FRANKLIN'S 1729 TRACT ON PAPER CURRENCY

Pennsylvania’s first experience with paper currency came in 1723 with the passage of two acts which provided for issues of bills of credit totaling £45,000. Except for £7,500 allocated to governmental agencies for public expenditure, the new currency was to be loaned to private individuals at 5 per cent interest for specified terms of years on the security of real-estate mortgages. The borrowers were to repay the principal in equal annual installments and the bills of credit received in payment were to be canceled and destroyed. The last of the loans would be repaid and the last bills of credit “sunk” in 1736. But in 1726, when almost £5,000 of the paper money had been retired, complaint about the shrinking currency induced the Assembly to halt the further destruction of the bills and to authorize instead their reissue on new mortgage loans.

During the next few years paper currency became a major issue. Many believed the acts of 1723 and 1726 had greatly promoted the prosperity of Pennsylvania; others, including the more conservative inhabitants, the proprietors in England, and officials of the British government, feared inflation and serious depreciation of the paper money such as had already taken place in New England and South Carolina. The Assembly, acting on several petitions, sent to the governor in February 1729 a bill for a large new emission of bills of credit, with a lower interest rate on the mortgage loans and a longer term for retirement than any earlier Pennsylvania act had provided. Governor Patrick Gordon favored paper currency but objected to the terms of the bill. Prolonged discussions followed between governor and Assembly.

While these negotiations were in progress Franklin joined the debate. He and his friends had discussed the matter in the Junto, he wrote many years later in his autobiography, and he was “on the Side of an Addition.” He remembered the stagnant condition of the city when he “first walk’d about the Streets of Philadelphia, eating my Roll,” in 1723 just before the first of the currency acts began to take effect, and by contrast the prosperity that had followed. He attributed the great improvement to the more plentiful supply of a circulating medium. “Our Debates possess’d me so fully of the Subject, that I wrote and printed an anonymous Pamphlet on it, entituled, The Nature and Necessity of a Paper Currency.” This essay was dated April 3, 1729, and was one of the first of the publications issued by the new firm of Franklin and Meredith “at the New Printing-Office near the Market.”

The first part of this paper is a discussion of the importance of an adequate supply of money for the successful conduct of a community’s business. The treatment is general but has particular application to a colonial area such as Pennsylvania. Some of Franklin’s ideas may have been derived from his reading; others doubtless reflected the discussion then going on in the province at large and among his friends in the Junto. The second part of the essay deals with the specific question of how much paper currency might be safe for a community and how it should be secured to avoid the danger of a serious depreciation.

To read the complete article, see:
The Nature and Necessity of a Paper-Currency, 3 April 1729 (https://founders.archives.gov/documents/Franklin/01-01-02-0041)

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