A History of Paper Money in
Colonial New Jersey, 1668-1775

By Donald L. Kemmerer
Published in the "Proceedings of the New Jersey Historical Society,"
Vol. 74 (April 1956)

HISTORIANS who take an interest in colonial currency are still disputing whether there was enough money in circulation in those early days. One school of thought accepts the colonists' complaint that there was an insufficient supply and cites as proof a few of the many illustrations of barter set down in old petitions. The other school replies with cold logic that any region has as much hard money as it deserves to have, since the inhabitants spend their specie because they desire goods more. In the end this will cause such a fall in prices that there will be an excess of goods flowing out and an excess of money flowing in. The difficulty is in inducing people to wait for economic forces to adjust themselves in this fashion. Even today, with our modern methods of rapid communication and transportation the circulating media of the world are none too fluid in the most normal of times and they still level off slowly. In colonial days, with vessels taking six to eight weeks for a crossing and the world geared to a much slower pace, the fluidity of the circulating media might be compared to molasses. But, it was fluid, and in narrowly circumscribed areas quite fluid. The history of New Jersey's colonial money is a fairly good illustration of that point.

New Jersey's monetary history in colonial times may be divided into six chief periods. First was the period of experimentation with other than paper money methods, 1668-1709. Second came the period of early bills of credit. Third was the period of three loan-office acts. This last was a sort of golden era whose pleasures and privileges the people of New Jersey later sought to recover. Fourth was the period of repression by the British government in the 1740's. Fifth was the period of wartime issues of the French and Indian War. And last was a period of deflation and renewed efforts to obtain a loan-office act in the 1760's and 1770's.

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EXPERIMENTATION WITH DEBASEMENT

Specie was extremely scarce at first. The early settlers were people of small means and New Jersey's foreign trade was meagre. The first East New Jersey tax law (1668) levied a total of £30 on six towns and provided for payment in kind as follows: "Winter Wheat at Five Shillings a Bushel, Summer Wheat at Four Shillings and Six-pence, Pease at Three Shillings and Six Pence, Indian Corn at Three Shillings, Rye at Four Shillings, Barley at Four Shillings, Beef at Two pence Half penny, Pork at Three-pence Half penny a Pound."1 The variety of produce acceptable was increased in 1675, and payments of taxes in kind appear to have been legal until 1698 when the clauses providing for them were dropped.2 In 1686 a law was passed raising the value of the more commonly used coins about one-third. These included the Pillar, Mexico, Seville, and Peru pieces of eight (dollars) and fractional pieces, English crowns, Guineas, Rix dollars, New England shillings, Ducatoons and French crowns.3 The law was repealed a few months later, "it being found by experience that many inconveniences may attend the same."4 Sometime during the 1690's the eastern Proprietors suggested a new constitutional provision:

"that all Bonds, Bills, Mortgages, Recognizances, Statutes, Judgements or other obligations whatsoever; for debts contracted, that are of the vallue of tenn pounds and above (provided they are first registered) shall he transferable and pass by endorsement from one to another as current money paid and received and be good in Law. And for all sumes under ten pounds to pass likewise by endorsement whether registered or not."5

The author of this apparently wanted to make every man his own banker and to legalize the use of forms of value that would be easier to handle than bulky or perishable commodities.

In West New Jersey a 1681 tax law permitted payments in coin or skins or Money."6 For a short time after 1682 a man named Mark Newbie was permitted to issue a debased coin called the Patrick half-pence.7 In 1693 the tax law specifically stated that "the said tax was to be paid in Silver Money."8 The value of various coins was raised approximately one-third, people being obliged to accept them at this higher rate "except they plainly bargain to the contrary."9 Silver and gold continued to be scarce, however. Robert Quary, the surveyor-general of customs, wrote in 1704 that the lack of it could "be answered by the produce of the country."10 The governor complained in 1708 that the excessive clipping of the Spanish coins in circulation had diminished their value one-third.11

The two divisions of New Jersey were united as one royal colony in 1702 and the new governor, Lord Cornbury, was instructed not to "permit any act or order to pass - whereby the price or value of the current coins within your government (whether it be foreign or belonging to our dominions) may be altered."12 Apparently, however, some damage had already been done. Robert Quary reported in 1703 that £1000 New Jersey money was worth £600 sterling.13 The two divisions continued for many years to have monetary units of slightly different value - East Jersey's rate was the official one for the colony and tended to be influenced by New York's rate, and West Jersey's was often slightly higher (poorer) and was affected by Pennsylvania conditions. As a result of complaints to the Board of Trade about Pennsylvania's and other colonies' premiums on foreign coins, an investigation was made. In 1704 the Queen proclaimed that foreign coins should not be valued in the colonies over a third higher than they were in England, that is, a Seville dollar, worth four and a half shillings in England should not pass for more than six shillings in America. Coins overvalued thus were known thereafter as "proclamation" money. Since most colonies already had a higher rate than the Queen allowed, enforcing her rate would have resulted in considerable loss to holders of coin and serious deflation. When accordingly the order was not obeyed, Parliament in 1707 made it law and imposed penalties for disobedience.14 It was declared in New York that the colony would be ruined if the act were enforced, and the governor reported that only the paymaster of the royal forces obeyed it.15 Both the New York and New Jersey assemblies stipulated in their tax laws that money was "to be paid at the value it was before the said Act."16

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FIRST BILLS OF CREDIT

In 1709 an expedition against Canada was planned and the various colonies were called upon to contribute quotas of men and money. The New Jersey treasury was bare - hatred of corrupt Governor Cornbury had resulted in the voting of only three years of revenue in six years - but funds were needed promptly. The Assembly decided to issue £3000 of paper money, to be retired by taxes in two years.17 Creditors refusing to accept the bills in payment were to be fined by having the debt cancelled. It seems probable that the New Jersey money depreciated in value, for on January 28, 1710, a petition was presented by five gentlemen in behalf of themselves and other traders and inhabitants of New York and Pennsylvania "desiring to be heard against the passing of Any Act for Enforcing the Currency of certain Paper Bills lately Issued in this Collony."18 By the following spring silver was so scarce that the inhabitants of Salem petitioned the governor for permission to pay taxes in wheat.19

In 1711 a second colonial expedition was ordered against Canada. New Jersey's contribution of £5000 for men and supplies was made possible by a second issue of bills of credit.20 Fragmentary records indicate that New Jersey exchange in terms of sterling remained at £150 until 1714 - i.e., £150 New Jersey pounds were worth £100 sterling. Collection of taxes to retire the second issue had fallen in arrears then and when the legislature voted to postpone retiring £2000 of the bills, exchange rose to 165.21 Two years later taxes were still in arrears and there were at least £2000 in expired bills outstanding.22 Discussion of how to solve the problem was reopened.

William Pinhorne, former henchman of Governor Cornbury, now brought forward a plan which was essentially the loan-office plan adopted seven years later.23 Private land banks had been planned and perhaps tried on a small scale in South Carolina and Massachusetts toward the end of the previous century. Barbados had made an unsuccessful effort to use the scheme in 1706. An attempt in South Carolina in 1712 to finance an expedition against the Tuscarora Indians by establishing a public land bank or loan office had been a dismal failure in practice, but apparently a great success in theory. In the next few years colony after colony tried the scheme - Massachusetts in 1714, Rhode Island in 1715, and New Hampshire in 1717.24 The New Jersey Assembly gave Pinhorne's plan careful consideration before laying it aside. Possibly it was suspect because of the shady reputation of its sponsor.

Representative Jeremiah Basse, lately secretary of the province, made a speech on paper money at this time that so impressed his listeners that it was entered in full on the Assembly minutes, an honor accorded no other assemblyman during the colonial period. He proposed striking enough new bills of credit to retire all the old ones and providing "an Indubitable fond" for the annual sinking of them.25 It was believed at this time that the value of money depended upon the reserve behind it rather than the quantity in circulation. In the end £400 of bills were issued. This boosted the exchange from 150 to 178.26 When two years later still another issue was proposed, ostensibly to attract commerce to New Jersey, Governor Hunter, who had recently been warned by the Board of Trade against more paper money, frankly told the Assembly that the good trade conditions, for which they clamored so, could be found only if the credit of the province were sound. The best way to insure that, he said, would be to cease issuing paper money and pay the governmental debts.27 New Jersey exchange went to about £145 in August, 1719.28

During the years 1717-22 a genuine attempt seems to have been made to retire the colony's paper money. At one time, when the bills were not all sunk, the Assembly voted to pay the holders eight per cent interest for the period past maturity.29 The result was a period of currency deflation with its attendant discomforts. At a Burlington town meeting it was voted that silver pass at proclamation money rates (that is, £133 1/3).30 Interest rates appear to have continued high, but interest is the price for the use of capital, and capital was as scarce as ever. People then as today, confused money and capital, and thought the high interest rates were evidence of scarcity of money. The legislature set the maximum legal rate of interest at eight per cent in 1719. The revenue act of 1722 permitted taxes to be paid in wheat at a price below the market rate.31 Governor William Burnet reported an instance of people paying their taxes with jewelry because they could get no other specie.32 There were nearly three hundred lawsuits for the collection of debts in one county. Pennsylvania set up a loan-office system in March of 1723 and New York put a batch of bills in circulation.33 Shortly after the New Jersey Assembly met in October of 1723, petitions were presented setting forth the need of paper currency. The Assembly spent the remainder of the session preparing a satisfactory bill. It was one of the most important measures in the colony's legislative history and the assemblymen appear to have realized it. At one time they adjourned for a fortnight to go home and consult with their constituents. Finally, on November 30, 1723, the bill Setting up New Jersey's loan office or public land bank became law.

