Dr. William Douglass – A Discourse Concerning the Currencies of the British Plantations in America, 1740

  • There have been a lot of proposals to introduce enormous quantities of money into the economy.
    • Mr Franklin addresses this in regard to the public well-being, most of which were not previously discussed
    • While the Massachusetts Bay colony is one of the best, it still falls under the prey of evil mean & bad administrators
    • Whenever paper currencies come into effect in Europe, bad things happen
      • Sweden – introduction of extra currency reduced the people to poverty. Only once the paper currency was called in & replaced by coinage did things get better
      • The regent of France pulled one over on his creditors by banning all silver currency & substituted paper currency. The result was breaking almost all trade & business. Any business working on a cash basis, & not in-kind or bartering, went belly-up. This scheme set the French economy back & reduced the overall wealth of the country greatly
      • Great Britain – £4.5 million were introduced all at once, about 1/3 of the nominal silver currency in the system at the time. It took many years for this circulation to normalize in the economy
  • Several provinces in the colonies  have been allowed to depreciate their currencies from time to time, almost always in a way for governments & influential men to defraud their creditors. Ultimately, it’s the average traders & customers who suffer the most.
    • Colonial currencies were devalued so irregularly or strangely that they were often inconvertible with the British Pound Sterling. This led to great upheavals in cross-Atlantic trade.
    • Now we’re talking about making government credits 10+ years out as a form of currency while the overall value of it can fluctuate wildly. Why would anyone want to lend to the government or accept their worthless scripts of paper as a payment?
  • Bad results from paper currency:
    • 1 – Workmen’s wages are a result of trade. When the currency is inconvertible in trade among the colonies or with England, or it is so variable that’s not predictable what the return from the sales would be, it puts workers’ livelihoods at risk
      • English merchants sell their wares in the colonies on credit – i.e. government credits whose values will plummet by the time they return with their next transport. Because these credits have little to no value at home or abroad, to accept them often means risking bankruptcy
      • Orphans, Widows & Charities all depend on a stable currency to continue to excess, even if at the benevolence of the public at large.
    • 2 – The fluctuations of the value of currency change with the tides. Printing paper money will only worsen this
    • 3 – Paper money doesn’t help trade any more than coins. Because it doesn’t store value the way silver or gold does, holding on to it only decreases the holder’s wealth. This causes an overall sinking of the credit in the economy
    • 4 – It has a bad effect on civil government. Because the government can just print money to pay its bills, it has the incentive not to have to worry about taxation or borrowing to provide public services. While these services have to be paid for, they only get paid by decreasing the value of everyone’s money.
    • 5 – It has a bad effect on long-term credit. If you borrow a certain amount of money today, you only have to wait later to pay it off because the inflation will essentially shrink the overall amount of money you owe to your creditor in real terms. It’s good to be a borrower but terrible to be a lender.

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