Owen Nie: Monetary Policy in Colonial New York, New Jersey and Delaware

Following up on his guest posts “Playing Card Currency in French Canada,” and “Pre-Revolutionary Paper Money in Pennsylvania,” Owen Nie offers here another guest post on monetary history. This one is drawn from Richard Lester’s “Prosperity issues in New York, New Jersey and Delaware” Monetary Experiments: Early American and Recent Scandinavian. New York: Augustus M. Kelley, 1970. 112-141.

In New York, two paper money issues in 1714 and 1717 were authorized to finance military expenditures against French Canada. In following years evidences suggested that these monetary expansions were responsible for opulent trade and business conditions until the gradual retirement of these currencies from taxes occasioned for that purpose in 1720s and 1730s. Hence in 1737 another bill to issue paper money was passed, this time not only to defray expenses but with a deliberate goal of providing a circulating medium and stimulating the economy. This issuance, like the earlier two, aided greatly in New York’s recovery from depression. New Jersey did not issue paper money as early as New York first did and later decided on monetary expansion in 1723 after observing its neighbor’s better trade and industrial conditions. New Jersey’s reduced reliance on New York and Pennsylvania’s money was among many other benefits of such an expansion. In 1733 an additional bill to issue more paper currency was passed in New Jersey as it became a great necessity, but all subsequent proposals of such nature were rejected by British government except for defraying His Majesty’s military expenditures. These paper currencies were issued on loan; interest was paid to the state and served to reduce the need for levying taxes. Delaware had similar experiences with currency expansions (in 1723, 1729 and 1746) as these of New York and New Jersey and of Pennsylvania.  In all of these four North American colonies in over a half century, currency issues appeared to have achieved their purpose of greasing the wheels of the economy without bringing about detrimental effects of extreme inflation later on, as price stability was at least as good as it would have been on gold and silver standards.