Tuesday, June 28, 2016

Proclamation Money

In his 1777 Granville County will James Yancey (1704-1779), grandfather of Caswell County's Bartlett Yancey, Jr., included the following provision:

"Item 6 - I give unto my grand-daughter, Nancy Baynes, ten pounds proc. money."

What is "proc. money"?

Proclamation Money

To get around the shortage of money, colonial governments printed paper money, and colonists used whatever foreign currency they could get their hands on — Spanish dollars, for example. Today, global trading in currency sets exchange rates, but there were no international banks to set exchange rates in the 1700s. Instead, each colony set an official value in pounds, shillings, and pence on paper money and foreign coin. Because their value was set by proclamation, these currencies were called proclamation money.

People could also simply barter or trade goods back and forth. But someone who wanted to buy a bushel of corn, for example, might not have anything the seller wanted in trade. To get around this problem, certain commodities like tobacco were used as a kind of currency. Everyone would take tobacco in exchange for other goods, because it could be easily sold again. Barter made accounting difficult, though. To manage a plantation or business, people needed to keep track of their sales, purchases, and debts.

To make accounting possible, proclamation money also set a value on “rated commodities” that were commonly used as currency. These official prices meant that exchanges conducted in tobacco could be accounted in pounds, shillings, and pence. Turning commodities into “proclamation money” also enabled cash-poor colonists to pay their taxes in goods they had available to them.

Source: Walbert, David. "The Value of Money in Colonial America." Learn NC [http://www.learnnc.org/lp/editions/nchist-colonial/1646; accessed 17 June 2016].

A persistent lack of money prompted North Carolina and other colonies to print their own paper currencies and to rely on barter. In 1715 North Carolina's provincial government sanctioned a form of barter to sustain economic growth, approving the use of "the chief Produce of the Country" to pay public and private debts. Known as commodity money, this multitiered system had been used informally as early as 1694. In lieu of money, set quantities of tobacco, butter, tar, pitch, feathers, deer skins, beef, pork, whale oil, wheat, and other commodities could be used by citizens to pay their taxes and rents and to satisfy other expenses.

The North Carolina colony tried other means of increasing the supply of currency, or circulating medium. The legislature tried to increase the supply of coins, but North Carolina had no known supplies of gold or silver (until the discovery of gold near Charlotte in the 1830s), and Britain forbade the colonies to coin their own money. An available solution was to try to encourage the flow of coins into the province. As early as 1715, the North Carolina General Assembly declared the official value of British, Spanish, and other European silver and gold coins to be higher than their intrinsic bullion value in the hope that these coins would flow into the colony. This was not successful, however, since many British colonies were engaged in the same pursuit, and the British parliament subsequently made it illegal to rate coins at over one-third of their bullion value.

The most common and more successful solution, however, was the issue of fiat paper money, or "proclamation" money. Proclamation money was essentially a way of setting consistent values for the wide variety of currencies and commodities that served as money in the colony. To standardize this bewildering variety of currencies, the General Assembly would "proclaim" what the relative values of these kinds of money would be in North Carolina. In addition, proclamation money notes issued by North Carolina were essentially IOUs to cover the cost of necessary public works, such as fortifications. They were to be withdrawn from circulation when they were returned to the colony in payment of taxes, and the government would burn the bills they took in each year.

Source: deTreville, John R. and Fulghum, R. Neil. "Currency." NCPedia [http://ncpedia.org/currency; accessed 17 June 2016].

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