USA > Pennsylvania > History of proprietary government in Pennsylvania > Part 36
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1 Votes, iii, pp. 149-150.
2 Franklin was largely instrumental in securing the passage of this act. In fact his pamphlet entitled, " A Modest Inquiry into the Nature and Necessity of a Paper Currency," set forth its advantages so convincingly that he was given the lucrative job of printing the money. Phillips, Sketches of the Paper Currency of the American Colonies, p. 17; Franklin, Works, ii, p. 253, et seq.
3 Franklin, Laws of Pa.
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money at its face value, this discrepancy operated injuriously upon those who by contract had claims for their payment in sterling. Hence it can be readily understood why the pro- prietors issued such imperative instructions to their governors not to pass any law that did not provide for the payment of sterling debts, duties to the crown, and rents, according to the rate of exchange between Philadelphia and London. In fact parliament in 1739 resolved to make inquiry into the nature and quantity of the paper money bills in America, and the expedients adopted for retiring them. At the same time the House of Commons sent an address to the king requesting that the governors of the various colonies should report upon the workings of the act 6 Anne, chap. 30. The assembly of Pennsylvania thereupon transmitted a complete account of the currency in that province.1 But in spite of this action on the part of the home government, May 19, 1739, the assembly passed a measure providing for the re-issue for ten years of £68,889, 15s then outstanding. This was to be also used for the redemption of dilapidated currency. In addition to this sum, LII,IIO, 5s should be issued for 16 years at 5 per cent. Hence, £80,000 in new bills was printed. A novel device was stamped on them to offset the great quantities of counterfeits then in circulation, and the trustees were ordered to be on their guard against frauds practiced by the printer or his em- ployees. Furthermore, they were directed to deliver only £1,000 at a time to the signers. Because they had been in the habit of allowing the mortgagers to be behindhand in their annual payments, they were also ordered to keep them strictly within the bounds of their contract. At the same time, the security for the performance of their duties was increased; and the death penalty for counterfeiting was introduced.2 The law was passed on the promise of the proprietors to re-
1 Votes, iii, p. 355-357 ; Col. Rec., iv, p. 318 et seq .; P. L. B., i, John Penn to Gov. Thomas, March 29, 1739.
2 Franklin, Laws of Pa.
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ceive their quit-rents in currency rather than in sterling, though by doing so certain instructions were set aside. It was a prudent step on their part, since, owing to popular excitement, the favorable estimate of the Penns was rapidly disappearing.
On August 21 of the following year an instruction founded on the address of the House of Commons was sent by the Privy Council to Gov. Thomas, commanding him to pass no act whereby bills of credit might be issued in lieu of coin without a clause suspending its execution till the king's pleasure was known. It was stated that great inconveniences had resulted from the action of some colonies in passing laws for issuing paper currency, and in making its acceptance obli- gatory on all. By such action the statute of Anne had been frustrated, business thrown into confusion, and credit in the colonies weakened.1 This did not trouble the assembly particularly, for it made several attempts to induce Thomas to consent to a further issue of the currency. His refusal was answered by a petition from the assembly to the proprietors, asking for his removal. The request, however, was denied.2
Four years later the assembly persuaded him to sign an act for printing £10,000 in bills of credit, to exchange for those which were torn and defaced. It was confirmed by the king in council, October 29, 1748.3 In 1744, also, a bill was brought into parliament 4 to prevent the colonies from issuing paper currency for the payment of debts. Undaunted by this men- ace, the assembly, in 1746, declared that the use of the bills of credit had increased the trade of the province, and had been the cause of other great benefits to the people. By means of the interest which had accrued from them several thousand
1 Votes, iv, p. 252. 2 Pa. Arch., Ist series, i, p. 628.
3 Hall and Sellers, Laws of Pa.
4 A petition signed by twenty-four merchants, against allowing the colonies to issue paper currency as a legal tender, was presented to the House of Commons. The proprietors thereupon made some effort to show several members the neces- sity of a system of paper money in the colonies. P. L. B., ii, T. P. to Thomas, May 5, 1744.
