in case their security already given be by them esteemed insufficient, and if any of them refuse so to do, his mort- gage shall be sued out, and he shall no longer be partner.
VIII. To oblige all partners to pay their interest and dividend of the principal punctually, whoever neglects paying above three months after it is due, his mortgage shall be put in suit, and he shall be no longer a partner.
1X. The directors shall from time to time put out upon lawful interest on good security all such sums as shall be in the treasurer's hands for the use and benefit of the company; the annual contingent charge first deducted; the borrowers to pay principal and interest in the company's bills, or in the aforesaid manufactures.
X. There shall be a meeting of the partners on the second Tuesday in June an- nually, and at the end of five years at that meeting there shall be a dividend made of so much of the profits as shall be agreed on by a major part of the directors, con- curring with a major part of the partners then present, and from that time there shall be a dividend at every annual meeting ; provided always that in such dividends care shall be taken that there still remain in the stock double the principal paid in from time to time as aforesaid.
XT. It shall be in the power of any partner to redeem the estate he hath mort- gaged at the end of five years, or afterwards, he having the consent of the major part of the directors, with the major part of the partners, by paying in the money he received ont thereon, with the interest then due, either in the company's bills, or in the manufactures before mentioned.
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XII. Whereas it is principally designed that all the subscribers shall give land security, as before mentioned in the third Article, yet as there are many artificers and traders in this town of Boston, in good credit, who have not real estate to mort- gage, but can give good personal security to the satisfaction of the directors; Now that such persons and they only be encouraged in their respective occupations, it shall be in the power of the directors to admit such persons to be subscribers, but none for more than one hundred pounds, they giving bonds with two sufficient sure- ties in double that sum.
X111. As the signers of the bills oblige themselves to the possessors in behalf of the partners, so the partners must oblige themselves by an instrument to indemnify the signers.
XIV. At the annual meeting in June all accounts relating to the company shall be laid before them by the directors and treasurer, and a major part of the directors, concurring with a major part of the company then present, may agree upon any other rules or methods for the better observing and fulfilling the Articles aforesaid.
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