Sunday, May 23, 2010

Which statements are accurately characterizes the colonial currency problem of early and mid-18th century?

A. When Rhode Island tried to establish a land bank and paper currency in 1740, Britain intervened.

B. Recent discoveries of gold and silver, as well the seizure of spanish ships, increased the supply of coins in the colonies

C. The lack of currency in the colonies led New england states to issue paper money, which English creditors increasingly refused to accept.

D. The Currency act of 1751 required New England colonies to set up land banks and issue paper money, which quickly depreciated in value.


C. The history of paper money in America dates from Massachusetts' issue of Old Tenor in 1690. The laws of economics were not understood in that time, so the hazards of over-issue were not obvious. However, as evermore paper money was printed and issued, it became increasingly obvious that the colonial government's taxing power could not support full redemption. This made the currency depreciate, inducing English creditors not to accept it. Use of such money (rightly) was seen as partial repudiation of a debt.

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