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pounds had been paid into the exchequer for the king's use, and £4,000 had been expended in provisions for the garrison at Louisburg. As the time during which the bills were to circulate grew shorter, the sums to be loaned had to be so soon repaid and in such comparatively large amounts that the payments would be rendered difficult. This fact also, the assembly asserted, might cause the bills to be returned to the loan office and there remain in the hands of the trustees; conse- quently the funds which were intended to be raised by the interest of the money would be lacking. The argument that the scarcity of currency would be an embarrassment to busi- ness prevailed with Thomas. Hence, on March I, an act for continuing the existing amount of bills of credit (£80,000) for 16 years was passed. It was provided that, during the first ten years of this period, the whole sum should be kept out by lending or re-issuing the yearly payments of the principal as they became due. Besides obliging applicants to pledge as security land, plate, or houses in double the value of the sum loaned by the trustees, it was further enacted that, after the expiration of the tenth year, one-sixth of the bills annually paid in should be cancelled and destroyed.I . The act was ac- cepted by the Board of Trade after consultation with promi- nent British financiers.2
On June 24 of the same year an act granting £5,000 for the king's use was accepted by the governor. This was to be taken from the bills of credit in the hands of the trustees for ex- changing torn and ragged currency, a like amount being issued to replace them. Provision was made for the retirement of this sum in ten yearly payments of £500 each. For this purpose the treasurer should use the money annually payable to him from the excise. This act was confirmed by the king, October 29, 1748, though no mention of any suspending clause was made in it.3
1 Hall and Sellers, Laws of Pa.
2 " Case of the Inhabitants of Pennsylvania," 1746.
3 Hall and Sellers, Laws of Pa.
.
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In 1748 and 1749 the question of the abolition of colonial paper money again came up in parliament. As alternative propositions, the removal of its legal tender quality, and the requirement that, if it were issued on an emergency it must be retired by rapid payments, were discussed. A bill providing against the issue of paper currency as legal tender in the colo- nies, and for the enforcement of royal instructions on that head, was accordingly presented. Those who had offered the bill agreed, however, to strike out the clauses which related to such instructions. Thereupon the proprietors drew up a state- ment concerning the necessity for the use of paper as a legal tender, particularly in Pennsylvania. This was given to lead- ing members in the House of Commons, and appears to have had some effect, for the view of the proprietors prevailed. After several postponements, the House of Commons, " finding there was not such information before it as would enable it to properly consider such an important matter, voted an address to the king for an account of the tenor and amount of the paper currency then outstanding." The Board of Trade and certain members of parliament then directed the proprietors to allow no further issue of currency until the next session of parliament.ª In February, 1749, however, an act to make current £5,000 in bills of credit was passed for the purpose of ex- changing them for such as were dilapidated.2 Then the as- sembly sent up a bill for making £20,000 current on loan, but it was persuaded by Gov. Hamilton to withdraw the measure until the attitude of parliament became better known.3
Soon after parliament, by the statute 24 Geo. II., chap. 53, restrained the northern colonies from creating or reissuing bills of credit, except on sudden emergencies. Pennsylvania was not included, as it had not exceeded the bounds of moderation, and because the paper which
1 Penn MSS., Supp. Proc., T. P. to Peters, Feb. 20, 1748, and Aug. 2, 1749 ; P. L. B., ii, to Hamilton, June 6, and July 31, 1749.
2 Hall and Sellers, Laws of Pa.
3 Votes, iv, p. 108.
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had been issued was so secured as to be more stable in value than that of New England and less injurious in its consequences. Hence, when the assembly of 1752 pro- posed to reissue the £85,000 already in existence, to post- pone the time of redeeming it, and to issue £40,000 more, Hamilton cautioned it against the extension of time, and the danger of making so large an addition to the amount in circu- lation. Any action on the subject he thought might provoke the displeasure of the king," and by preventing future applica- tions to him render insecure the paper already in existence. Nevertheless, in the following year, the assembly resolved upon the continuance of the old and the emission of new bills, a sum being printed to exchange for those which were dilapidated. The amount of the new issue was £20,000. Hamilton de- clined to pass the bill without the suspending clause. The assembly urged that the statute just mentioned did not apply to Pennsylvania, and that Hamilton ought not to consider him- self bound by the royal instruction which had been issued to a former governor. In truth it regarded the province as freed from the burden of the instruction by virtue of the fact that Pennsylvania was exempted from the operation of the statute. Hamilton, however, remained obdurate,2 because in 1748 he had been instructed by the proprietors to consent to no bill for an increase of the currency, unless the suspending clause was inserted.3
Early in 1754 the assembly again resolved that the time for redeeming the currency then outstanding should be extended, that the amount of currency should be increased, and that a
1 " The great objection to the bill for increasing the currency, is the opinion of the Board of Trade, in whose power it lies to determine the fate of the bill. A little later may be advisable, when the act to restrain the New England govern- ments has passed somewhat from memory." P. L. B., iii, T. P. to Peters, July 17, 1752.
