The Earliest Money Using the Dollar as a Unit of Value


ERIC P. NEWMAN

To the Colony of Maryland goes the unique distinction of issuing and thus introducing the "dollar" to the world as an official unit of money. In 1767 Maryland changed monetary and numismatic history by printing and circulating paper money in a one dollar denomination and in multiples and fractions of a dollar. That dollar designation was thereafter adopted by the Continental Congress of the United Colonies in its paper money issues beginning in June 1775 and by the Congress of the United States in 1792 for coinage at its soon to be created Philadelphia Mint. The dollar was the unit authorized by several American states for paper money emissions beginning in 1776, in coinage for Sierra Leone in 1791 and for an 1804 Bank of England silver trade coin. The dollar today retains the universal status of being the best known monetary unit, being the basis of many present and past circulating coins and paper money of many countries during the 19th and 20th centuries.

The word dollar in 1767 was new only as an official monetary unit, but, as is well-known, was a translation into the English language of the Germanic word Thaler which was originally applied to a large 15th century silver coin of provincial Austria. The Scandinavian countries had translated Thaler into daler or Rixdaler for their currency unit. The word Dollar in the English language was the commercial reference to silver coins of the same general size as the Thaler, but became applicable primarily to Spanish-American silver coinage of the denomination of 8 reales because of the extensive use and circulation of that coinage throughout the world. The piece of 8 reales was more commonly called the Spanish Dollar and after 1732, that expression was often modified to Spanish Milled Dollar to reflect the introduction of edge milling and circular shape to such coinage. The Lyon Dollar or Lion Dollar was the English language expression referring to the large silver trade coin minted in 17th century Holland, bearing the emblem of a large rampant lion, but the Maryland Act of 1708 used the derisive term Dog Dollar in evaluating that coin.

For many years prior to 1767, the English words Dollar, Spanish Dollar and Spanish Milled Dollar were sometimes used as the special pricing and special accounting language in America, being a basis for bills of exchange calculations. This distinguished the transactions from money of account trading which related solely to transactions within a particular colony. Sterling was often used in accounting for the same purposes as the dollar.

Maryland's dollar paper money was payable in bills of exchange in London at the rate of 4 shillings 6 pence sterling for one dollar. The Maryland paper money of 1767 had denominations of $1/9th (6 pence sterling), $1/6th (9 pence sterling), $2/9ths (1 shilling sterling), $1/3rd (1 shilling 6 pence sterling), $1/2 (2 shillings 3 pence sterling), $2/3rds (3 shillings sterling) and $1, $2, $4, and $8 on the same basis. The sterling conversions to the dollar denominations were clearly printed on the paper money to aid in calculations, but there was no reference whatsoever to Maryland's money of account shillings or pence. Legal tender status was not given to the issue as that would have required a legal tender in Maryland's money of account system. The denial of legal tender status was most unusual in colonial issues but gave the offeree the opportunity to reject the money. The $1 and $2 denominations had illustrations of one or two Spanish dollars as part of their respective designs, just as the Chinese had used pictures of their bronze cash many centuries earlier. Maryland had also used secret marks on its paper money to deter counterfeiting and denominational alteration, but on the few known counterfeits, the secret marks were nevertheless carefully copied. Nature prints were put on the back of the paper money in a continuation of the use of that technique by the Green family of printers, using Benjamin Franklin's invention.