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THE LOAN-OFFICE SYSTEM

The nearest approach to a modern commercial bank in colonial times was these loan offices or land banks. The fundamental functions of a commercial bank are discounting, receiving deposits, and lending its credit in the form of banknotes or deposit currency. The colonial land banks or loan offices did not perform all three of these functions.35 The land bank idea is said to have originated from the Englishman William Potter's book, The Key to Wealth (London, 1650) and was tried at one time or another in every mainland colony but Virginia, beginning with South Carolina in 1712,36 or according to Alexander Del Mar possibly as early as about 1675. The Massachusetts Land Bank of 1740, though not the first in that colony, is the most famous. The Pennsylvania loan-office system is usually cited as the most successful. New Jersey's loan-office system is not so well known, but certainly deserves consideration as a close contender for such honors as there may be. It will be seen, however, that those honors are not great, since the system, even at its best, had very fundamental flaws.

The New Jersey law of 1723 called for the printing of £40,000 of legal-tender money of denominations ranging from one shilling to three pounds. This was more than enough to relieve the currency stringency. Loans were to be made in amounts of not less than £12 6/ or more than £100. Loan offices were set up in each county and allotted a quota, based on the county's population. Borrowers had to give as security a mortgage on land or houses at least double the value of the loan. The interest rate of five per cent, a saving over the current rate of eight per cent, was calculated to make it easy for poor people to borrow. A moratorium was laid on all debts for four months, until March 25, 1724, to allow time for the new money to get into circulation. The borrower was expected to pay back one-twelfth of the principal and interest annually. If he failed to make his payments on time, that failure was considered as judgment against him. If he did not pay within the succeeding thirty days of grace, foreclosure took place. If the money still could not be collected, the county was obliged to stand the loss.

Almost everyone in the province appears to have favored the scheme. Members of the legislature voted themselves duplicate pay and generous bonuses. Governor Burnet was to receive a £1000 present under the guise of "incidentals" and longer, more regular salary appropriations. The taxpayers gained in two ways. The old public debt of £4000 was paid off. The interest on loans helped defray the costs of government. The law stated that the interest payments should be used along with the principal to retire the notes, but after 1725 the Assembly refused to destroy the bills paid in for interest. Burnet explained to the home authorities that the people's representatives "cannot venture to lay higher Taxes on the People . . . when so much money lyes dead in the Loan office."37 For the next thirty years the costs of government were met partly or wholly out of these interest payments; as it is sometimes loosely phrased, "the government was run on the profits of a banking business." The wealthy landholders do not seem to have opposed the bill. James Alexander, surveyor-general for both the East and West New Jersey Proprietors, helped draw up the bill, and Lewis Morris, councilor and later governor, was chiefly incensed over the bribe given Governor Burnet. The explanation is that they did not yet fully realize the dangers of inflation, but they could see that the system lessened the taxes which they had to pay on improved lands and other properties which were the principal sources of revenue in a province whose foreign trade was unimportant.

Alexander wrote ex-Governor Hunter in December of 1723, "I hope there may be no discount for the Utmost Care was taken in passing the Act that there should be none.38 But the legislature was unable to amend any economic laws: the notes which were issued at proclamation money rates39 (really a twenty-five per-cent discount from sterling) passed at a further discount of one-sixth in terms of New York money, the best in that area at the time. They passed at par with the money of Pennsylvania which had set up a loan-office system earlier that year. There was of course a discrepancy between the buying and selling rates for these notes; for example, New Jersey merchants related in 1726 that the rate during the year had been even or just a little unfavorable to them, and at the same time New York merchants were reporting that it took twenty-one New York shillings to buy a New Jersey pound (twenty shillings). According to Burnet, governor of both New York and New Jersey, both monies were at about a five-per-cent discount from the proclamation rate on gold.40 It was not long before New Jersey money was preferred to Pennsylvania bills. The explanation of the improvement in New Jersey money is that the New Jersey collections were conscientiously made and foreclosures were prompt. Furthermore New Jersey money became acceptable in all three colonies, while Pennsylvania bills were not acceptable in New York or New York ones in Pennsylvania, with the consequence that New Jersey bills were much in demand for making interprovincial payments.41 It was estimated a few years later that only a third of the New Jersey money in circulation was in New Jersey.42 The New Jersey bills suffered somewhat in popularity about 1727, however, because of a flood of clever counterfeits, but the legislature handled this problem by calling in the old notes and issuing new ones.43 There is no indication that this was a device to get another paper money issue without the knowledge of the English authorities. By 1728 New Jersey money was at a premium of fifteen pence to two shillings over New York money and Governor John Montgomerie was boasting that half of the bills had been retired.44

The pains of deflation were now felt.45 Once more people began to complain of the growing scarcity of money. By 1728 a third of the notes had been retired. Taxes became increasingly difficult to collect: the two treasurers had barely £250 between them in 1730, and unpaid salary warrants for twice that amount were outstanding for as far back as 1726. The commissions of the loan-office officials were cut in 1728.46 Bills were introduced in the Assembly to ease the lot of the increasing number of insolvent debtors, and to lower the maximum legal interest rate.47 In short the stage was set for the introduction of another paper-money bill.
A second loan-office bill calling for £20,000 was enacted into law in 1730.48 It differed from the first law only in that the loans were to run for sixteen instead of twelve years, and by the provision that principal paid in before the first eight years might be lent out again. The King's approval was necessary before the law could be put into operation and this was not obtained until 1732, just before the Assembly met the next time.

Meanwhile the economic pressure on the debtors had grown worse. Only £10,000 of the original £40,000 was left in circulation. Bills were introduced to reduce the maximum legal rate of interest and to relieve "poor distressed Prisoners for Debt."49 A bill regulating the size of fees lawyers might charge was passed, its enemies summarizing it as a popular declaration that "We will pay no Law Fees. We will have no Lawyers. We will pay no Customs fees. Neither will we pay our Debts. But we'll punish every man that shall pretend to sue for his Own."50 There was now a provincial deficit of £3000. A petition from Monmouth County requested that the paper money of New York and Pennsylvania be made legal tender in New Jersey.51 The Assembly, however, had no intention of losing the opportunity for profit to the government and saving to the taxpayers, and so drew up and passed a third loan-office bill. This act called for £40,000 but in every other way resembled the second law.52 Its confirmation was delayed in England because of the opposition of some Bristol merchants but it was finally approved in 1735.

 

TABLE I
NEW JERSEY PAPER MONEY ISSUES, 1709-36

Date	Amount	Proposed Method of Retiring
June 30, 1709	£3000	To be retired £1500 a year 1710-11
July, 1711	£5000	£1000 a year, 1712-16
March 13, 1714	£2000	Maturity of this amount extended.
Jan. 1716	£4002	Maturity of £1800 extended; £2200 constitute a new issue
First Loan Office Act Sept. 24, 1723	£40,000	To be retired £3333 a year 1725-36
Dec. 9, 1727	£24,670	All notes out as of May 1728 replaced by new notes because of counterfeiting
Second Loan Office Act, July 1730	£20,000	Confirmed 1732, begun 1733, expired 1749. £1333 retired each year
Third Loan Office Act, August 16, 1733	£40,000	Confirmed 1735, begun 1736, expired 1753. £3333 retired each year

The average (median) size of the loans made in Burlington and Hunterdon counties was smaller for the second loan than for the first but larger for the third than for the second. That might be expected.