2 Votes, iv, pp. 237-284.
3 MS. Instructions in the Pa. Hist. Soc. Library.
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sum should be issued immediately to exchange for bills that were in poor condition. Thereupon it prepared a bill for £30,000, a large part of which was intended for the king's service. As Hamilton would not accept it, various expedients were suggested to meet the needs of the government.1 He insisted that the excise, by the revenue from which the cur- rency was to be redeemed, should not be continued more than four years. He claimed also that an extension of the excise, like that which was contemplated by the assembly, i. e., for a period of ten years, would be an unnecessary tax on the people, and the fact that Gov. Thomas had allowed a similar extension was no reason for his doing so. He believed that, if the excise tax had been properly paid into the loan office, the necessity would not have arisen for such an extension of time. He then offered to make the period six years. In re- ply the assembly resolved that the excise was preferable to "toll and pound rates," and adhered to the bill as presented.2
Gov. Morris, at the beginning of his administration in October of the same year, pleaded the royal instruction of 1740, as well as the oath which both he and Gov. Hamilton had been compelled to take in England that they would obey the statute of Anne for the regulation of coinage in the colonies. The assembly declared that the royal order referred only to bills of credit issued on ordinary occasions, but not to cases of extreme emergency when the province was threatened with all the horrors of Indian war. The governor in his reply referred to the fact that parliament, in its statute affecting the eastern colonies, had fixed the term of the excise at five years. As similar conditions existed in Pennsylvania, he thought five years a proper period for its continuance in that province also. Furthermore, the proprietary party was in favor of introduc-, ing a bill for an addition to the paper money, and that it should be brought within the scope of the royal instruction by inserting in it the suspending clause. Then the Board of
1 Votes, iv, Pp. 304-310.
2 Ibid., pp. 311-315.
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Trade might be induced to advise the king to withhold his ap- proval, on the ground that the disposal of the money was left to the assembly alone, and not to the governor and assembly jointly, as the proprietors desired. This suggestion of course only fanned the flame of discord between the governor and the assembly. Indeed, the latter tried to arouse public sentiment in its favor by openly stating that, if its currency bill had been accepted, the losses inflicted by the French and Indians would not have been suffered.1 But at a time so critical the asser- tion of privileges could not obscure the fact that money and supplies were a crying necessity. The governor was willing to yield on some points, but the assembly clung obstinately to its cherished claims. Still, upon repeated calls from Morris for aid, the house again presented a bill for the issue of £40,- 000, of which £20,000 should be paid to the governor for the king's use, and for that purpose expended as he might see fit. The income from the excise, which was to be continued for twelve years, should be used for the redemption of these bills. The other £20,000 should be set aside for the redemption of torn and ragged currency. Morris insisted on the introduc- tion of the suspending clause and that the period of five years should be allowed for redemption. Moreover, he would not consent that the house should have unlimited control of the £20,000; for, as it was annually elected, and as many of the electors were not of English descent, he feared that the money might be diverted from the use intended, and employed to weaken the ties of dependence upon the mother country.2 He was beset on every hand by imploring cries for aid, while the assembly posed as the champion of the popular rights and liberties. It is clear, however, that, under the cir- cumstances, Morris was not justified in adhering so rigidly to the five year regulation; but, in spite of a petition sent by the