The reasons for Maryland's unusual action in 1767 are explained by Maryland's complex prior economic history. In the 17th century, Maryland used tobacco as its primary medium of exchange to settle payments because tobacco was a home-grown product with general marketability and reasonable durability. Being a commodity, it had many disadvantages but there was nothing better available. England had a policy of withdrawing through English merchants as much in specie coinage as Maryland colonists obtained, thus keeping specie coins in very limited circulation in Maryland. A differential in value between accounts in England in sterling pounds, shillings and pence over accounts due from Maryland sources in the same pounds, shillings and pence was created, due to the desirability of having sterling accounts available in England. As in other colonies, a local money of account developed in Maryland, reflecting the discount. This made sterling a foreign exchange from the Maryland point of view. The local pounds, shillings and pence became money of account for internal Maryland use. Tobacco was often overproduced creating a depressing effect on the value of Maryland money of account because of tobacco price weakness. To remedy the situation to some extent, Lord Baltimore obtained Maryland legislation in 1661 to introduce specially minted Maryland silver coinage in denominations of 1 shilling, 6 pence and 4 pence (the penny was not placed in circulation). This silver coinage was similar in size and in effect to the Massachusetts Bay silver coins minted beginning in 1652. They both stabilized to some extent the differential between sterling and the money of account on the same basis as the differential between the weight of the sterling shilling and the weight of the shilling for the colony. The Maryland silver coinage was initially put into circulation by exchanging it for tobacco at a rate established by law. There was only 2500 in Maryland coin minted and this was insufficient to stabilize Maryland's money of account weakness.

By the end of the 17th century, 6 shillings in Maryland money of account was equal in value to 4 shillings 6 pence in sterling, both of which amounts were equal to one Spanish dollar. This was a ratio of 4 Maryland units for 3 sterling units of the same name. Some people in Maryland and in other colonies were willing to pay more than 6 shillings in money of account for a Spanish dollar or its equivalent value in order to obtain specie coin, bullion or foreign exchange. To prevent this form of inflation, Queen Anne, in 1704, issued a Proclamation which was formalized in 1707 by an Act of Parliament making it illegal to pay more than 6 shillings in money of account for the Spanish dollar or for coins of equivalent silver weight and fineness. The law failed to put a maximum on payment for gold coin or for gold or silver bullion and thus was easily subverted. This Proclamation law was applicable to Maryland and thus to Maryland's money of account as well as to the New England colonies and the Southern colonies. Because of currency stability in New York, Pennsylvania, New Jersey and Delaware, this control was not applied to those central colonies. The Proclamation law remained in force in Maryland up to the American Revolution and Maryland's money of account was often called Proclamation money, as was the money of account of several other colonies.

In 1733, paper money was first issued by Maryland to establish a public Loan Office which put money into circulation by lending it out to individuals. This money was in Maryland money of account shillings, conforming to the Proclamation rate of exchange. The net proceeds from taxes and payment of interest on the loans was to be invested in securities of the Bank of England, thus creating a further income and collateral for the paper money. Taxes were also collected in Proclamation money and thus redemption of the paper money was further protected. These issues were continued on generally the same basis in 1740, 1748, 1751 and 1756. After 1756, the desirability for a Loan Office was diminished and further loans were discontinued. By 1766 all loans had been paid back and all outstanding paper money redeemed. The Colony had on hand its investment in Bank of England securities.

However a drastic change had taken place in the monetary habits of the people of Maryland during the period that paper money was outstanding. The neighboring colonies on the north and east (Pennsylvania, New Jersey and Delaware) which were known as the Middle Colonies had informally locked each other's paper money exchange rate together in business transactions so that the value of each of their respective moneys of account was uniformly steady at 7 shillings 6 pence for a Spanish Dollar. By 1754 the commercial influence of Philadelphia had spread its exchange rate to Maryland in such a dominating manner that Maryland's money of account was no longer in general usage in commercial transactions and Pennsylvania's money of account took its place. This meant that prices and payments in commercial transactions were on the basis of the Pennsylvania money of account and not on the Maryland money of account basis.

Maryland thus found itself with two internal money systems instead of one and no other colony was in such a predicament. If the sterling exchange (though for external use) was added to the internal money systems, there were three systems for Maryland inhabitants to have to cope with. Each money system had a separate name or names. Proclamation money retained that name and was also known as current money which was 6 shillings to the Spanish Dollar. Common money, common currency, Pennsylvania money or common current money were the terms for the commercially used money at 7 shillings 6 pence to the Spanish Dollar. Sterling or English money remained at 4 shillings 6 pence to the Spanish Dollar. The formulas to convert one form of money used in Marlyand to another were challenging enough for large amounts, but for small sums there was total confusion. The two interior money of account systems were in simultaneous existence due to absentee bureaucratic neglect and stubbornness, but commercial practicality always seems to prevail in spite of law or lack of flexibility. The commercially unpopular money of account systems were to be used for official purposes such as taxes, governmental expenditures, probate inventories, etc.

