USA > Rhode Island > Rhode Island : three centuries of democracy, Vol. I > Part 38
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colony by so much depreciating our whole paper currency . . . . which when once begun no one can tell where it will stop." (3) Because "This emission will make so large an addition to that load of bank mortgages already upon the lands of this colony that posterity will never be able to discharge them, but must unavoidably end in the utter ruin of a vast number of families." (4) Because "we look upon it to be highly unjust to make an act that will natu- rally and necessarily depreciate the bills already extant, whereby all creditors will be defrauded of a great part of their just dues; widows and orphans, whose interest consists of money, will be greatly injured and oppressed, all industry discouraged, and idleness, extravagance
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GROWTH OF A COLONIAL COMMONWEALTH
and extortion highly encouraged, to the manifest hurt and dishonor of the colony." (5) Because "we apprehend it will greatly endanger our most valuable Charter privileges, and be looked upon as a presumptuous and undutiful piece of conduct to add one emission to another, and of such a pernicious tendency, after so many instructions, admonitions and commands to the contrary. . . . . ' In September, 1744, a direct tax on property of £ 10,000, old tenor, was levied to defray in part the expenses incurred since news of a fresh war with France had reached the colony. In the same year Rhode Island had recourse to a new device for financ- ing internal improvements, the lottery. Private lotteries had been forbidden in 1733 as · gambling games. Eleven years later, the colony chartered a lottery for £ 15,000 to raise £ 3000 net to rebuild the Weybosset bridge in Providence. This lottery was so successful that the public lottery thereafter for a century was a favored device for financing public, quasi-public and private enterprises. The General Assembly faced its fiscal problems with four devices for raising money: (1) direct taxation; (2) interest on bills of credit issued as loans ; (3) bills of credit issued (as forced loans) to pay colony debts, and (4) lotteries. The first was unpopular ; the second was failing as loans were repaid; the third became dif- ficult because of depreciation at the outset, in spite of the promise of tax levies to sink the issues within reasonably short periods of time. Governor Wanton, in filing claim in Janu- ary, 1748, for reimbursement for war expenditures stated the gross amount claimed in New England currency "at the rate of £750 this currency for £ 100 sterling," the prevailing ratio of exchange for old tenor. Further depreciation was indicated by the vote in General Assem- bly, in May, 1748, to pay the troops raised for an intended invasion of Canada "in bills of public credit at 900 per cent. advance upon the sterling wages." Two years earlier, in August, 1746, the freehold qualification was increased from land valued at £200 to land valued at £ 400, and the rental value required was raised from £10 to £40 per annum; in February, 1729-1730, the freehold qualification had been raised from £ 100 or forty shillings per annum to £200 or £ 10 per annum. Both of these changes were measures to stabilize the property qualification by offsetting the depreciation of currency and inflation of land values. When, in 1798, the freehold qualification was changed to $134 or $7 per annum, colonial currency was translated into decimal currency at the rate of six shillings to one dollar. In 1749 £7800 sterling exchange, remitted as reimbursement for war expenditures, was exchanged for £88,725 currency, old tenor, at the ratio of £100 sterling for £ 1050 currency. The £88.725 was sunk by burning. In May of the same year the sheriff of Newport County was ordered to "provide liquor, to the amount of £ 50, to entertain those gentlemen that shall attend the solemnity of proclaiming peace."
