Currency Act
Encyclopedia
The Currency Act is the name of several acts
of the Parliament of Great Britain
that regulated paper money
issued by the colonies of British America
. The acts sought to protect British merchants and creditors from being paid in depreciated
colonial currency. The policy created tension between the colonies and Great Britain, and was cited as a grievance by colonists early in the American Revolution
.
. These colonies had issued paper fiat money
known as "bills of credit
" to help pay for military expenses during the French and Indian Wars
. Because more paper money was issued than what was taxed out of circulation, the currency depreciated
in relation to the British pound sterling
. The resultant inflation
was harmful to merchants in Great Britain, who were forced to accept the depreciated currency from colonists for payment of debts.
The act limited the future emission of bills of credit to certain circumstances. It allowed the existing bills to be used as legal tender
for public debts (i.e. paying taxes), but disallowed their use for private debts (e.g. for paying merchants).
, a colonial agent in London, lobbied for repeal of the act over the next several years, as did other agents.
The colonial government of the Province of New York
insisted that the Currency Act prevented it from providing funds for British troops in compliance with the Quartering Act
. As a result, in 1770, Parliament gave permission (10 Geo. Ill c. 35) for New York to issue £120,000 in paper currency for public but not private debts. Parliament extended these concessions to the other colonies in 1773 by amending the Currency Act of 1764 (13 Geo. III c. 57), permitting the colonies to issue paper currency as legal tender for public debts. According to historian Jack Sosin, the British government had made its point:
. In all of the colonies except Delaware, the acts were considered to be a "major grievance".
When the First Continental Congress
met in 1774, it issued a Declaration of Rights
, which outlined colonial objections to certain acts of Parliament. Congress called on Parliament to repeal the Currency Act of 1764, one of seven acts labeled "subversive of American rights".
However, according to historians Jack Greene and Richard Jellison, the currency debate was no longer really a "live issue" in 1774, due to the 1773 amendment of the act. The controversy's most important impact was psychological, in that it helped convince many colonists that Parliament did not understand or care about their problems. Colonial leaders came to believe that they, rather than Parliament, were better suited to legislate for the colonies.
Act of Parliament
An Act of Parliament is a statute enacted as primary legislation by a national or sub-national parliament. In the Republic of Ireland the term Act of the Oireachtas is used, and in the United States the term Act of Congress is used.In Commonwealth countries, the term is used both in a narrow...
of the Parliament of Great Britain
Parliament of Great Britain
The Parliament of Great Britain was formed in 1707 following the ratification of the Acts of Union by both the Parliament of England and Parliament of Scotland...
that regulated paper money
Paper Money
Paper Money is the second album by the band Montrose. It was released in 1974 and was the band's last album to feature Sammy Hagar as lead vocalist.-History:...
issued by the colonies of British America
British America
For American people of British descent, see British American.British America is the anachronistic term used to refer to the territories under the control of the Crown or Parliament in present day North America , Central America, the Caribbean, and Guyana...
. The acts sought to protect British merchants and creditors from being paid in depreciated
Depreciation (currency)
Currency depreciation is the loss of value of a country's currency with respect to one or more foreign reference currencies, typically in a floating exchange rate system. It is most often used for the unofficial increase of the exchange rate due to market forces, though sometimes it appears...
colonial currency. The policy created tension between the colonies and Great Britain, and was cited as a grievance by colonists early in the American Revolution
American Revolution
The American Revolution was the political upheaval during the last half of the 18th century in which thirteen colonies in North America joined together to break free from the British Empire, combining to become the United States of America...
.
Act of 1751
The first act, the Currency Act of 1751 (24 Geo. II c. 53), restricted the emission of paper money by the colonies of New EnglandNew England
New England is a region in the northeastern corner of the United States consisting of the six states of Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, and Connecticut...
. These colonies had issued paper fiat money
Fiat money
Fiat money is money that has value only because of government regulation or law. The term derives from the Latin fiat, meaning "let it be done", as such money is established by government decree. Where fiat money is used as currency, the term fiat currency is used.Fiat money originated in 11th...
known as "bills of credit
Bills of Credit
Bill of credit is a phrase from Article One, Section 10, Clause One of the United States Constitution. It refers to a document similar to a banknote that is issued by a government and designed to circulate as money. Because the framers of the Constitution sought to limit the issuance of currency,...
" to help pay for military expenses during the French and Indian Wars
French and Indian Wars
The French and Indian Wars is a name used in the United States for a series of conflicts lasting 74 years in North America that represented colonial events related to the European dynastic wars...
. Because more paper money was issued than what was taxed out of circulation, the currency depreciated
Depreciation (currency)
Currency depreciation is the loss of value of a country's currency with respect to one or more foreign reference currencies, typically in a floating exchange rate system. It is most often used for the unofficial increase of the exchange rate due to market forces, though sometimes it appears...
in relation to the British pound sterling
Pound sterling
The pound sterling , commonly called the pound, is the official currency of the United Kingdom, its Crown Dependencies and the British Overseas Territories of South Georgia and the South Sandwich Islands, British Antarctic Territory and Tristan da Cunha. It is subdivided into 100 pence...
