Currency+Act-Ruben

 The colonies suffered a constant shortage of currency with which to conduct trade. There were no gold or silver mines and currency could only be obtained through trade as regulated by Great Britain. Many of the colonies felt no alternative to printing their own paper money in the form of Bills of Credit. But because there were no common regulations and in fact no standard value on which to base the notes, confusion ensued. The notes were issued by land banks, or loan offices, which based the value of mortgaged land. Some notes paid interest, others did not. Some could be used only for purchase and not to repay debt. Some were issued only for public debts and could not be used in private transactions. There was no standard value common to all of the colonies. British merchant-creditors were very uncomfortable with this system, not only because of the obvious complexity, but because of the rapid depreciation of the notes due to regular fluctuations in the colonial economy. On September 1, 1764, Parliament passed the Currency Act, effectively assuming control of the colonial currency system. The act prohibited the issue of any new bills and the reissue of existing currency. Parliament favored a "hard currency" system based on the pound sterling, but was not inclined to regulate the colonial bills. Rather, they simply abolished them. The colonies protested vehemently against this. They suffered a trade deficit with Great Britain to begin with and argued that the shortage of hard capital would further exacerbate the situation. Another provision of the Currency Act established what amounted to a "superior" Vice-admiralty court, at the call of Navel commanders who wished to assure that persons suspected of smuggling or other violations of the customs laws would receive a hearing favorable to the British, and not the colonial, interests. The American colonies struggled with currency issues from their inception. Operating under the prevailing [|mercantile system], the settlers provided relatively cheap raw materials to the mother country in return for more expensive manufactured goods; the difference in value was balanced by payments in hard money. Many early settlers had dreamed of finding wealth in North America comparable with that of New Spain, but those hopes were not realized. As a result of these conditions, little hard money remained in the colonies and business was usually conducted on the barter system. Beaver pelts, tobacco and corn were made [|legal tender] in various places in the early years of North American settlement. The pound sterling was unusual in the colonies. Most of the coins that circulated — French crowns, Spanish doubloons and Dutch ducats — entered through illegal trade and created a confusing picture because they frequently carried different values from one colony to another. Under these conditions it was natural for the colonies to resort to paper money. Massachusetts, an innovator in many fields, tried several approaches to cure the currency shortage: Against this backdrop, the government headed by George Grenville supported legislation in 1764 to reform the colonial currency situation. British merchants had long complained about the tendency of Americans to try to settle their debts with paper money of dubious value. The Currency Act provided for the following: This reform was a clear victory for the conservative, hard money forces and a disaster for the working class elements, which lost a cheap means of discharging their debts. In the short space of a few months, Grenville had managed to ignite the passions of the two extremes of American society: The laborers saw their hopes thwarted by the Currency Act and the wealthier merchant class was stung by the [|Sugar Act].
 * Late in the 17th century, the colony issued bills of credit, a form of paper money that was backed by anticipated tax collections. Used initially for paying soldiers, the idea became popular and was later adopted by other colonies.
 * In the early 18th century, Massachusetts turned to the “land bank” idea to expand its currency. Under this scheme, paper notes were issued to landowners willing to mortgage their properties. The idea won widespread support among farmers, who traditionally had both land holdings and heavy indebtedness. Urban dwellers opposed the idea and successfully persuaded Parliament to outlaw such schemes in 1740. That action outraged land bank supporters and caused severe economic problems. The issue did not disappear and remained a favorite of radical rural interests.
 * Paper money could longer be used as legal tender in the North American colonies.
 * No new paper money could be issued and that already in circulation was to be retired according to a prescribed timetable.