The war being at an end, Parliament had resumed interest in colonial affairs, and, in 1749, had before it a bill relating to paper currency. The Rhode Island agent in England was instructed to oppose the bill, "since, should it pass into a law, it would annihilate all the legislative power granted to this colony." A committee of the General Assembly. of whom Peter Bours, Stephen Hopkins, and Daniel Jencks acted, appointed in October, 1749, to draft a statement of the amount and tenor of all bills of credit issued and outstanding, reported in February that it had "assumed that province and perpetrated the business." The report may be condensed as follows : Of bills issued as loans on mortgages of land £ 40,000, series of 1715, and £ 40,000, series of 1721, had been redeemed. Bills of this type outstanding were :
Year of Issue
Currency Emitted
Value in Sterling
Outstanding Sinking to be
in Sterling
Completed
Old Tenor
1728
£40,000
£12,800
£727
1751
Old Tenor
1731
60,000
16,842
1,09I
1751
Old Tenor
1733
100,000
25,397
3,627
1753
Old Tenor
1733
100,000
19,753
8,182
1758
New Tenor
1740
20,000
15,802
7,272
1760
New Tenor
1743
40,000
28,444
14,545
1763
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RHODE ISLAND-THREE CENTURIES OF DEMOCRACY
Of bills issued for the treasury, amounting to £ 312,300 of currency, between May, 1710, and February, 1747, £ 176,964 6s. 1012d. had been redeemed and burned; and £ 135,335 13s. 11/2d. was still in force, of which £24,891 Ios. Iod. was in the treasury. The net indebt- edness of the colony was stated as £ 10,040 7s. 5d. sterling. The report also stated that £9,332 12S. Iod. sterling, due from the crown for war expenses, was held as a sinking fund; which when paid would reduce the colony indebtedness to £708 14s. 7d. sterling. In this summary the £ 35,444 sterling secured by mortgages was treated as a private debt rest- ing on the landholders rather than as a public debt resting on the colony, in spite of the fact that the colony had indorsed its promise to pay upon each and every bill of credit issued on mortgage security. Again, the report ignored altogether the plain fact that the volume of outstanding bills of credit secured by land mortgages constituted the major factor contributing to the depreciation of paper money.
A bill introduced in the House of Deputies in August, 1750, to authorize emission of £ 50,000, postponed because of adjournment, aroused seventy-two inhabitants to send a letter of protest to the King. In March, 1750-1751, the bill was revived, but the amount to be issued was reduced to £25,000, exchangeable for silver at 6s. 9d. per ounce. An attempt to prevent depreciation appeared in a penalty for "the indirect and illegal practices of sundry persons giving and offering from time to time for gold, and silver, and bills of exchange for sterling money, greater and larger sums and proportions of the bills of credit of this colony." In March the ratio of the new bills in exchange for old tenor was stated as 6s. 9d. to 54. In June the statute was amended, and the value restated as 6s. 9d. per ounce of silver, 16s. new tenor, and 64s. old tenor. In August, 1751, the Assembly abandoned effort to stay depreciation and established silver as the standard money of the colony, in a statute that ordered judgments by courts in such amounts of bills "as at the time of payment are really and truly worth one ounce of silver of sterling alloy" for every sixty-four shillings due of old tenor, or for every sixteen shillings due of new tenor, or for every 6s. 9d. due of bills emitted in March, 1750. In February, 1751-1752, the value of Spanish milled dollars was stated as fifty-six shillings each old tenor. The issue of March, 1750, was the last during the colonial period of bills of credit resting on mortgages of land. Thereafter the colony from time to time issued bills of credit to replenish the treasury, some of the emissions in war times being for large amounts.
There is little reason for doubting that the earlier issues of paper money were beneficial to Rhode Island. Had the initial plan for sinking the treasury bills issued in 1710 and 17II by an annual tax been followed, the episode would have passed in history as amounting to nothing more serious than emergency borrowing in anticipation of revenues. The repeated emissions of treasury bills without definite provision for redemption suggested so much uncertainty as to warrant hesitation in accepting them at face value; depreciation is much easier to prevent by sound financing at the outset than to stop once it has begun. The issues of land loan bills of credit in 1711 and 1715 might be justified to permit a wholesome expan- sion of trade and commerce, besides investment in improvements and new enterprises that would more than repay the principal and yield ample profits within the period fixed for retiring the loans. Dean Berkeley found Rhode Island unusually prosperous in 1729-1730. The population had more than doubled between 1708 and 1730. Newport was a thriving commercial town, the metropolis of Rhode Island if not of English North America. "The great obstruction concerning trade," wrote Governor Sanford in 1680, "is want of merchants and men of considerable estates." Capital had been found, and merchants and wealthy men had risen up in or had come to Rhode Island. All was not well, however; else there should have been no necessity for extending the time of paying off the mortgages written as security for bills of credit issued in 1711 and 1715. Eventually, as further relief for debtors, provi- sion was made for repayment of these mortgages in annual installments without interest.
