Conceived in Liberty Volume 2 - Ludwig von Mises Institute

followed each new emission of paper, and set up a clamor for still more accelerated
inflation.
Hardest hit by the severe depreciation of all the notes were nondebtors,
especially creditors, fixed-income groups, charitable endowments, and laborers,
whose wages—as has generally been true—rose less than prices. Thus in
1712, when silver in Massachusetts was priced at eight shillings per ounce,
wages of laborers averaged five shillings a day; in 1730, with silver appreciated
to twenty-nine shillings an ounce, wages were only twelve shillings a day.
In short, the price of silver (a reflection of the price movements of imports
and indeed of prices in general) rose three and one-half times, while wages
had risen only two and one-half times.
By 1740 the indefatigable Colman was ready to renew agitation for a private
land bank in Massachusetts. The critical factor in amassing support was
the change in Massachusetts land policy. Before 1720, the province had
required actual settlement before granting new land to private persons or
groups. But after that date, Massachusetts engaged in an orgy of grants to
land speculators, who held title to the virgin land until they could resell to
actual settlers at a profit. This land speculation was particularly rampant
during the 1730s; much of the land was on the New Hampshire border,
where a boundary dispute prevailed with the neighboring colony. The new
host of land speculators was anxious for an inflationary land bank.
Through the 1730s the Massachusetts General Court had been able to
evade Governor Belcher's restrictions on paper issues by postponing debates
on redemption. Finally, in 1739, the Crown insisted the bills be called in and
redeemed on the dates due. This meant that the 250,000 pounds of paper in
circulation would have to be reduced to the annual 30,000-pound limit by
1741. One way to evade this restriction, however, would be to set up a private
land bank, and at the invitation of the General Court for suggestions for ways
to inflate the money supply, John Colman resubmitted his old scheme. While
it was largely a land bank emitting irredeemable notes, Colman broadened the
appeal by permitting loans on personal property as well. It was also proposed
that loans be repayable, not only in banknotes but also in such commodities as
hemp and iron—the aim being to subsidize local manufacture of these products.
A competing group of merchants made a rather sounder proposal, the
notes of which bank could at least be redeemable in specie after fifteen years.
Both proposals were led by prominent and wealthy citizens.* The Assembly
*While the competing silver bank was backed by such wealthy Boston merchants as
James Bowdoin, Samuel Welles, Joshua Winslow, and Andrew Oliver, the subscribers
to and directors of the land bank included Samuel Adams, a wealthy Boston brewer;
Peter Chardon, son-in-law of Colman and one of Boston's wealthiest merchants; the
wealthy Roxbury lawyer and landowner, Robert Auchmuty; George Leonard of Norton,
a large iron manufacturer and one of the biggest landowners in New England; and
Samuel Watts, a merchant who owned a third of the land in Chelsea. Throughout the
towns of Massachusetts, large landowners and land speculators were conspicuous in the
ranks of land-bank subscribers.
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