An American Monetary History Timeline
Colonial Period to 1799
Written by Darrell Anderson.
No common medium of exchange circulated. British legislators discouraged currency from circulating freely to encourage commodity exchanges back to England. Colonists used waupumpeag, crops, furs, bullets, and cattle as mediums of exchange.
First coins minted in America by John Hull of the Massachusetts Bay Colony.
Massachusetts colonial legislators establish a mint in Boston to coin precious metal, primarily silver. The coin was not minted according to strict standards and circulated in England at a 25 percent discount. The most notable coin was the “Pine Tree Shilling.” All coins were stamped as being minted in 1652.
Massachusetts legislators issue and circulate bills of credit to circulate as currency. The bills ranged in exchange value from 5 shillings to 5 pounds and were receivable for taxes and goods paid into the treasury for taxes.
Massachusetts legislators accept their bills of credit at a 5 percent advance over actual coin, thereby encouraging circulation. By limiting issuance, the bills of credit remained stable at par value for the next 20 years.
Charter for the Bank of England issued.
Pennsylvania legislators loan currency into circulation.
Benjamin Franklin writes A Modest Inquiry into the Nature and Necessity of a Paper Currency.
The Rhode Island colony economy collapses as the exchange value of the local paper currency was continually eroded by issuing bills of credit without any actual exchange of commodities to back the currency. British legislators prohibit issuing any paper currency.
British legislators prohibit the circulation of any colonial based paper currencies.
May 10, 1775
Continental congress legislators issue continentals, a paper currency, payable in terms of the Spanish milled dollar or the equivalent in gold or silver. The first issue was for 300,000 Spanish dollars, convertible to silver or gold. Nine million dollars of continentals were issued before any depreciation began.
British occupational military forces begin to widely circulate counterfeit continentals to debase the currency.
Adam Smith, writes An Inquiry into the Nature and Causes of the Wealth of Nations.
July 9, 1778
Articles of Confederation adopted, providing members of the continental congress with authority to regulate the value of coins minted by the congress or state legislators and to issue bills of credit.
Continentals circulate at an exchange value of 2 cents on the dollar.
The Bank of North America established through a charter from the continental congress. (Later rechartered through Pennsylvania legislators.)
Prompted in large part by debt and the collapse of any meaningful circulating medium of exchange to pay those debts, farmers revolt in Shays’ Rebellion.
The first U. S. coin minted, the Fugio Cent. None of the coins entered into circulation.
March 4, 1789
State legislators adopt a new federal constitution to replace the Articles of Confederation. The new document allegedly defines a legislative power to coin money and regulate the value thereof, as well as prohibiting state legislators from doing likewise.
September 2, 1789
Volume 1 Statutes at Large, 1st Congress Session I, Chapter 12, pp. 65–67. Established the Department of the Treasury.
August 4, 1790
Volume 1 Statutes at Large, 1st Congress Session II, Chapter 35, Section 40, pp. 167–168. Specified the exchange rates of certain foreign coins.
February 25, 1791; March 2, 1791
Volume 1 Statutes at Large, 1st Congress Session III, Chapter 10, pp. 191–196. Volume 1 Statutes at Large, 1st Congress Session III, Chapter 11, pp. 196–197. Charter approved for incorporating the First Bank of the United States. Bank members issued notes to circulate as a paper currency.
April 2, 1792
Volume 1 Statutes at Large, 2nd Congress Session I, Chapter 16, pp. 246–251. Popularly known as the Coinage Act of 1792. Statutorily established a bimetallic coinage system and a silver standard. Established a statutory definition of a dollar as a coin containing 371.25 grains of silver and 416 total grains of metal (silver and alloy). The statutory purity ratio was 1445:1664. The dollar was not a unit of value, but a unit of weight based upon a precious metal commodity.
The act established a coin called an eagle. An eagle was defined as containing 247.5 grains of gold and 270 grains total metal. The statutory purity ratio was 11:12. Contrary to popular misconception, the act did not establish a gold dollar or gold standard, but merely established the eagle with a market exchange value of 10 dollars.
Additional coins included half eagles, quarter eagles, half dollars, quarter dollars, dimes, half dimes, cents, and half cents.
The 1792 act established an exchange ratio between silver and gold at 15 parts silver to 1 part gold (15:1). The ratio was between the pure metals, not the included alloys. The act established a U.S. Mint as well as allowing private coinage.
Section 19 of the act specified a punishment of death for debasing coinage.
By establishing a fixed statutory ratio of 15:1, and along with a subsequent increase in the silver supply, gold would become undervalued with respect to silver as a circulating currency. Gold would become more valuable as a commodity and gold would stop circulating as currency.
May 8, 1792
Volume 1 Statutes at Large, 2nd Congress Session I, Chapter 39, pp. 283–284. An act to mint cent and half-cent copper coins.
Construction of the first U.S. Mint begins in Philadelphia, Pennsylvania, then the current capital of the United States.
February 9, 1793
Volume 1 Statutes at Large, 2nd Congress Session II, Chapter 5, pp. 300–301. Specified the exchange rates of foreign coins and declaring all such coins legal tender.
March 3, 1794
Volume 1 Statutes at Large, 3rd Congress Session I, Chapter 4, p. 341. Amended the Coinage Act of 1792 by specifying duties of various U.S. Mint officers and established a required bond as surety.
March 3, 1795
Volume 1 Statutes at Large, 3rd Congress Session II, Chapter 47, pp. 439–441. Amended the Coinage Act of 1792 by specifying duties of various U.S. Mint officers and established a required bond as surety.
May 27, 1796
Volume 1 Statutes at Large, 4th Congress Session I, Chapter 33, p. 475. Specified the amount to appropriate toward the purchase of copper, gold, and silver bullion for minting coins.
February 1, 1798
Volume 1 Statutes at Large, 5th Congress Session II, Chapter 11, p. 539. Suspended the expiration period in the act of February 9, 1793 for three years.
As the aggregate silver supply increases the market exchange rate between silver and gold reaches approximately 15¾ to 1, thereby increasing the commodity value of gold with respect to gold as currency and the fixed statutory ratio of 15 to 1. Gold coins effectively stopped circulating in America as gold coins were instead melted for the bullion and commodity value.
Next: 1800 to 1849