1 Penn MSS., Offic. Corresp., vi, R. Peters to T. P., Dec. 16, 1754.
2 Votes, iv, pp. 342-391.
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assembly criticising him for this policy, the Board of Trade appears to have sustained the governor's views.1
Upon the receipt of imperative orders from the king, Morris again pictured the wide-spread misery, and besought the house to comply with the demand. The bill presented was as faulty as its predecessors. In response, however, to the request of Josiah Quincy it was withdrawn in favor of one for a grant of £10,000, and eventually of £15,000. This sum should be borrowed by the assembly on its own credit, and used in aid of Gov. Shirley's expedition. But the amount of ready money in the province was not sufficient to admit of a loan. There- fore it was agreed to issue notes, drawn by a committee of the house on the provincial treasurer and the trustees of the loan office, and payable to the bearer in one year at 5 per cent. in- terest. It was made receivable as cash in payment of the ex- cise, and in discharge of debts due to the loan office.2 Associ- ations were then formed to circulate them. All this was done without the consent of Morris, who declared the matter worthy of the attention of the home government. For, said he, if an assembly that claimed the privilege of sitting when and as long as it pleased, and of keeping its proceedings a secret from the governor, could borrow and circulate notes as it chose, it might use them against the government under whose authority it acted, and on whose charter it wrongfully urged that its exercise of liberty was based.3 The house stated that the bills issued had been drawn on the treasurer and trustees merely for the payment of provisions for the expe- dition. But the fact remained that the governor had not given his assent.4 In March, 1755, moreover, the house sent up a
1 Penn MSS., Supp. Proc., T. P. to Morris, May 10, 1755; Col. Rec., viii, p. 537.
2 Votes, iv, pp. 391-2; Penn MSS., Supp. Proc., Thos. Penn to Peters, Aug. 14, 1755.
3 Pa. Arch., Ist series, ii, pp. 288, 368.
4 Phillips, op. cit., p. 22; P. L. B., iv, T. P. to Hockley, July 3, 1755.
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bill to grant £30,000 for the use of Gen. Braddock. The governor refused to sign it. Thereupon, in June, a bill for the issue of £10,000 to be exchanged for dilapidated currency,1 and one for the issue of £15,000 to be employed in the king's service, were presented. The former was signed by the gov- ernor. To the latter he proposed certain amendments which occasioned its loss.
Up to 1746 we have noticed that the issue of paper money was based on reliable securities. Trade had therefore pros- pered. Imports had increased. The bills were eagerly sought for in other colonies. Public improvements, stores, houses, and the like had been erected on these loans, the terms of which were much more favorable than could be obtained from a private individual. Could this course have been continued, the loss by depreciation would have been very slight. But the exigencies of the colony no longer allowed this procedure. Large sums were required for immediate use. Loans could not readily be obtained. Even the issue of bills of credit based on the extension of the excise was inadequate to satisfy the demand. The desired amounts could not be obtained, except by issuing paper money to be redeemed by taxation within stated periods, a method fraught with the greatest danger.2 But, since the interest on the bills of credit had come from the resources of the people, and was sufficient to pay the expenses of the government, taxes had not been levied for some years. As the governor remained firmly opposed to the extension of the excise, and although Franklin endeavored to induce the assembly to draw up a bill for the issue of £40,000 to be based on the extension of the excise for five years only,3 in Nov- ember, 1755, it saw fit to present to the governor a bill for the issue of £55,000. This sum was to be redeemed by a
" The proprietors believed that the bills of credit issued for the purpose of being exchanged for dilapidated currency were often employed in other ways. P. L. B., iv, T. P. to Morris, Aug. 13, 1755.
2 Phillips, op. cit., p. 23.
3 Hazard, Register of Pa., iv, p. 356.
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general tax to be levied for two years on all estates, real and personal, at the annual rate of one shilling per pound, and twenty shillings per poll. The basis of the currency was thus changed from mortgages to the credit of future taxes on real and personal estate. But the governor refused to accept this bill. Then the house sent him another granting £60,000, to be redeemed by a similar tax of 6 d. per £ and 10 sh. per poll levied yearly for four years. At this point the angry contro- versy was hushed for a while by the agreement of the pro- prietors to make a gift of £5,000, though the assembly construed this as a gratuity for the exemption of their es- tates from taxation. In fact this idea was incorporated in the bill appropriating £60,000, of which £55,000 should be im- mediately issued in bills of credit. The exigencies of the time forced the governor under protest to accept it. But the sum did not prove adequate. Hence in 1756, in order to hasten the payment of the proprietary gift, an additional issue of £4,000 was ordered. The redemption of this sum was to be effected by yearly payments made by the receiver-general to the trustees of the loan office.2 Thus closed the experience of the province with paper money during the administration of Gov. Morris.