When in 1767 Maryland again needed paper money, it was faced with a dilemma. It could not use the units of money of account shillings as it did on its prior issues because of their impracticality. It could not use the Pennsylvania money of account shillings because they were illegal in Maryland. Sterling money was a foreign exchange which was of higher value and had the same monetary units as the money of account and thus impractical for local use in Maryland. The Colony might have hoped that Pennsylvania money of account might be made legal some day, but that was very unlikely. Maryland was unwilling to put out an impractical currency of the type it suffered with prior to 1767. The only sound solution was to pick the dollar (Spanish Dollar) as the monetary unit. This was a value everyone was familiar with. It gave the Maryland public and Maryland officialdom the choice of choosing whatever money of account system each respectively chose to use. In this way, current money did not have to be dropped in favor of common money or vice versa. The sterling equivalent could be shown on the dollar money because of the mutual specie basis. Thus the problem of money of account units of value could be straddled by the use of the dollar as the official unit even though it was a foreign exchange just as sterling was. The Bank of England securities could be used as collateral for the dollar unit paper money. The Maryland people might have to become better mathematicians, but when it comes to money handling, the most primitive humans learn quickly. By the use of the dollar unit, the paper money would have stable value even though specie circulation might constitute an insignificant part of Maryland economic life. Whatever chaos resulted was more than offset by the creation of an official monetary unit which no one else had and which no one else intended to have. It was a sound compromise to an almost impossible situation.

The success of the 1767 issue was followed by further issues in 1770 and 1774 on the same basis, with the same denominations and with the same designs. The only change other than the dates were that different members of the Green family put their names on as printers. The issue of 1767 survived for over nine years in spite of the complications, but when the Revolutionary War began and Maryland joined the other colonies in declaring its independence from England, the collateral of the Bank of England securities was no longer available to redeem its pre-Revolutionary paper money. During the American Revolution Maryland added other dollar unit paper money for its military and other public needs, but all to its pre-Revolutionary paper money became worthless by 1780. The holders of the paper money paid that price for freedom so that much of the money which adopted the dollar as an official monetary unit for the first time still survives in reasonable quantity.

BIBLIOGRAPHY

BEHRENS, KATHRYN L.
Paper Money in Colonial Maryland 1727-1789, Baltimore, 1923.
CROSBY, SYLVESTER S.
The Early Coins of America Boston, 1875.
GOULD, CLARENCE P.
Money and Transportation in Maryland 1720-1765, Baltimore, 1915.
H.M.
"The Paper Money Controversy in Maryland" in Canadian Antiquarian and Numismatic Journal, 1983.
JONES, ALICE HANSON.
American Colonial Wealth, New York, 1977.
NEWMAN, ERIC P.
The Early Paper Money of America, Racine, 1967.
PHILLIPS, HENRY, JR.
"Some observations on Early Currency of Maryland" in Proceedings of the Numismatic and Antiquarian Society at Philadelphia, Philadelphia, 1867.
WRIGHT, J.
The American Negotiator, London, 1761.

ILLUSTRATIONS

Prior to the changeover in 1767 to dollars as the unit of value for paper money, the Maryland money of account shilling had been used. The illustrated face and back of the 1756 Maryland 20 shilling bill of credit also carried denominational equivalents in Maryland money of account - 1 pound in the right border, four ornamental crowns next to the serial number and 8 half crowns vertically next to the signatures. The nature print on the back was Benjamin Franklin's invention.

The face of the 1767 Maryland one dollar paper money containing the first official use of the dollar as a monetary unit. The name of Thomas Sparrow, engraver of the ornamentation, is in the top border. The text containing the conditions of repayment are type set.

The back of the 1767 Maryland one dollar paper money showing the conversion of one dollar into sterling exchange. The initials (I.G.) of Jonas Green, the printer, are punched upside down in the single leaf of the nature print.


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