. The resultant inflation
Inflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...
was harmful to merchants in Great Britain, who were forced to accept the depreciated currency from colonists for payment of debts.
The act limited the future emission of bills of credit to certain circumstances. It allowed the existing bills to be used as legal tender
Legal tender
Legal tender is a medium of payment allowed by law or recognized by a legal system to be valid for meeting a financial obligation. Paper currency is a common form of legal tender in many countries....
for public debts (i.e. paying taxes), but disallowed their use for private debts (e.g. for paying merchants).
Act of 1764
The Currency Act of 1764 (4 Geo. III c. 34) extended the 1751 act to all of the British colonies of North America. Unlike the earlier act, this statute did not prohibit the colonies from issuing paper money, but it did forbid them from designating future currency emissions as legal tender for public or private debts. This tight money policy created financial difficulties in the colonies, where gold and silver were in short supply. Benjamin FranklinBenjamin Franklin
Dr. Benjamin Franklin was one of the Founding Fathers of the United States. A noted polymath, Franklin was a leading author, printer, political theorist, politician, postmaster, scientist, musician, inventor, satirist, civic activist, statesman, and diplomat...
, a colonial agent in London, lobbied for repeal of the act over the next several years, as did other agents.
The colonial government of the Province of New York
Province of New York
The Province of New York was an English and later British crown territory that originally included all of the present U.S. states of New York, New Jersey, Delaware and Vermont, along with inland portions of Connecticut, Massachusetts, and Maine, as well as eastern Pennsylvania...
insisted that the Currency Act prevented it from providing funds for British troops in compliance with the Quartering Act
Quartering Act
The Quartering Act is the name of at least two 18th-century acts of the Parliament of Great Britain. These Quartering Acts ordered the local governments of the American colonies to provide housing and provisions for British soldiers. They were amendments to the Mutiny Act, which had to be renewed...
. As a result, in 1770, Parliament gave permission (10 Geo. Ill c. 35) for New York to issue £120,000 in paper currency for public but not private debts. Parliament extended these concessions to the other colonies in 1773 by amending the Currency Act of 1764 (13 Geo. III c. 57), permitting the colonies to issue paper currency as legal tender for public debts. According to historian Jack Sosin, the British government had made its point:
Legacy
The Currency Acts created tension between the colonies and the mother country, and were a contributing factor in the coming of the American RevolutionAmerican Revolution
The American Revolution was the political upheaval during the last half of the 18th century in which thirteen colonies in North America joined together to break free from the British Empire, combining to become the United States of America...
. In all of the colonies except Delaware, the acts were considered to be a "major grievance".
When the First Continental Congress
First Continental Congress
The First Continental Congress was a convention of delegates from twelve of the thirteen North American colonies that met on September 5, 1774, at Carpenters' Hall in Philadelphia, Pennsylvania, early in the American Revolution. It was called in response to the passage of the Coercive Acts by the...
met in 1774, it issued a Declaration of Rights
Declaration and Resolves of the First Continental Congress
The Declaration and Resolves of the First Continental Congress was a statement adopted by the First Continental Congress on October 14, 1774, in response to the Intolerable Acts passed by the British Parliament...
, which outlined colonial objections to certain acts of Parliament. Congress called on Parliament to repeal the Currency Act of 1764, one of seven acts labeled "subversive of American rights".
However, according to historians Jack Greene and Richard Jellison, the currency debate was no longer really a "live issue" in 1774, due to the 1773 amendment of the act. The controversy's most important impact was psychological, in that it helped convince many colonists that Parliament did not understand or care about their problems. Colonial leaders came to believe that they, rather than Parliament, were better suited to legislate for the colonies.
See also
- Early American currency
- Gold Standard ActGold Standard ActThe Gold Standard Act of the United States was passed in 1900 and established gold as the only standard for redeeming paper money, stopping bimetallism...
of the United States (1900), also sometimes called the "Currency Act" - MercantilismMercantilismMercantilism is the economic doctrine in which government control of foreign trade is of paramount importance for ensuring the prosperity and security of the state. In particular, it demands a positive balance of trade. Mercantilism dominated Western European economic policy and discourse from...
- Navigation ActsNavigation ActsThe English Navigation Acts were a series of laws that restricted the use of foreign shipping for trade between England and its colonies, a process which had started in 1651. Their goal was to force colonial development into lines favorable to England, and stop direct colonial trade with the...
External links
- Currency Act of 1751 24 Geo. II c. 53
- Currency Act of 1764 4 Geo. III c. 34
- Currency Act of 1773 13 Geo. III c. 57