MEDIAN SIZE OF LOANS IN
BURLINGTON AND HUNTERDON COUNTIES53

	First	Second	Third
Burlington	£35	£32	£34
Hunterdon	Unknown	£20	£25

With the issuance of the bills available under the second loan-office act the premium enjoyed by New Jersey money over New York's vanished. When news of the third bill became known, no merchant in New York would take New Jersey money, according to Lewis Morris, until it was learned that the act would he delayed until the King gave his approval some time in the future. Then the bills passed at 7 1/2 per cent less than before. Morris was strongly opposed to the issue of paper money and wrote a vigorous but fruitless protest to the Board of Trade in the hope of killing the third loan-office bill. He said:

". . . It being in the power of the people of New Jersie to give what Denomination they please to their own paper; if it would be of the same Vallue they are pleased to call it, it would equally be in their power to be as rich as they pleased; but since it is not, and passes at a great discount, and sometimes will not pass at all, the obliging the Creditors by a Law to take it in payment for their debts at the imposed Vallue, is obliging them to take from 12 to 20 and 25 per cent lesse than is due to them; who, instead of receiving a moderate interest from lying out of their money, will pay their debtors an Excessive interest for being admitted to the Honour of trusting them; the best paper money daily growing worse in its reall vallue, tho' retaining its legall Vallue and denomination and tho' it does not fall equally in Vallue in all places, yet Experience has shown that this is the nature of it which renders it Difficult to manage any trade with Successe. This losse, tho' it falls first on the factor in New Jersie, and next on the merchants or factor in New York; yet at Last it centers in the British merchant in London, who cannot be paid for those that buy of him are rendered unable to do it and must in some measure Affect the British expectations. Tho' the trading part of men justly exclaim against this paper credit; as distructive of their trade; and yet governours who find their account in it, are led by their private views to countenance and promote such credit, for the £1000 present, if it does for 20 per cent lesse than its denominated vallue, is still £800, all which is clare gaines, and by paying of the Soldiers is most of it turn'd into sterling money without any risque, which the trading men cannot Do . . ."54

Whether the real estate boom that took place soon after the second loan law went into operation was a result, cannot be proved. At least the chronology is worth noting and the increased money in circulation was doubtless no damper on speculation. The year after New Jersey's third loan office began operations, New York decided to try the experiment too. Her currency then fell to a discount in terms of New Jersey's. The following year Pennsylvania issued more bills of credit. The result was that New Jersey's money was again the best of the three, though eight per cent worse than before in terms of sterling.55 Again a law was passed to restrain creditors from charging high rates of interest,56 and soon afterwards a petition was presented from the inhabitants of the growing frontier county of Hunterdon pointing to the necessity of "striking more Paper Money for the Encouragement of Trade."57

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REPRESSION AND FRUSTRATION BY THE BRITISH

For some time the British merchants had been protesting to their government at having to accept depreciated legal tender bills in settlement of debts. In 1739 the House of Commons requested the Board of Trade to prepare a complete report of the colonial paper money outstanding and the extent of its depreciation. The following table, published in the Boston Evening Post of January 12, 1741, will give some idea of the situation.

Number of Paper Pounds Necessary
to Purchase 100 Pounds Sterling58

New England	525
New York	160
New Jersey	160
Pennsylvania	170
Maryland	200
N. Carolina	1400
S. Carolina	800

The House of Commons passed a series of resolutions in 1740 directing all governors to enforce the Proclamation money act of 1707 (prohibiting more than a 33 1/3 percent premium on bullion) and forbidding them to sign acts calling for further issues of legal tender bills unless the law carried a suspending clause. Previously this rule had only been an instruction to the governors. New Jersey had obeyed it however in getting the second and third loan office acts.59 Henceforth the Board of Trade condemned all paper-money laws on general principle. Lewis Morris, the shrewd, wealthy, and domineering old man whose views on paper money have been set forth above, was now governor of the province.

When the legislature met in 1740, Morris asked that troops and money be voted for an expedition which the English were planning against the Spanish West Indies. Quaker influence was strong in the province at the moment and the Assembly would do no more than bring in a bill for the issuance of £2000 in bills of credit to be used to meet the expenses of feeding and transporting troops. No taxes were levied to retire these bills; instead, for the next four years £500 a year of interest money was to be employed for that purpose.60 This put Morris in a dilemma because he wanted to help the King's expedition, yet he did not want to break the instruction forbidding him to sign a paper-money act not bearing a suspending clause. Reluctantly he signed it and then wrote the home authorities urging that they disallow it. He explained that the Assembly would then have to levy taxes to retire the bills. The English ignored the suggestion. Morris then thought of another plan for "making lemonade out of the lemon" the Assembly had handed him: he proposed to the Board that Parliament pass an act authorizing the Crown to take over the loan-office system in New Jersey and apply the profits from it to pay prrovincial salaries and other expenses.61 When the English authorities still paid no heed, Morris wisely decided that "the softest way of treating" the Assembly would be the best.

During the preparations for the West Indian expedition, while supplies were being accumulated in quantity, the supply of English bills of exchange was such, and the demand for specie so great that New Jersey exchange rose sharply. The number of paper pounds needed to buy £100 sterling went from 170 to 150, then to 125 at the peak, after which the rate dropped to 140, 150 and finally back to 170 again.62 Pennsylvania exchange behaved in the same manner.63 At one time Morris wrote Colonel Blakeney, adjutant-general of the King's troops in America, that he could not sell the British government bills of exchange for either specie or New Jersey money and so could not give the officers pay for the troops raised in the colony. Morris' explanation was that the specie had left the province. The farmers who had received some of the bills of credit for wheat were hoarding them in anticipation of a further rise and expecting eventually to use them to buy land for their children.64 During the French and Indian War an even greater deviation of exchange rates from the probable purchasing power parity took place.

In the autumn of 1742 the New Jersey legislature passed a £40,000 loan-office act with a suspending clause attached. Realizing that Morris was opposed to paper money and that in addition the home authorities had recently urged him strongly to maintain the colony's credit and prevent any increase in the paper-money supply, the Assembly took the usual steps to make acquiescence worth his while. It passed a second measure, ostensibly to pay for printing the notes, but actually to offer a £500 bribe to Morris. The governor's reaction was not the one expected. He said,

". . . If you believ'd money would have influenc'd me to come into your measures, the offer should have been of a different kind. . . . We have I think in a wonderful manner, preserv'd the Credit of our Bills, but, that this is owning to any prudent management of our own. I will not venture to affirm: but should your bill pass in the manner now offered for my Assent, there is much reason to believe your money would soon fall 15% in its value and consequently my own Sallary and that of every Officer of the Government, become of 15% less value than they are at present: and to induce me to get this done, I am to have what will be of the Present value of £425 to take £150 per Annum from my own Salary, if my behavior (Subservient to your purposes) induces you to continue it."65

He then dissolved the Assembly.

The following year the Assembly announced he would have to Sign their bills before they would vote the annual revenue act which of course included his salary. A new loan-office bill was introduced but it died in the upper house. In 1744 Morris announced the need of a better militia law because of the imminence of war with France. The Assembly replied by drawing up another loan-office bill which the Council again smothered. The Assembly thereupon voted to cut all salaries in half.

Meanwhile in England merchants' opposition to colonial paper money was stronger than ever. The resolution of 1740 had not been sufficiently strong. Parliament now asked the Board of Trade to draft a bill forbidding the issuance of legal-tender bills of credit. The Board realized that the governors were often obliged by threat of salary-stoppage or were tempted by bribes to assent to paper-money laws which their instructions forbade them to sign. Accordingly the Board went even farther and added a clause to the proposed law giving all royal instructions the force of an act of Parliament. Assemblymen all over America became very excited. Colonial agents lobbied busily and the hated measure was defeated.66

In 1745 an expedition against Fort Louisbourg in Nova Scotia was organized and New Jersey was "invited" to join. Again the Assembly contributed a meagre £2000 for provisions, the grant taking the form of bills of credit to be retired, like the previous one, with interest money.67 By this time everything was sooner or later connected with the controversy of whether the colony should have another loan-office act. Governor and Assembly were at a deadlock. He would assent to no laws until he was voted his salary which had expired in 1744, and they refused to vote him his salary unless he would assent to certain laws, the chief being the loan-office one. There were pamphlet controversies. One sponsor of the loan-office system insisted that money could not depreciate since it was secured by double its value in land and land was continually rising in value.68 Others claimed that New Jersey money could not harm English merchants since New Jersey did all her trading through New York and Philadelphia and not directly. Morris' views appear clearly in a letter to the Board of Trade in 1745 in which he said of the bills of credit, " . . .their decrease in Vallue is some indication of the decrease of ye quantity of silver & gold in ye plantations, where they are Current; and were there no such paper bills the Traders would be under a necessity of keeping so much silver as would answer the purpose of them, & be the medium of Commerce that paper bills now are . . . "69

In the Spring of 1746 Morris decided to try diplomacy again in his dealings with the Assembly. He had now been without his salary for over a year; the newly-elected Assembly had but two members who had not served in the previous one, which showed where the populace's sympathies lay; and he might soon need war funds again. The Assembly early prepared another loan-office bill and a few weeks later the Council gave its assent. Morris agreed to sign the bill if they would grant him his customary salary. They agreed to give him half of it now and half when the bill was confirmed in England, for they had reason to fear he would double-cross them. The governor balked at this, and when neither side would give in, he prorogued the Assembly, automatically killing every bill he had not signed.70 Two weeks later he died. His heirs were never able to collect his last two years' salary.

An expedition against Canada was under preparation and so the president of the Council called the legislature to vote men and supplies. The Assembly resolved that five hundred men should be raised and provisioned immediately and then introduced a bill for the issuance of £20,000 in bills of credit.71 This was soon cut to £10,000 but was supplemented by the re-emission of £4000 of notes originally printed as replacements for torn bills of the 1740 and 1745 grants, and the retirement of the £2000 issue of 1740 was postponed for two more years.72 Exchange rates fell from about 170 to nearly 200.71 In November, £850 more was voted for army provisions and the following spring another £1000 was appropriated for military purposes.74 All of the £17,850 was to be sunk by 1753 with interest money.

