Conceived in Liberty Volume 2 - Ludwig von Mises Institute

price of silver in New England shillings continued its disquieting rise: by
1720 it had climbed to thirteen shillings per ounce.
With depreciation worsening and silver disappearing, the cry arose once
more against a "shortage of money" and John Colman returned to the fray,
again urging a private land bank to emit 200,000 pounds in notes. Colman
urged farmers to support such a bank, since the increased currency would raise
prices of farm produce and land. Colman also urged a law that would prohibit
the depreciation of banknotes, and would fix the price of silver at eight
shillings per ounce. Such a law would have been impossible to enforce and
would have aggravated the shortage of silver by artificially overvaluing paper
in relation to specie. Colman denounced the government bank for not being
inflationary enough. The agitation for a private land bank was joined by the
Reverend John Wise, but without success. Another public issue of 50,000
pounds in 1721 was enough to quiet the agitation, which was evidently concerned
with more inflation rather than with private as against public banking.
Throughout the colonies the Crown, propelled by English creditors, was a
continuing force for sound money, and its embattled governors attempted to
veto paper issues and to moderate the inflationary drive. But the legislatures
often threatened to withhold executive salaries and even issued money on
their own authority. Increasing royal pressure on Massachusetts, imposed especially
by Governor Jonathan Belcher after 1730, managed to reduce the notes
in circulation by one-half by 1741; Belcher steadily enforced a limit of 30,000
pounds of notes per year to be payable in one year's time. Neighboring Rhode
Island, however, with its elected governor, was able to go hog-wild, and its
note issue, being acceptable in Massachusetts, thwarted the Belcher reductions.
Thus Rhode Island emitted 100,000 pounds of notes in 1733 alone. As a
result, silver rose further, to nineteen shillings per ounce, and by the late
1730s, to twenty-seven shillings an ounce.
The other colonies followed the lead of Massachusetts during Queen
Anne's War, to pay for military expenditures. South Carolina was the first to
issue paper—in 1703, to pay for an abortive plunder expedition against St.
Augustine. Rhode Island began its reckless career of inflation in 1710, to pay
for its share of an aggressive expedition against Port Royal in Nova Scotia.
By 1740 the following colonies had indulged in paper issue for government
spending: Massachusetts, Connecticut, Rhode Island, New York, New
Jersey, South Carolina, and North Carolina. Public loan banks were initiated
by South Carolina in 1712, for loans on real or personal estates. Almost all the
other colonies followed suit. By 1740, only Virginia had refused to join the
ranks. The Carolinas, indeed, had indulged so heavily that the price of silver
rose to thirty shillings in 1730, and paper money played a large role in South
Carolina's rebellion against the proprietary, which had refused to assent to
paper money. Other struggles between legislature and governor took place in
New Hampshire, where during the 1730s the legislature refused all funds for
five years in order to win its way for paper issues; and in New Jersey and
133