Abstract
The British North America colonies used different media of exchange to transact domestic trades. The creation of efficient domestic barter structures helped maintain chronic outside-money (specie coin) scarcity. To replace this missing outside money, the colonies developed alternative inside transacting media and units of account. I assess whether these alternative media were monies using a new approach to determining what is money and what is not money. These alternative media included tobacco money, wampum money, grain or country pay as money and, eventually, legislature-issued paper monies. I document how colonial legislatures structured their paper monies, show how the value and performance of these monies can be predicted, and report the estimated relationships between prices and paper monies. Colonial economies were under-monetized, bank-structure constrained, and undeveloped in their ability to produce import substitutes. These conditions maintained chronic outside money scarcity and induced colonial legislatures to eventually create inside paper monies. These paper monies, however, were cumbersome media of exchange compared with subsequent post-colonial banknote monies.
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Grubb, F. (2018). Money and Prices in Colonial America. In: Battilossi, S., Cassis, Y., Yago, K. (eds) Handbook of the History of Money and Currency. Springer, Singapore. https://doi.org/10.1007/978-981-10-0622-7_18-1
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