In the meantime Jonathan Belcher, formerly governor of Massachusetts, had been appointed to the New Jersey vacancy. His opposition to the famous Massachusetts Land Bank scheme had aroused so much hostility and intrigue that he had been recalled. Determined not to repeat this mistake, he was soon writing enthusiastically of the "charming New Jersey money."75 The keynote of his policy in New Jersey was to please the Assembly. His brother-in-law, Richard Partridge, was New Jersey's colonial agent and of course informed him even before he left England of the Assembly's keen desire for another loan-office law. One of the men asked permission of the Board for the governor to sign such an act as soon as it was presented. Robert Hunter Morris, son of the late governor, chief justice of the province, and subsequently governor of Pennsylvania, wrote the agent of the eastern Proprietors in London, Ferdinand John Paris, urging him to oppose such permission. Morris gave as his reason that it would

". . . be Vastly prejudicial to the Proprietarys of Pensilvania where New Jersey money has always past at par with the Money of that Province & in which the Proprietarys debts & quit rents are payable . . . & we are of oppinion that So Large a New Emission in New Jersey as £40,000 with a greater Sum now Already Current will diminish the Value of all the Quit Rents & debts due to those Proprietors ten or 20 per cent which we apprehend will he at least a ten or twenty thousand pounds Loss to those Proprietarys very soon."76

Belcher was told that he must see to it that a suspending clause was attached to any act presented to him and that it would then be considered on itsmerits.77 When the Assembly met soon after the new governor's arrival, one of the first things it did was to draw up a new loan-office bill for £40,000 complete with suspending clause. Belcher was given a £500 "present" for backing it and the measure was sent to England with his earnest recommendations for confirmation.78

The legislature had to set up tax-collecting machinery lest the new loan-office act be disallowed, because the second loan-office law expired in 1749, the third in 1753, and over £18,000 in bills of credit would have to be sunk by 1753. A bill was brought in to set the quotas of the various counties. This led to a long and heated dispute between the two houses lasting over nine sessions and not finally settled until I752.79 Most of the councilors were landed proprietors and therefore interested in deciding which counties should have the highest tax and in preventing the taxation of unimproved lands. The latter concern was also a major issue in Pennsylvania about this time. The assemblymen, on the other hand, represented the populace who were particularly incensed at the Proprietors in the 1740's because of their attempts to collect back quit-rents and make "squatters" buy title or move on. Thus the lower house wanted to impose most of the new taxes on the wealthy landowners and pointed out that the poorer classes had long provided most of the revenue through interest on their borrowings.

The financial condition of New Jersey was poor indeed in 1753. The loan-office act sponsored by Belcher had been disallowed in 1749; the third loan-office act had expired; and Parliament had passed the Currency Act of 1751 forbidding the erection of land banks and the issuance of legal tender bills of credit In New England - evidence that English dislike of paper-money legislation was stronger than ever.

Rates of exchange of New Jersey currency in Philadelphia indicated deflation. A law had been passed in 1751 "for the Relief of Poor distress'd Prisoners for Debts," a measure that had previously been a precursor of paper-money agitation.80 When the legislature met in the spring, Belcher advised them to put the colony's finances in order. An investigating committee discovered that there were £4,598 of loan-office bills still unsunk and £17,850 of war bills of credit out. The Assembly took steps to force collection on the loan-office bills, used a Parliamentary grant of £2,548 to reduce the bills of credit debt to £15,302, and passed a tax law to raise funds to retire the balance at a rate of £1530 a year.81 The purpose of all this was to appear to deserve special consideration from the English authorities.

The colony had paid none but petty local taxes for nearly eighteen years and but meagre taxes for twelve years before that. A new loan-office act appeared to be the elixir that would cure all their economic ills, and so the Assembly drew up a petition to the Crown asking for approval of a loan-office act of £60,000. The principal entreaties, threats, and arguments that had carried weight in the past were aired again. The King was urged to lighten the heavy burden of taxes on the people, then threatened that the colony "would be unable to support Government so amply as heretofore unless effectually relieved," and finally told that a new paper-money issue would enable the colonists to pay their past debts and contract for more goods, since as soon as they had paper money they could spend their hoards of specie. The Council thought the time unpropitious, but the petition asking for permission to lend out £60,000 was sent to England nonetheless.82

TABLE II
NEW JERSEY PAPER MONEY ISSUES, 1740 - 1783

Date	Amount	Method of Retirement
July 7, 1740	£2000	To be retired £500 a year, 1743-46 out of loan office interest money
August 24, 1745	£2000	£500 a year, out of interest money
June 4, 1746	£4000	£1000 a year out of interest money
June 4, 1746	£2000	Retirement of 1740 issue postponed two years
June 4, 1746	£10,000	1753, out of interest money
Nov. 1746	£1,253	To be retired out of interest money
Nov. 1746	£850	1753, out of interest money
May 9, 1747	£1000	1753, out of interest money

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BILLS OF CREDIT AND WAR-TIME INFLATION

The French and Indian War began before it could be learned whether the British government had approved the £60,000 loan-office act of 1753. The Assembly quickly saw an Opportunity to use English need for troops as a leverage to obtain their paper money. New Jersey, largely protected on her frontiers by New York and Pennsylvania, with hardly any Indians of her own, and without rich ports to invite sea attacks, was in a fairly good position to employ such politics. When Governor Dinwiddie of Virginia asked for men and supplies to repel French invasion, the Assembly told Governor Belcher the colony was too much in debt to help but might if the King agreed to their loan-office petition. In the spring of 1754 word came that the King would agree to the petition on two conditions that amounted to a veto. One was that the bills not be legal tender; the other was that the interest be appropriated to government purposes and the funds be handled by the governor and Council.84 The first condition would have made the bills useless for paying debts, the second would have taken the power of the purse from the Assembly. The Assembly refused to send delegates to the Albany Congress of 1754, possibly in anger over this. The governor dissolved the Assembly and called an election.

The Assembly that met in the autumn of 1754 agreed to vote men and supplies to help resist French encroachments, but was puzzled as to how to finance this assistance. It was decided to petition for £70,000 in loan-office bills, the first £10,000 to be spent on an expedition against the French as soon as the King agreed to the law, and the remaining £60,000 to be lent out in the usual way. The first £10,000 of interest received would be used to retire the bills spent on the expedition, the next £13,500 would be used to pay the debts of the last war, and anything after that would go to a fund for the defense of colonies in danger. But the Assembly insisted that the bills be legal tender; otherwise they would fall to a discount in the nearby colonies.85 A decade before, the Assembly had cut off the governor's salary because he would not sign a loan-office act; now it was applying the same tactics to the King when he asked for assistance against an enemy. Governor Belcher wrote the Board that if the offer were accepted the value of New Jersey exchange would be cut in half, and proposed the useless remedy of making the colony peg the rate at the Proclamation rate. He admitted that the colony would give no help if the law were not approved.86

An extensive campaign was planned for 1755. In February the fate of the loan-office proposal was still unknown and New Jersey would do no more than vote £500 for supplies and wagons for troops passing through the colony. By spring, people in the northern counties were beginning to worry over Indian attacks from upper Pennsylvania. Petitions poured into the Assembly, and it was decided to raise and supply five hundred men for General Braddock's use. The Assembly voted to issue £15,000 in bills of credit to be legal tender and to be retired in five years time.87 In July, 1755, Braddock's famous defeat occurred. Word finally arrived late in the summer that the £70,000 loan-office proposal was "in every way" unacceptable.88 The assemblymen were thoroughly disgruntled, but the necessity of defending the colony was now greater than ever. A second appropriation of £15,000 to support the colony's troops was made, the bills to be retired £5000 a year after 1758.

Although there were rumors of Indian marauding parties on the northern border that summer, the Assembly would vote no more money for protection. Matters were still serious during the winter and so the Assembly authorized another £10,000 of bills of credit, due in five years, to build blockhouses and buy supplies for troops defending that area. Another Indian attack occurred and the Assembly hastily put up still another £15,000 but tried to persuade the governor to postpone their retirement date because so many bills already out were maturing within the next few years. Belcher had received instructions not to extend such emergency appropriations beyond five years and he refused. At this point there were rumors of more Indian depredations on the frontier and the Assembly offered £17,500 instead of £15,000 and for the five-year period.

That fall the Assembly's attitude changed. A large part of the New Jersey contingent was captured at Oswego during the summer owing to negligence of the English command, so that the Assembly was in no mood to vote funds for distant campaigns when it met in the autumn of 1756. General Loudoun asked the colony for one thousand men that winter for the 1757 campaign, but the Assembly voted only five hundred and contributed only £10,000 in bills of credit for expenses.89 Even after General Loudoun appeared before the legislature himself and spoke, the members would not increase the appropriation. New Jersey was the only colony not to vote its quota that year."

