CHAP. I. paper was received without suspicion, and its 1776. depreciation was not soon observed. To the eastward, and further to the southward, where the subject was better understood, the enthusiasm with which they engaged in the contest, and the hope that it would not be of long duration, furnished motives for giving a value to paper, which overbalanced the apprehensions their past experience might otherwise have excited.

There were other causes which, in some degree, aided the first admission of paper bills into common circulation. The nature of the colonial commerce had not been favourable to the introduction of large quantities of specie. There were in America but few large cities. The people were spread over an extensive country, covered with woods, which they cleared with immense labour, and the soil of which they cultivated for subsistence. Having but little of that circuitous commerce, of which the precious metals will, necessarily, in part, constitute a medium; their produce was remitted directly to the country from whence their goods were received, and the surplus almost immediately assumed the form of labour, for the cultivation and improvement of their lands. This was more especially the situation of the middle and southern colonies, whose commerce was chiefly in the hands of British merchants, who received the crops of the plan

ters, furnished them with goods, and gave the CHAP. I. industrious credit for the purchase of lands or 1776. slaves. This species of commerce would introduce and require, in a new country, but very inconsiderable quantities of the precious metals.

When the intercourse with Great Britain was cut off, and the credit of the people of the country with their merchants no longer existed, a part of the gold and silver in circulation, at no time equal to the demand, disappeared. This effect was produced, in part, by remittances to Europe; in part by collections made by government for essential purposes, among which was the expedition to Canada; and perhaps, still more, by being hoarded up by those who, not being under the influence of the general feeling, foresaw the effects which must be produced by the large emissions the war would render inevitable. This diminution of the quantity of the precious metals, connected with the loss of that particular species of credit which had been found to be a substitute for specie, produced a real necessity for a circulating medium, to answer the ordinary purposes of society. This necessity, which for the moment was very sensibly felt, co-operated, with the real patriotism of the great body of the people, to facilitate the circulation, on a par with gold and silver, of bills of credit issued by an authority which all acknowledged; and

CHAP. I. although no specific funds were pledged for 1776. their redemption, nor were there any in the

power of government in any degree competent to that object; yet common opinion supplied the want of these substantial requisites, and he would have been thought a traitor to his country, who had manifested a suspicion that the public faith would not be religiously observed. On this delicate subject, a resolution of congress was passed so early as January 1776, denouncing against those who should discourage the circulation of the paper money, the penalty of being held up as enemies of their country.

It was however impossible that this delusion could be permanent, or that it should, in the first instance, be complete with men of reflection and experience. Although a confidence in the engagements of government might not for a time be shaken; yet as the paper bills were continually emitted, without being capable of finding their way into other countries, it was impossible to conceal, from those who would permit themselves to think, the dangerous truth, that the mere quantity in circulation, would so sensibly impair their value, as to render impracticable their redemption at par.

This truth, however, which was not universally perceived, was cautiously concealed by the friends of the revolution; and if uttered by its enemies, the declaration was deemed a

crime which merited the severest punish- CHAP. I.

ment.

Aware, however, that it must in time be betrayed by its effects, the utmost exertions of congress were used to procrastinate, as much as possible, an event, the arrival of which, should the war be of long continuance, was foreseen to be inevitable; and which must be attended with difficulties, there were no apparent means of surmounting. The emissions therefore, were as small as possible; and the disbursements of money were so parsimonious, as almost to produce the mischief dreaded from that absolute want of pecuniary resource, which would be experienced when the public credit should fail.

But it was not in the power of congress to regulate the amount of paper bills, which should come into circulation. The right to emit them was possessed by every local government, as well as by that of the union; and this right was very liberally exercised.

The consequences of thus augmenting the quantity of bills put into circulation, were foreseen with trembling apprehensions; while the means for counteracting the mischief could only be recommended.

To economize disbursements, and to call in by taxes a part of the sums disbursed, thereby diminishing the quantity, and increasing the demand, were the only possible means

1776.

CHAP. L. of preventing such an accumulation of paper 1776. money, as infallibly to continue its depreciation, until it should entirely cease to be a circulating medium. The disbursements were placed in too many hands to be economized, and the power of taxation was not in congress. That body could only recommend the imposition of taxes, and their recommendations were, perhaps, the less attended to, because, whatever might be the public exigencies, the measure, was at all times unpopular, and could only be effectual by being universal. It was most earnestly recommended, first, to the several colonies, and then to the states, to adopt measures to redeem their quotas of the bills of credit emitted by congress; but such was the danger apprehended from immediate taxation, that the payment of the first instalment of the first emission was to be postponed until 1779, by which time, it was certain, the depreciation must be considerable. This can be accounted for only by the difficulty of collecting taxes before the declaration of independence; the difficulty of paying them without commerce; and the fear that their burden might detach many from a war avowedly undertaken to oppose taxation.

In consequence of these, or other causes, taxation was not commenced until depreciation had made considerable progress; and then the remedy was so sparingly applied, as very