Early American Currency History for kids: Colonial Era
American Currency History: This short history of currency used by early Americans enables a better understanding of what was happening in the country in terms of money and why the First Bank of the United States was established.
During the Colonial Era there was no United States and therefore there was no United States currency and no central bank
Although there was no specific U.S. currency, forms of money were required as payment for goods and services and for the repayment of debts
Three types of money were used in the colonies of British America - Commodity money, paper money and specie (coins)
Commodity money: Commodities were articles of trade such as beaver skins, produce, tobacco and wampum (beads or shells used as money by Native American Indians)
Paper money: Printed paper used as a substitute for specie (coins)
Specie (coins): Specie were gold and silver coins. Specie is a form of visible wealth, and not merely representing it, as bills and notes do
American Currency History for kids: Paper Money and Bills of Credit
American Currency History: During the Colonial era there was a shortage of gold and silver coins - the British failed to supply the colonies with enough coins and refused to allow the colonists to make money. Colonists had to barter (using commodity money). In 1690 the Massachusetts Bay Colony were the first to issue paper money as a response to the shortage of coins and in order to meet the high demand for trade. The paper money was in the form of Bills of Credit (also known as Bills of Exchange or Promissory Notes). These were signed documents, based as money on the credit of the colony, containing a written promise to pay a stated sum in gold or silver to a specified person at a specified date or on demand to pay debts.
American Currency History for kids: The Revolutionary War
American Currency History: During the Revolutionary War, starting in 1795, the Continental Congress began issuing paper money known as Continental currency, or Continentals. And all of the first thirteen colonies, which would soon become independent states, also issued paper money to pay for military expenses. The paper money should have been backed by gold or silver, but not all of it was. Paper money rapidly depreciated, the famous phrase "Not worth a Continental" comes from this era.
American Currency History for kids: The State Banks
American Currency History: The Revolutionary War had ended in victory but the nation had a substantial war debt which was also shared by the individual states. There was no common currency, so many states opened state banks and printed their own money.
American Currency History for kids: The Constitution
The collapse of the Continentals prompted the delegates to the Constitutional Convention to include the gold and silver clause into the Constitution so that the individual states could not issue bills of credit, or "make any Thing but gold and silver Coin a Tender in Payment of Debts."