Taxes on the first war issues were now falling due and seemed extremely heavy to people who for a generation had known almost no taxes at all. Again the Assembly turned to the loan-office device as a way to lighten the colony's financial burdens. It drew up another petition to the King for £89,000 of paper money, £29,000 to be issued as bills of credit for the King's service immediately, and £60,000 to be a loan-office fund. The interest was to be used to retire the bills of credit. Belcher would not sign the petition and so it was laid away until a more propitious time.

Half of New Jersey's troops were captured and massacred at the surrender of Fort William Henry in the summer of 1757. For a time it was feared that a French invasion might reach as far as New Jersey. The governor ordered out the militia and kept them very busy for a while. A few days after the Assembly met that autumn, Governor Belcher suddenly died.

The president of the Council, John Reading, took charge, but he was an old man and not a very strong character. The result was that the Assembly got out of control. The £89,000 loan-office petition was sent off to England, and £30,000 was voted for military purposes. The date for retiring the bills was postponed to 1768-73, contrary to royal instructions. The following March the Assembly met again to vote on military appropriations and this time resolved that £50,000 in bills of credit should be "struck" to be sunk in far-off 1774-78.91 The two appropriations were about the equal of the £89,000 loan-office bill now pigeon-holed in England. Some of the Council were dubious whether Reading should agree to such a huge paper-money issue, but the majority advised him that it would be "Almost Impossible to bring the Assembly into Compliance with the Orders in Mr. Pitts' letter by any other Method."92 Certainly the generous grants of 1758 are in sharp contrast to the niggardly sums given Loudoun. The Assembly would do much if allowed to use its favorite device of paper money.

A new governor, Francis Bernard, who would later be governor of Massachusetts, arrived in June. By his personality and prompt handling of a critical Indian situation on the northern frontier he soon became quite popular. He had asked for a liberalizing of the usual instruction limiting bills of credit issues to non-legal-tender bills maturing in five years and of the law to carry a suspending clause. He only got permission to omit the suspending clause.93 The appropriation voted that summer was for £10,000, the bills matured in 1766 and were legal tender.94 That was the closest he could come to obeying his instructions and yet get military funds.

More funds were needed for the campaign of 1759. Bernard wrote to England, pointing out that the Assembly would not provide notes of less than six to eight years' life because taxes for the next five years were so heavy. He stated that it was useless to prohibit making them legal tender. Also he asked for a special instruction permitting the issue of £40,000 to be retired in 1764-65. The British authorities finally agreed to this. However, before an answer was received, the funds had to be voted and Bernard was forced to accede to an act for £50,000 of legal tender bills of credit to be retired in 1764-67.95

The following year the Assembly voted £45,000 in bills of credit, to be sunk in the five years 1768-73. Bernard again attempted to persuade them to retire the bills sooner but without success. The year after, the next governor, Thomas Boone, obtained £25,000 to be retired in 1774-78 and but half as many troops. Boone was soon transferred and his successor, Josiah Hardy, obtained £30,000 in 1762 to be retired in 1779-80. Hardy was removed for disobeying a royal instruction having to do with judicial appointments and was succeeded in 1763 by William Franklin, the able but illegitimate young son of Benjamin Franklin. Although the war was now at an end in Europe, Pontiac's Rebellion in the west necessitated making plans for another campaign. New Jersey contributed £10,000 to be sunk in 1781, and then £25,000 to be retired in 1781-83.96

New Jersey, with a population of seventy to eighty thousand people had issued £347,500 during the war, of which at least £275,000 were still outstanding in 1764.97 One would expect a very considerable inflation. Yet the accompanying table indicates that the number of New Jersey pounds necessary to buy £100 sterling in Philadelphia actually declined for a time during the war, according to W. A. Whitehead.

TABLE III
WHITEHEAD'S INDEX OF THE PRICE OF £100 STERLING
IN NEW JERSEY PAPER POUNDS IN PHILADELPHIA98

Jan. 1749	170
Jan. 1750	172 1/2	175
Jan. 1751	172 1/2
Jan. 1752	165	167 1/2
Jan. 1753	165	167 1/2	170
Jan. 1754	167	167 1/2	170
April 1755	166 1/2	167 1/2	170
Aug. 1755	169	170
Dec. 1755	170	172 1/2	175
June 1756	170	172 1/2	173
March 1757	165	167 1/2	169
June 1757	167 1/2
Oct. 1757	161	162 1/2	165	166
April 1758	160	162 1/2
Aug. 1758	160	162 1/2
Mar. 1759	155	157 1/2
Mar. 1760	152	152 1/2	153	154	155
Mar. 1761	170	172 1/2
Mar. 1762	175	177 1/2
Dec. 1763	168	170	171 1/2
Feb. 1764	171	172 1/2	173	175
Sept. 1764	170	171	172 1/2

One might suppose the answer to be that inflation in England was as great as it was in New Jersey. However, the studies of J. E. T. Rogers indicate that agricultural prices in England in this period were quite stable.99 Another explanation could be some early form of exchange control, but there is no evidence of that. The answer seems to be that the credit of the English government declined markedly during the war100 - the British forces did not win a major battle in America until 1758. Furthermore, during the war the customary condition of an unfavorable balance of trade was temporarily replaced by a balance favorable to the colonies because the English government was paying so many soldiers over here, buying large amounts of provisions, and remunerating the colonies in part for their appropriations.

What about prices in New Jersey? No study of colonial New Jersey prices has ever been made. However, a very scholarly piece of research has been done on prices in colonial Philadelphia. Using an arithmetic index of wholesale prices of twenty commodities, the base being the monthly average of 1741-45, the price level there rose from 110 at the beginning of 1755 to 148 at the close of 1762, after which it dropped to 120 in 1765.101 Pennsylvania increased the amount of money in circulation about 350 per cent between 1755-60; while New Jersey increased her issues nearly 1300 per cent, and New York increased hers substantially.102 It is a mistake, however, to regard each of these colonies as a separate and distinct cell. Governor Bernard reported to the Board in 1758 that New Jersey bills were current in New York and Pennsylvania counting houses, and New York and Pennsylvania bills were also current in New Jersey.103 The famous traveler, Andrew Burnaby, wrote in 1759 that New Jersey money was "in very good repute, and preferred by the Pennsylvanians and New Yorkers to that of their own provinces."104 Sterling exchange rates for the monies of the three provinces showed little variation. The presumption is fairly strong, therefore, that the New Jersey price level was not far out of line with that of Pennsylvania.

Such fragmentary contemporary evidence on New Jersey prices as is readily available indicates that prices rose at least as high in New Jersey as in Pennsylvania. Bernard wrote Lord Halifax, December 3, 1759, that because of the war "The Price of necessaries is risen to near double of what it was some years ago."105 The Reverend C. Campbell, Anglican minister in Burlington, wrote Secretary Bearcroft of the Society for the Propagation of the Gospel December 20, 1759, "It is true the war has occasioned heavy taxes upon each individual here, and the necessarys of life are greatly increased in their price, So that people not in trade or the farming way have adoe to Support themselves and families." Two years later he wrote again on the rise in the price of provisions, "It is with the utmost difficulty that we of the Mission can support our families."106 The governor wrote General Amherst May 8, 1762, that because of the high price of provisions he feared four pence would no longer "subsist" a soldier for a day.107 The writer of a famous pamphlet to New Jersey freeholders, J. W. (probably assemblyman John Wetherill), claimed that the wages of tradesmen had increased one hundred per cent since 1747.108 Governor Franklin on his arrival in 1763 claimed that "all the Necessaries of Life in this country are increased in Price near Three fold what they were seven years ago" and asked for a salary increase.109 He was given a twenty-per-cent raise. Governor Bernard pointed to the inflation in 1760 and prophesied that after the war prices would fall and money grow scarce as it was retired. He urged the Assembly that "to postpone the Payment of the Provincial Debt, from a time of Plenty to a Time of Scarcity, (or at least of less Plenty) will be removing a light Burthen from yourself by laying a heavy one on Posterity."110 His successor, Governor Thomas Boone, gave similar advice the next year.111 But the people and the Assembly paid little heed. Parliamentary grants to New Jersey - £79,668 altogether - were not used to speed up the retirement of the public debt, but were employed to lighten taxes for about five years.112 J. W. said in his pamphlet in 1763

". . . that we were not affluent before the War, might have been said with far more Truth than it can be said at this Time, when not one of you can be ignorant that the Estates of the Husbandmen, including a large Majority of the People, are greatly augmented, and indeed most of the other Classes of inhabitants, within a few Years, much bettered. . . . That the Farmers may not command in a Manner their own Price for most of their Commodities. . . . That your Lands are surprisingly advanced in Value, and that the Province is in Fact richer in a great degree than ever it was. . . . You have paid Taxes . . . you will pay Taxes for eighteen Years to come. But how light do our Taxes set upon you notwithstanding."