221
GROWTH OF A COLONIAL COMMONWEALTH
When the time for repaying mortgage debts was extended, practically it was necessary also to continue the circulation of bills of credit secured by these mortgages, lest the borrowers, through reduction in the volume of currency, be compelled to make repayment in money forced to a value higher than that in which their debts had been contracted. The loans rested on good security, save for the objection to land as a basis for currency and commercial loans that it is not a "quick" asset. Probably these bills of credit would not have depreciated, had the colony made reasonable provision for redeeming its own treasury notes. Withal there was little reason for an accusation of inflation, in view of general prosperity, until, in 1728 and 1731, the colony emitted two series of bills of credit, totalling £ 100,000, secured by mortgages on land. There had been enough depreciation following the emission of 1728 to arouse a serious doubt amongst merchants as to the wisdom of additional issues of bills of credit. Merchants protested vigorously before the emission of 1731, and Governor Jencks attempted to veto the act of the General Assembly authorizing it. Very unfortunately for Rhode Island, paper money advocates were able to exploit his appeal to England as an attack upon the liberties of the people secured by the Charter, and thus to ingratiate themselves with the people as defenders of Rhode Island independence. Attention was thus diverted from the very significant economic issue. Two emissions of £ 100,000 each followed, in 1733 and in 1738. Premonition of disaster appeared in the difficulty attending collections of installments on mortgages as due. The device of substituting four county attorneys for the Attorney General, abandoned in 1742, was intended in 1740 to facilitate trials of collection cases. Over 1000 collection cases were pending in 1742. While repayment of mortgages could be enforced by foreclosure and sale, any considerable volume of forced liquidation is disquieting to business, which is never satisfactory unless the tone of the community indicates prosperity. Foreclosure sales are evidence to the contrary, indicating that beneath the surface something radically wrong is at work. While it is difficult (1) because of colonial wars as distracting factors ; (2) because of English regulation of colonial trade that tended to hamper and embarrass both merchants and carriers, and (3) because of gains made by Providence in commercial rivalry with Newport that have been counted as losses to Rhode Island by some who have failed to distinguish Newport and Rhode Island, to ascertain exactly the period in which merchants became convinced that the financial situation in Rhode Island was becom- ing hopeless, the year of 1749 appears to have been critical. Massachusetts had supplemented the money received from England as reimbursement for war expenditures by a tax upon property, and had used both to retire the larger part of paper currency issued during the colonial wars, the policy of redemption having been dictated by England. Rhode Island and Connecticut were less subject to dictation. In Rhode Island only a part of the money received from England was actually applied to redeeming outstanding bills of credit. The Massachu- setts policy was beneficial; the Bay Colony experienced little of the financial distress from loss of trade that visited both Rhode Island and Connecticut. With coin legal tender in Massachusetts, a profitable trade with the West Indies that heretofore had passed through Rhode Island ports was attracted to Massachusetts ports because of the better money. Rhode Island merchants and carriers became thoroughly alarmed. Seventy-two inhabitants pro- tested to England in 1751 against further emission of bills of credit. The General Assembly was obdurate and defiant, but it reduced the amount of a proposed new issue fifty per cent. and repealed provisions for bounties which had been proposed as a stimulus for production in Rhode Island of merchantable commodities for export. The last issue of bills of credit on land security, 1751, barely escaped the inhibition in an act of Parliament which became effective in September, 1751. The act of Parliament stopped the printing presses, but it had come too late to avert disaster in Rhode Island. Business failure followed failure in Rhode Island in 1752, as defaulting debtor dragged his creditors after him into bankruptcy. For- tunes melted in the debacle; rich became paupers almost in a twinkling. Joseph Whipple,
222
RHODE ISLAND-THREE CENTURIES OF DEMOCRACY
theretofore prosperous merchant, beheld his argosies vanish into nothingness, assigned his entire estate for the benefit of his creditors, and resigned his office as Deputy Governor. The General Assembly enacted a special statute of insolvency for Joseph Whipple in compliance with his pathetic plea for relief. In 1754, a bill for the relief of insolvent debtors was drafted, and ordered printed, "and a copy sent to each town clerk in the colony, for the perusal of all persons that shall incline to it." Following this informal "referendum," a statute was enacted in 1756, so that debtors, stripped by their creditors, might be discharged and permit- ted to make a fresh start toward earning a livelihood. The chaotic financial legislation of the period, with the changing tenor of bills of credit, and attempts to stabilize the currency, while purposing to stem the tide of depreciation, had tended to precipitate the panic by unsettling money values altogether ; it was this, rather than unsoundness in their adventures and invest- ments, that had stampeded the merchants. Even the statute of 1751 establishing the silver standard, while sound in principle, was like tonic medicine administered after the patient had become so weakened as to be able no longer to withstand the shock of heroic treatment. The more promising remedy-direct taxation and retirement of currency after redemption -- undertaken in 1744, had not been so well sustained in the intervening years as to return colonial finance to a sound basis.