A bill providing for the issue of £40,000 was presented to Gov. Denny, but his objections to the opinion of the assembly in regard to taxation of the proprietary estates were fatal to this project.3 Thereupon the assembly offered £60,000 for the king's service, to be redeemed by an extension of the excise for twenty years. Denny declared that the clause concerning the disposition of the money by the assembly alone was inconsist- ent with his instructions.4 After the adoption of resolutions
1 Votes, iv, pp. 419-525.
2 Hall and Sellers, Laws of Pa.
3 Votes, iv, p. 587-94.
" The proprietors had informed Denny that the act of parliament restraining the New England colonies was not binding on him, and that therefore he might per- mit the levy of an excise for five years longer than the time specified in the statute.
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protesting against the invasion of its privileges, and dwelling upon the woes of the ravaged and depopulated province," the assembly passed a bill for the issue of £30,000, September 21, 1756, in accordance with the governor's amendments. The sum was to be redeemed by an extension of the excise for ten years. £3,000 would thus be cancelled by the trustees every year. But as the prayers for aid at home, and the orders from abroad continued, the house sent up a bill for £100,000 to be raised by a general property tax. The bill contained several objectionable clauses,2 but at length the governor felt obliged to accept it, March 23, 1757. Of this sum £45,000 should be issued in bills of credit to be redeemed by a county tax of one shilling per pound, and ten shillings per poll. Every year for four years the treasurer should pay to the trustees of the loan office out of the money received by him from the taxes, not only the quarterly installment of £13,750, as directed in the act for £60,000, but also £11,250, the fourth of the sum to be presently issued, in order that the same might be cancelled. If the tax as levied was not sufficient to redeem the entire amount of £100,000 in four years, the period might be extended so long as was necessary.3 The issue of £45,000 was speedily exhausted, and more was needed to pay the troops. Hence, on the 17th of the following June, the remaining £55,000 was issued under similar regu- lations.4
On April 22, 1758, an act was passed which granted £100,- 000 to the king in bills of credit, and continued the several acts of assembly for redeeming them. As the several sums of £55,000, £30,000 and £100,000 had been expended, and as still more was needed for supporting the troops, £100,000 should
Much to the disgust of the proprietary party, he showed this instruction to certain members of the assembly. Penn MSS., Offic. Corresp., viii, R. Peters to T. P., Sept. 22, 1756.
1 Votes, iv, pp. 595-603.
2 Ibid, pp. 668-703.
3 Hall and Sellers, Laws of Pa.
+ Ibid.
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be issued. The previous assessments were to be continued for three years more, so that the taxes should all be collected by March 10, 1764, at which time the bills should cease to be current. For the period of three years after October, 1760, the treasurer was to pay annually into the hands of the com- mittee of the assembly to audit public accounts £33,333, 6sh., 8d., which the committee was to cancel and destroy. Also, the period appointed for collecting the tax should, if necessary, be extended.I Accordingly, in April, 1759, the period was ex- tended three years.2 Then, inasmuch as the time limited by the acts passed in 1739 and 1746 had nearly expired, a measure was laid before the governor providing for the reissue of all the bills of credit which had already been emitted on loan. Part of them had been paid in and cancelled. Hence the funds hitherto raised by the interest for the support of government would be wanting, and there would again be a dearth of currency. It
was stated, moreover, that the expenses of government on several occasions had been paid out of money voted for the king's service. Many persons who had mortgaged their property for bills of credit were rendered incapable of paying these taxes. The fact that so much property had been de- stroyed in the ravages of war injured the securities. If the trustees should sell the property, great distress would thereby be caused, and the owners of it would become a burden on the community. But, in spite of these arguments, the measure failed to meet with the governor's approval. It seems, however, that Gen. Stanwix and Col. Hunter had represented to the assembly that money was needed imme- diately to pay the expenses of the last campaign, as well as those of a proposed expedition to the west. Hence a rider was attached to the bill, providing for the issue of £36,650 additional, in order to enable the trustees to lend £50,000 to Col. Hunter, who was an agent in the king's service under the commissioners of the treasury. With this addition, the gov-
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