He estimated the colony's "fund" (wealth) to be £6,000,000, and her yearly "revenue" (income) to be £240,000.113

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DEFLATION AND RENEWED EFFORTS
TO OBTAIN A LOAN-OFFICE ACT

The failure of American assemblies to obey royal instructions had annoyed the Crown authorities for years. Steps had been taken to strengthen the authority of the Board of Trade in 1748 and the governors' instructions had been revised in 1754. More would have been done at that time if the French and Indian War had not broken out and necessitated a postponement of matters. The behavior of the colonies during the war demonstrated the need of strengthening royal authority. It also showed that the colonies were capable of bearing a larger share of the Empire's growing burden than had been realized. England's annual expenditures had now tripled whereas American taxes were comparatively light. The measures undertaken by England to enlarge her authority in America are an old story. There was the Proclamation of 1763, reserving the newly acquired trans-Appalachian territory to Indian and English use. There followed the Sugar Act of 1764 to put a stop to the smuggling trade with the French West Indies so necessary to maintain New England's balance of trade. The funds from this were to be used to support the English garrisons in America which were needed to keep the Indians at peace, overawe the Canadians, and maintain English prestige and authority. Thirdly, and of chief importance in this study, there was the new (1764) Parliamentary prohibition of legal-tender bills of credit in all the colonies.

Merchants trading principally to Virginia and North Carolina had been complaining to the Board of Trade of losses which they had sustained from having to accept depreciated legal-tender bills in payment of debts. The Board had reported to Parliament that it was necessary as well for the security and interest of the colonies themselves, as of the trade and commerce of the Kingdom that a broad regulation against legal tenders be enacted. The Board did not wish to censure any colony especially and admitted that the middle colonies' money was least depreciated, but pointed to the fortunate results of the New England prohibition of 1751. 114 William Knox, agent for Georgia, summed tip the Board's views thus,

"Whenever the lawful Tender has been affixed to Paper Bills in order to give them circulation, an abuse has been committed for no Paper Bill ought to be issued without having a Fund assigned for its security, sufficient to give it Credit, and if it has such a Fund, there is no occasion for obliging People to take it. They will do so of themselves."115

Most of the New Jersey laws stipulated that if a creditor refused to accept her legal-tender bills from a debtor, the debt was automatically cancelled. The war measures also provided that any merchant refusing to sell for legal tenders the goods he had exposed for sale should be fined £25.116 Parliament accepted on the Board's recommendation and in April of 1764 enacted that after September 1 no colonial assembly should pass an act issuing legal-tender bills of credit nor extend the maturity of any bills already issued. It is noteworthy that this did not forbid paper money, but forbade only legal-tender bills.

The economic skies were now darkening all over British North America. The Sugar Act upset the balance of trade of New England, and reduced the supply of specie. New Jersey felt this only indirectly, but she felt it. The Currency Act of 1764 cut off that customary avenue of relief. The cessation of heavy English spending terminated the artificial war-time prosperity and a depression ensued. Although taxation had been a burden in New Jersey after 1753, it had been somewhat lightened by the repeated issues of paper money, prosperity, and war hysteria. A total of £347,500 had been issued during the period 1755-64, and there had been nearly £20,000 of paper money outstanding before that. Parliament had returned about a quarter of the war expenditures, but the Assembly had devoted these sums to lighten taxes rather than to speed up the extinction of the debt. In 1765 the little province had the largest public debt of any on the continent.117

TABLE III
NEW JERSEY BILLS OF CREDIT ISSUES AND DATES SET
FOR RETlRING THEM, 1755-64 (000's omitted)

( table too complex for presentation )

Beginning in 1763, taxes were levied regularly sufficient to reduce the public debt by about £12,500 a year, that is, retire about that much in bills of credit. The pains of such a deflation can easily be imagined. Debtors in prison began petitioning for relief in considerable numbers."118 The Assembly voted £200 to buy bread and corn for some unfortunates in the frontier county of Sussex.119 The Hunterdon County grand jury asked for a loan-office act, an act to regulate the practice of law, and an act to "restrain Shopkeepers and other Retailers from trusting above Six pounds to any one Person" - all typical depression measures.120 Another petition complained that the price of wheat and grain had so fallen, owing to Parliamentary checks on foreign trade, that farmers would be reduced to misery and distress unless some other method of improving their lands was found. A bounty on the raising of hemp was proposed as a remedy.121 Bounties were placed on the production of hemp, flax, and silk. A law regulating the practice of law (that is, forbidding the taking of high fees) was passed, and a bankruptcy law passed to help out debtors with dependents.122 Governmental officers were threatened with salary cuts.123 On top of all these difficulties came the Stamp Act in 1765, the proceeds of which, it was first reported, were to be sent to England in the form of specie. James Parker, printer and editor of the only newspaper published in New Jersey, The New York Gazette or Weekly Post-Boy, described conditions in 1765 very vividly in a letter written to Attorney-General Cortland Skinner.

". . . There is such a general scarcity of Cash that nothing We have will Command it & Real Estates of Every kind are falling at least one half in value. Debtors that were a year or two ago responsible for £1000 can not now Raise a fourth part of the sum & those who had putt out their money upon Land Security of double the value are unable to get the principal as there is an Entire Stop to all sales by the sheriff for want of Buyers and Men of the best Estates amongst us can Scarce Raise money enough to defray the Necessary Expences of their familys. Our Stores in the Country that used to furnish Every necessary for the inhabitants are all shutt up & the proprietors of them either broke or obliged to decline that Business from a Real inability to carry it on which obliges the farmers to supply their familys as far as they are able with our own Manufactures, but it is Impossible for me to describe the distress in this Province, I may say all the Continent of North America, is in which I think may be very soon (if it is not already severely felt by our Mother Country). This is the Real State of our Country at present which we can account for no other way than from the great Restraints laid upon our American trade by the British Parliament which as it prevents our Exporting to foreign Ports in the West Indies the natural produce of this Continent by laying an Extravagant duty on what we must take in Return it deprives us of Introducing Either gold or silver amongst us which Was Ever a Considerable part of the Remittances for our Cargoes of Provisions to the foreign Islands which of Late Were generally assorted with more or less of British Manufactures & the West Indies produce we brought from thence was for the most part re-exported to European markets & the proceeds thereof from thence Remitted to England to pay our Importations of the manufacturers, all which being now entirely stopped our Navigation is almost Ruined, our ship Builders & Every other trade necessary in that Branch idle & beggar'd & the Very little Gold or silver now brought amongst us Immediately Remitted to England for want of others. We no sooner feel the fatal Effects of this Act of Parliament but the Stamp Act is in force. Under the Insupportable Distress we are now called upon for many thousands of pounds Sterling to be paid by a Stamp Duty in Gold & Silver at a time when we are totally deprived of Every means of obtaining it & our Estates so lessened in Value that we are unable to pay the Tax we imposed upon ourselves to Support the Last War.124

A year later he wrote Benjamin Franklin,

". . . Business is excessive dull in general throughout these Colonies, so that the Post Office must be something affected . . . To what its owing to, I can't determine: - perhaps some may think it the Dregs of the Stamp Act, but I rather think that during the War, money being plenty, Many abounded in Luxury, over-run the Constable, and thinking every Day alike, never thought a Day of Reckoning would come: and so Law-suits and Ruine ensued."125

A remedy for many of these ills was, in the minds of the colonists, the much beloved loan-office System. In fact Benjamin Franklin had proposed it to Lord Grenville to be used by the British in place of the Stamp Act but Grenville had put it aside "being besotted with his Stamp Scheme which he rather chose to carry through." 126 Benjamin Franklin was a true American in his love of paper money. He had testified before Parliament in 1766 that the Currency Act of 1764 was one of five major factors that lessened colonial respect for Parliament.127 Back in New Jersey the costs of government were met out of surpluses from wartime appropriations of bills of credit, but the supply of these was diminishing and the Assembly was desirous of finding some way to issue more paper money. The colonial agent was not influential, but Benjamin Franklin of Pennsylvania, Charles Garth of South Carolina, and Robert Charles of New York were asking the Board of Trade to repeal the 1764 measure. This was an especially hard time to persuade the English to surrender on any point to the colonists. However, in January of 1767 the three agents persuaded a group of merchants to petition the Board in favor of paper money that would be legal tender within the colonies except for sterling debt. The merchants argued that this would enable Americans to buy English goods after all their gold and silver was used up, and yet would protect them from having to accept the depreciated currency at par. Benjamin Franklin followed this up by appearing before the Board in person, at which time he took occasion to mention New Jersey's fine monetary record.128 Comparatively speaking, it was fine: as the French proverb goes, "In the country of the blind the one-eyed man is king." The plea gratified the people of New Jersey but it did not change the Board's views.

In June of 1767, petitions to the New Jersey Assembly were presented from three counties complaining of the shortage of money. The demand for paper bills was so great that Governor William Franklin wrote his father that he believed the Assembly would settle permanent salaries on the government officers if that were the price demanded by the British for a loan-office act.129 If this was so, the demand for money was indeed strong, but it seems likely that young Franklin was overoptimistic.