A recovery of public credit and a revival of prosperity in Rhode Island were delayed by the French and Indian War. As loans on land mortgages were repaid bills of credit were retired and burned. A policy of redeeming outstanding treasury bills of credit was inaugu- rated in 1754, when a tax of £25,000 was levied expressly for the purpose. To meet the war emergencies the Treasurer was authorized in January, 1755, to borrow £4000 at interest not exceeding ten per cent .; under similar circumstances in earlier years recourse had been to emission of bills of credit. In the same year, however, £240,000 in bills of credit were, emitted to finance Rhode Island's active participation in the expedition against Crown Point, with the provision for the redemption within two years or refunding at the end of two years with interest-bearing treasury notes, not intended to be circulated as cur- rency. The earnest effort made to prevent fresh increases in currency and to reduce the volume of older currency was indicated by the assessment of heavy taxes, and the care taken to apply such money as was received from England as reimbursement for colony war expen- ditures to the retirement of currency. Indeed, the shipment of gold and silver coin from England to America during the French and Indian War was most helpful in solving the colonial currency problem. Before 1750 the colonies had been steadily drained of gold and silver coin, as unfavorable trade balances tended to force specie shipments to England. During the French and Indian War regular shipments of specie were made from England to America to finance the war operations against France. Pitt, the English Prime Minister, had already undertaken the policy of spending English gold to win England's wars which later was most pronounced in the long contest with Napoleon. The heavy gold coinage of Portugal and the Spanish milled silver dollar helped America to resume specie payments. Eventually the Spanish milled dollar became the standard for the decimal currency of America. Governor Hopkins and a group of influential Providence men, including Nicholas Cooke, later the Revolutionary War Governor who replaced Joseph Wanton, earnestly supported a sound money policy. Governor Hopkins, in a message to the General Assembly meeting in Newport in August, 1756, urged careful consideration of the financial problem, as follows: "Public affairs of the greatest importance to the honor and interest of this colony must receive their determination from your resolutions at this time. The money granted by the British Parlia- ment . ... being now arrived in America, the manner in which the colony's debt may be sunk by it, must now be ascertained. The bills of credit last emitted by this colony, being so much obstructed in their circulation by many, whose designs seem calculated to ruin the public credit of this colony, with which its constitution must also sink, it is become abso-
223
GROWTH OF A COLONIAL COMMONWEALTH
lutely necessary to call in and sink those bills immediately, or find some other expedient to give them credit. The money already provided for carrying on the present expedition against Crown Point being wholly exhausted, and our forces like to continue some time longer abroad, where they must be provided for; and at their return, will reasonably demand their wages; and many expenses already accrued, not being paid, some method must be taken to supply the general treasury with money sufficient for these purposes. These, with such other things as are in course before you, will come under your consideration at this session." This earliest message of a Governor of which there is a copy in the state archives, was an earnest plea for sound financial practices. A committee of the General Assembly reported £ 18,208 of the Crown Point notes already burned. The Assembly enacted a statute calling in the balance of the Crown Point notes for redemption, two-thirds in coin received from England and one- third in treasury notes payable in gold or silver coin on or before December 22, 1757, and also ordered a direct tax for supplying the treasury. New Hampshire bills, which had been counterfeited, were declared not a legal tender and their circulation was forbidden. The sound financial policy adopted under the leadership of Governor Hopkins was helpful almost immediately, although Newport merchants, objecting in 1759 to the apportionment of a tax, complained that they had incurred losses totalling £2,000,000 in the war. The war was dis- astrous to commerce, although losses in trade were in large part recouped, if not surpassed, by gains made in successful privateering. Providence had gained tremendously as a rival of Newport, although Newport was still a cosmopolitan seaport, glorying as did Venice of old in being the resort of merchants of all nations. Witness this list of merchants naturalized in Newport in seven years: Joseph Antunes, Portugal, 1750; Francis Ferrari, Genoa, 1751 ; Peter Simon, France, 1751; Stephen Decatur (grandfather of the Commodore), France, 1753; Peter Miraill, 1753; Ami Decatoy, Genoa, 1754; Jacob Lund, Norway, 1754; Chris- tian Mayer, Luxemburg, Germany, 1755; Nicholas Battar, John Amiel, and Guillaume Albresby, France, 1756. Moses Lopez, for service in translating Spanish, was relieved in 1753 of personal services to the colony. In the same year, he was granted a patent for ten years for making potash, because "the said Moses, by the assistance of a particular friend, that is not in this country, hath made himself master of the true art and mystery of making potash, which is known to very few in the kingdom," with franchise for option on all wood ashes not used by owners. To James Rogers, 1754, a patent for making pearlashes for ten years was granted. James Lucena, late Portuguese, naturalized citizen of Newport, in 1761, was granted a patent for making "soap of the same kind and quality as that made in Castile, in Spain, and called Castile soap," for ten years, provided he would at the end of or expira- tion of the ten years "discover the secret or mystery of the said business or manufacture to the General Assembly."
