I am pleased to host another guest post by University of Michigan graduate student Owen Nie on monetary history. Don’t miss Owen’s earlier guest posts:
- Playing Card Currency in French Canada
- Pre-Revolutionary Paper Money in Pennsylvania
- Monetary Policy in Colonial New York, New Jersey and Delaware.
This one is drawn from Richard Lester’s chapter “Social dividend in Maryland in 1733” in Monetary Experiments: Early American and Recent Scandinavian (New York: Augustus M. Kelley, 1970, pp. 142-151).
Maryland, for the first thirty years of the 18th century, had been using tobacco, their main product for exports to Britain, as currency and the value of it naturally varied with world price of tobacco. In 1733 a bill was passed for 90,000 pounds of paper money to be issued, 48,000 pounds of which was an outright gift to the inhabitants in order for the monetary expansion to take effect swiftly; the rest was introduced as loans. This helped avoid diverting resources from tobacco plantations and revived trade. It would have had a greater effect had paper money been declared legal tender before 1747.
Between 1733 and 1747 tobacco, coins and paper money coexisted as monetary standards. The state ordered that some tobacco be burned in 1733 to increase its price. In 1748 Maryland’s paper currency rose to par in terms of British sterling and from 1764 remained on par with gold and silver despite a sequence of issuances. Both as a business practice for the government and as a stimulus for the private sector, Maryland’s monetary expansion was a remarkable success considering its faithful redemption, maintenance of value all the way through 1776 and benefits to trade and industry.