By 1768 the sentiment in favor of paper money had grown very powerful in the middle colonies. Only on rare occasions was any understanding shown of the nature of money. A writer signing himself "The Ploughman" from Hunterdon County had a rather clear grasp of the subject, however. He wrote in the Pennsylvania Gazette of January, 1768:

"We hear grievous complaints of the languishing condition of these provinces, arising from the scarcity of cash, and loud cries for Money! Money! - Money it seems, is to do everything for us, to clothe the sluggard, provide bread for the indolent, support the extravagant, and supply the luxurious - in short, it is to help those Who will not help themselves . . . The extreme plenty of money, in the latter part of the war, hath proved the greatest mischief that ever happened to these provinces. It relaxed industry, promoted idleness, encouraged running in debt, opened a door to profusion and high living, luxury, and excess of every kind, that the most superficial observer must be surprised at the difference in living and dress between 1755 and the present time, besides the expensive diversions, and scenes of dissipation unknown among us until of late; and now, the ebb tide not floating us where we used to swim, it occasions loud complaints, charging all our distresses to the scarcity of cash."

He concluded that what was needed was not more money but more industry.130

When the Assembly met in April, the jails were full of debtors clamoring for relief and the inhabitants of four counties were petitioning for a loan-office law.131 The Assembly promptly enacted a bankruptcy law and a loan-office act. Governor William Franklin refused to sign the loan-office act, partly because it made the notes legal tender and carried no suspending clause, and partly because it contained no provision for salary increases.132 At his Council's instigation, he inquired of the home authorities whether he might sign the bill provided the legal-tender provision were removed and the interest appropriated to governmental purposes. The Secretary of State replied he would have to see the bill first, so Franklin forwarded it to him.133 Word came back in 1769 that the Privy Council had disallowed the bill hut offered the colony hope if a revised law was passed. If the Assembly would pass another bill not making the money legal tender, and if the colony could justify such a large sum as £100,000, there was "the greatest probability" that the act would be confirmed. The assembly considered these terms "particularly hard."134

A new loan-office bill for £100,000 was introduced. The preamble described the misery and distress caused by the lack of enough currency both for the payment of debts and as a medium of commerce, and intimated that British merchants had suffered loss of trade as a result. The bill provided that the money be lent at five per cent for twenty years, one-twentieth of the principal to be amortized each year. It is noteworthy that the maximum-size loan was increased from £100 to £200. To obviate the legal-tender objection, mention of it was omitted except for a stipulation that the loan offices would take the money in payment of all debts due them for the next twenty years. The Assembly correspondence committee admitted to Benjamin Franklin, now the colony's agent, that the Assembly would never have surrendered the point of outright legal tender if the colony had not needed money so badly.135

The New Jersey public debt was now £190,000 and although supposedly being retired at the rate of £15,000 a year,136 it was £60,000 in arrears. The eastern treasury had recently been robbed of £7,8I4.117 Taxes were heavier and at the same time English trade restrictions and colonial non-intercourse agreements were hurting business. Last of all, a bad drought accentuated the depression. William Paterson, later federal supreme Court justice, wrote Luther Martin in June of 1769, "You must be sensible that there is very little circulating cash in the Country which renders it difficult to take up money, tho' the best Security be offered. I know of none about this place who have money to dispose of in this way."138 There was strong feeling among the poorer people against the lawyers for their part in helping to collect debts and because of the high fees they charged. A number of serious riots took place at court sessions; one particularly despised lawyer, Bernardus Lagrange, escaped a beating from the mob only by jumping out the courthouse window.139 A sympathetic observer from Hunterdon County described his impressions of the popular attitude after such a riot:

. . . their Case I apprehend to be what is the Case of Two Thirds of the People of this Province, and that of every Degree, more or less; they are in Want of Money; they are in Debt; and do not know how to extricate themselves; they are hard pressed by their Creditors, and cannot pay; they are sued, Judgments are obtained against them, they try to borrow, offer good Security for the money, but all in vain, there is no money, nor Money lenders; execution issues against them, a heavy Bill of Cost arises, the Sheriff levies, advertizes and sells the Effects for one fourth or fifth part of their Value, not because the Effects are not wanted, but because there are really no Buyers who can furnish the money; hence a Man possessed of an Estate worth £5000, will have it torn from him, tho' all his Debts amount to but £1000; a Situation which will naturally make a man feel desperate; 'tis said it has made many even of the better Sort of People wink at, and secretly encourage the illegal Steps that have been taken.140

Word arrived in 1770 that the Privy Council had disallowed New Jersey's loan-office bill on the ground that the notes were made legal tender at the colonial treasury which was contrary to the Currency Act of 1764. Governor Franklin was disgusted and worried: he wrote to England that Pennsylvania and Maryland had notes in circulation that were legal tender at the issuing office. Furthermore, in New York the deprivation of legal-tender bills, even more than the Townshend Act, had prompted the local merchants to sign a second non-importation agreement. In April of 1769 New York's Assembly had passed a £120,000 legal-tender act and resolved to vote barracks supplies for the King's troops only if the legal-tender act were confirmed in England. The Privy Council disallowed this act. But a year later., when Parliament repealed the Townshend acts, it also voted to let New York issue £120,000 in paper money good at the treasury. This was evidence of the effectiveness of New York's tactics. The New Jersey Assembly now resolved that they too would vote no more money for the King's troops. The governor could not decently allow this but the best he could do was to get a very small appropriation.141

The long winter session of 1773-74 saw the presentation of four petitions from Morris and Somerset counties complaining of the scarcity of money and asking for a loan-office act. A bill was passed lowering the interest rate to six per cent and a resolution passed by a large majority in favor of a loan-office bill.142 Parliament had recently passed an explanatory or amending act to the 1764 Currency Act stating that bills of credit might be made legal tender at the treasury, but it had not said that this applied to loan-office bills. Franklin advised the Assembly to do as Pennsylvania had recently done, say nothing about legal tender, and simply assume that the bills would be acceptable at the loan offices.143 The Assembly reluctantly took his advice and the bill was confirmed the following year. It provided for the issue of £100,000.144 The Assembly had finally obtained a paper-money bill, but by sacrificing its legal tender demands. The money could have been had at that office years before.

TABLE IV
LOAN OFFICE ACTS THAT PASSED BOTH HOUSES

Date	Amount	Fate
1723	£40,000	In operation to 1736
1730	20,000	In operation 1733-49
1733	40,000	In operation 1736-53
1742	40,000	Vetoed by the Governor
1746	40,000	Prorogation kills bill
1748	40,000	Disallowed by Privy Council, 1749
1753	60,000	Disallowed by Privy Council, 1754
1754	70,000	Disallowed by Privy Council, 1755
1757	89,000	Disallowed by Privy Council
1768	100,000	Disallowed by Privy Council, 1769
1769	100,000	Disallowed by Privy Council, 1770
1774	100,000	Approved in England, 1774

Even greater relief was in store for the debtor classes when war broke out with England. British merchants could be ignored, and local creditors could be paid with increasing ease out of the abundance of bills of credit turned out by the printing presses. But that is another story.

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CONCLUSlONS

New Jersey's paper money record was a relatively good one, but it would be a mistake to presume that her colonial government deserves much credit. The Assembly's behavior under weak President Reading in 1758 is a damning piece of evidence. Rather, the credit goes to the British government, whose policy was in turn largely influenced by the desires of the British merchants trading to all the colonies. Another factor that helped New Jersey was the jealousy of New York and Philadelphia merchants of one another, which gave New Jersey money a much wider area over which to circulate.

The results of New Jersey's numerous paper-money issues were of a pattern sufficiently perfect to satisfy a fairly orthodox quantity theorist: a large issue of paper money, unfavorable exchange rates for importers, real estate booms and other evidence of prosperity; then, as the notes were retired, debtors began to feel economically pinched, interest rates seemed high and lawyers' fees more excessive, debtors' prisons filled up; next legislation to relieve the situation was passed, chief of which was another paper-money bill; and the cycle was ready to begin again. It did not take the colony's creditor classes long to see the results of inflation, nor the debtors long to see the results of deflation and protest, but few persons, if anybody, saw that the method of suddenly expanding and gradually contracting the paper-money supply was largely responsible for both evils.

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THE WRITER: "I grew up in Princeton . . . got all my degrees at Princeton (A.B. in economics in 1927; Ph.D. in American history in 1934), and first taught at Lehigh University, 1934-37. Since 1937 I have been at the University of Illinois where I am in charge of the economics courses in American economic history and American financial history. Monetary history is my special area of interest." Professor Kemmerer is author of numerous articles, co-author with his father, E. W. Kemmerer, of The ABC of the Federal Reserve System (12th edition). His The Path to Freedom: the Struggle for Self-Government in Colonial New Jersey: 1703-1776 was published 1940 by the Princeton University Press. Several articles have appeared in the PROCEEDINGS.