The policy of retiring treasury bills of credit was pursued steadily. In 1762 a commit- tee appointed "to examine into the amount of bills of credit issued by the colony" reported that £41,647 17s. IId. of bills issued earlier than February, 1749, had been burned, reduc- ing the amount outstanding from £135.335 13s. Id. to £93.687 15s. 2d., old tenor. Of the £ 240,000 emitted in 1755 to finance the Crown Point expedition £236,678 3s. had been burned. Bills amounting to £ 14,000 emitted in 1756 had been sunk, or would be by money already in hand. A committee appointed "to prepare a statement of the condition of the currency of the colony" reported in 1764: (I) That the land loan of £25,000 issued in 175I had depreciated two-fifths, and was approaching complete redemption: (2) that the Crown Point issues of 1755 and 1756 had been redeemed and burned; (3) that £20,909 of treasury bills issued in 1758 and £20,000 emitted in 1759 had been burned; (4) that £27,000 emitted in 1760 and £ 13,000 emitted in 1762 for war purposes were outstanding. The £40,000 of outstanding war issues equalled £ 30,000 sterling, carried five per cent. interest and had not depreciated. The committee anticipated complete repayment of all bills by 1767:
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RHODE ISLAND-THREE CENTURIES OF DEMOCRACY
but reported that the colony was "largely in debt for money hired of private persons during the course of the war ; and this debt is the greater because it (the colony) has received nothing for its expenses incurred in support of the war in the year 1756, which was reimbursed to the other colonies by Parliament." The report concluded with this significant statement: "In a colony where the constant demand for remittances to the mother country makes it impossible for silver and gold to continue, what will be the medium and instrument of commerce when paper bills are at an end we know not." One of the glaring defects of colonial government in the seventeenth century was the failure of European statesmen to provide adequate colonial currency ; Spain and Portugal were more fortunate than England in this particular, because of the gold and silver easily mined, the export of which to the mother countries cancelled unfavorable trade balances arising from importing commodities produced in Europe. The money problem was one only of several that were perplexing and that tended to recognition of a divergency of interests economically that portended conflict.
In June, 1763, the General Assembly enacted a statute "declaring what is and shall be lawful money of this colony." The preamble recited that "there is no act of this colony declaring what is or shall be lawful money of this colony, for want whereof, as a standard in contracts and dealings, much uncertainty and confusion have been occasioned; . .. . great quantities of paper bills of credit . . . have been . created and issued on loans and
otherwise, which .
must soon be called in, discharged and sunk ; and . . . . said paper bills of credit have been considered as a medium of trade and a measure in dealings in lieu of money, whereby obligations and securities have been made and given, and debts contracted in said bills, which from a scarcity of these bills that must unavoidably happen near the expi- ration of the several terms for which they were issued, cannot be discharged and paid in the bills themselves," etc. The act declared an exchange value for lawful money bills in silver and gold coins of England, Spain and Portugal, and to arrest depreciation forbade higher rates of exchange under penalty. "For the better ascertaining the true value of such old tenor bills," the act included a table to be used by courts in fixing "the value of old tenor debts," in Spanish dollars, indicating the changing ratio of exchange from year to year. The table showed that whereas £2 16s. of old tenor equalled a Spanish dollar in 1751, £7 was required to purchase a Spanish dollar in 1763. The depreciation in twelve years was 60 per cent. The circulation of old tenor notes was forbidden after January 1, 1771; they were redeemed in treasury notes at the rate of six shillings lawful money for £8 old tenor. Law- ful money notes at that time were at par with sterling, and the paper money period was at an end.
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