Colonial Currency: When America Was Free (from British Banks)

When America had its own currency and England didn't like it: A tale of colonial oppression, economic turmoil and the ultimate financial enslavement.

During the colonial era, the American colonies established their own paper currency known as colonial script or bills of credit. Massachusetts was the first colony to do so in 1691, and soon Pennsylvania, New York, Delaware, and Maryland followed suit. By freeing themselves from the control of English banks, the colonies were able to manage their financial affairs in an inflation-free environment with minimal taxes. This system facilitated sustained, stable economic growth and prosperity throughout the colonies, which would not have been possible under a privately run banking system based on usury.

In 1763, while visiting London, the renowned American statesman Benjamin Franklin (1706-1790) was shocked by the widespread poverty and slum conditions he observed. When asked by the British parliament to explain the source of prosperity in the American colonies, Franklin attributed it to the colonies' use of their own paper currency, which allowed them to manage their finances independently and effectively.

“That is simple. In the colonies, we issue our own money. It is called colonial script. We issue it in proportion to the demands of trade and industry to make the products pass easily from the producers to the consumers. In this manner, creating for ourselves our own money, we control its purchasing power, and we have no interest to pay anyone.” — Benjamin Franklin

Unsurprisingly, in 1764, the Bank of England enacted a Currency Bill that severely curtailed the colonies' ability to issue their own currency, prohibiting its legal tender status for private and public debts. Instead, the bank mandated that the colonies issue interest-bearing bonds and sell them to the Bank of England in exchange for English currency. However, only half of the currency was ultimately remitted. This law had devastating consequences for the colonies' economy, resulting in over half of the population becoming unemployed and destitute within a year. While the Stamp Act of 1765 was a significant factor in the revolution, it was the abolition of colonial currency that was the primary cause of the revolt.