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1 A. Leaming and S. Spicer, Grants, Concessions and Original Constitutions (1752), p. 81.
2 lbid., passim.
3 Ibid., pp. 285-86.
4 lbid., p. 195.
5 Proposed amendment to East Jersey concessions, Misc. Mss., No. 25, New Jersey Historical Society.
6 Leaming and Spicer, p. 432.
7 Ibid., p. 445. Not legal tender beyond five shillings.
8 lbid., p. 523.
9 Ibid., pp. 516-17.
10 E. B. O'Callaghan, Documents Relative to the Colonial History of the State of New York (1853-87), IV, 1084.
11 Headlam, Calendar of State Papers: Colonial, 1708-09, p. 113, No. 157.
12 N.J. Archives, 1st Ser., II, 516.
13 lbid., III, 21.
14 C. M. Andrews, "Current Lawful Money," Am. Hist. Rev., XXIV, 73-74.
15 N.J. Archives, III, 468.
16 Headlam, p. xxiv.
17 S. Allinson, Acts of the General Assembly of New Jersey (1776), p. 9.
18 Assembly Minutes, Jan. 28, 1710.
19 N.J. Archives, IV, 82.
20 Allinson, Acts, p. 14.
21 N.J. Archives, VI, 82.
22 Allinson, Acts, p. 31.
23 N.J. Archives, IV, 271.
24 C. J. Bullock, Essay on the Monetary History of the United States (1900), p. 32;
C. Nettels, The Money Supply of the American Colonies before 1720 (1934), p. 261; "Banking," Dictionary of American History.
25 Minutes, Jan. 15, 1717.
26 Allinson, Acts, p. 41.
27 Minutes, April 9, 1719.
28 N.J. Archives, XIV, 125-26.
29 Allinson, Acts, p. 61.
30 Burlington Town Book, p. 27, Aug. 6, 1722.
31 Bradford, N.J. Laws, 1723.
32 N.J.A., V, 87. L. Morris later claimed this was a much overworked story of an exceptional case. Lewis Morris, Papers (1852), p. 223.
33 H. Phillips. Paper Currency of the American Colonies (1865), p. 13; The Colonial Laws of New York, II, 137; Statutes at Large of Pennsylvania, p. 324.
34 Minutes, October 8, 9, 1723.
35 If operated privately, the institutions were usually called land banks; if operated by the government they were called loan offices.
36 C. J. Bullock, Essay, pp. 29-35.
37 N.J. Archives, V, 104-06, 165, 190.
38 W. A. Whitehead, "East Jersey Index," No. 115. New Jersey Historical Society.
39 J. Alexander Mss. on New Jersey Money, New Jersey Historical Society.
40 N.J. Archives, V, 153-55. The Assembly resolves, August 21, 1725, that the attorney General should prosecute anyone insisting on a premium for taking New Jersey instead of New York money. Minutes.
41 W. Douglass, Discourse, p. 314.
42 N.J. Archives, V, 289.
43 A!linson, Acts, p. 80.
44 N.J. Archives, V, 193, 251.
45 They were also being felt in Pennsylvania. H. Phillips, Paper Currency, p. 17.
46 Minutes, XIV, 380-81, 437, 440, 443.
47 Ibid., June 10,19, 24, 1730.
48 Laws.
49 Minutes, July 23, 24 Aug. 8, 1733; N.J. Archives, V, 492, 495.
50 N.J. Archives, V, 395.
51 Minutes, July 23, 1733.
52 Laws.
53 These records are in the New Jersey Public Record Office and the Secretary of State's Office, Trenton. Computations by the Author.
54 L. Morris to Board, Oct. 4, 1733, Mss in W. L. Clements Library.
55 J. Alexander Mss. on New Jersey Currency; N.J. Archives, VI, 68.
56 Allinson, Acts, p. 110. The maximum interest rate was lowered to seven percent.
57 Minutes, Jan. 9, 1739, May 7, 16, 28, June 2, 12, 1740. Misc. Bills to Establish Two
Trading Companies, State Library, Trenton.
58 N.J. Archives, XII, 64.
59 Ibid., VI, 78, 94-95, 122-24.
60 Minutes, June 26-28. 1740; Laws..
61 Lewis Morris, Papers, p. 148; N.J. Archives, VI, 101.
62 N.J. Archives, VI, 134.
63 A. Bezanson, and others, Prices in Colonial Pennsylvania (1935), p. 321.
64 Morris, Papers, p. 107.
65 N.J. Archives, XV 273-75; Minutes, Nov. 2, 1742.
66 Morris, Papers, p. 221.
67 Allinton, Acts, p. 139.
68 Modest Vindication of the Late New-Jersey Assembly (1745), p. 16. Ridgeway Library, Philadelphia.
69 Morris, Papers, p. 222.
70 Minutes, May 7, 1746.
71 Ibid., June 13, 17, 18, 24, 1746; N.J. Archives, VI, 419.
72 Laws.
78 N.J. Archives, VII, 398.
74 Allinson, Acts, p. 148.
75 Belcher Papers, p. 247.
76 Paris Papers, X, 21, New Jersey Historical Society.
77 N.J. Archives, VI, 433; Paris Papers, X, 16.
78 Laws; Belcher Papers, p. 162.
79 Minutes, 1748-52, passim; Laws.
80 Allinson, Acts, p. 190. It had expired in 1748.
81 Minutes, May 28, June 6, 8, 1753; N.J. Archives, XVI, 400; Laws.
82 N.J. Archives, VIII, 1st pt. 183-86; XVI, 418.
83 Laws; Minutes, May 28, 1753.
84 N.J. Archives, VIII, 1,1 pt., p. 197.
85 Minutes, Oct. 8, 11, 1754; N.J. Archives, VIII, 2nd pt., pp. 36-72.
86 N.J. Archives, VIII, 2nd pt., pp. 93, 97.
87 Laws.
88 N.J. Archives, VIII, 2nd pt., pp. 95-102; Acts of Privy Council, 1745-66, p. 229
89 Laws.
90 Minutes, March 16, 17, 30, 1757.
91 Laws. The 1754 instruction forbade governors to sign emergency paper-money laws unless the bills were retired within five years' time. The Assembly re-interpreted this to suit itself by providing that the bills be retired within five years' time, but the five years were far in the future.
92 N.J. Archives, XVII, 159.
93 Ibid., IX, 39.
94 Laws.
95 Ibid.
96 Ibid.
97 Ibid.
98 Whitehead, East Jersey Index, No. 121, New Jersey Historical Society.
99 J E. T. Rogers, A History of Agriculture and Prices in England (1866-1902). 100Bezanson, Prices in Colonial Pennsylvania, p. 330.
101 Ibid., p. 294.
102 H. Phillips, Paper Currency, pp. 40-43.
103 N.J. Archives, IX, 134.
104 A. Burnaby, Travels, p. 110.
105 J. Sparks Coll.; Gov. F. Bernard Papers, I, 188, Harvard University Library.
106 Transcripts of correspondence of Society for the Propagation of the Gospel, Library of Congress, Dec. 26, 1761.
107 Amherst Papers, War Office, 34-31. Public Record Office, London.
108 J.W., Address to the Freeholders of New-Jersey (1763), p. 21. Ridgeway Library, Phila.
109 N.J. Archives, IX, 384; Minutes, June 2, 1763.
110 Minutes, March 19, 1760.
111 Ibid., March 27, 1761.
112 Ibid., April 23, 1771.
113 J.W., Address, pp. 3-5.
114 N.J. Archives, IX, 410.
115 W. Knox Papers, IX, 7, W. L. Clements Library.
116 Laws.
117 E. Channing, History of the United States (1905-25), III, 33n.
118 Minutes, Nov. 17, 1763.
119 Laws, Feb., 1764.
120 Minutes, May 23, 1765.
121 W. Alexander Papers, III, 43, 56. New-York Historical Society.
122 Laws.
123 Minutes, June 5, 6, 11, 1765.
124 Whitehead, Misc. Mss., II, 149.
125 B. Franklin Letters, I, No. 30, July 1, 1766. American Philosophical Society.
126 B. Franklin to W. Franklin, Oct. 11, 1766 (unpublished Galloway Mss., Univ. of Pa. Libr.); J. Smith Papers, VI, 230 (Ridgeway Library, Phila.)
127 Benjamin Franklin, Works (J. Bigelow), pp. 407, 418.
128 B. Franklin to Galloway, May 20, Aug. 14, 1767. Unpublished Galloway Mss.; Shelburne Papers, XLVIII, 633ff. W. L. Clements Library.
129 B. Franklin Letters, II, 88. American Philosophical Society.
130 N.J. Archives, XXVI, 5-8.
131 Minutes, April 15, 21, 1768.
132 Ibid., May 10, 1768.
133 N.J. Archives, X, 48-50, 100.
134 Minutes, Oct. 17, 1769.
135 Laws; Package 5, No. 7, Dec. 7, 1769. New Jersey Historical Society.
136 The method of retiring the bills was to collect any £15,000 in bills, regardless of whether they were overdue or underdue. N.J. Archives, X, 316.
137 N.J. Archives, IX, 564; X, 37-39; XVII, 519-25. In 1768.
138 W. J. Mills, Glimpses of Colonial Society (1903), p. 142.
139 Minutes, Nov. 1, 1769.
140 N.J. Archives, XXVII, 80-85.
141 Ibid., X, 179n., 200; A. C. Flick.
142 Laws; Minutes, Nov. 18, 19, 23, 1774; N.J. Archives, X, 508, 549-51.
143 Minutes, March 2, 3, 1774.
144 Laws.