Currency Act | Images of Old Hawaiʻi

As we approach the semiquincentennial (250^th) anniversary of the forming of the United States, here is a brief summary of issues and actions that led to the Revolution and the Revolutionary War … this is about Taxes, Taxes, Taxes.

The French and Indian War was a clash of British, French and American Indian cultures. American Colonists were British citizens and fought side-by-side with the red coats.

The war started as a struggle for control of the land west of the Allegheny Mountains in the Ohio River Valley. (It was waged from 1754 to 1763.)

As the conflict spread, European powers began to fight throughout the world. It became a war fought on four continents: North America, Europe, Asia & Africa.

(The European portion of the war was called the Seven Years War.)

It ended with the removal of French power in North America.

The stage was set for the American Revolution. In a lot of respects, actions after the French and Indian war changed every-thing in the Colonies.

While the British won the war, it had been enormously expensive and left Great Britain with a heavy debt.

British government’s attempts to impose taxes on the Colonists to help cover those expenses resulted in increasing Colonial resentment.

The Colonists claimed they were equal to all other British citizens.

They felt they should be treated equally and argued that without representation in Parliament, Parliament could not tax them.

Parliament taxed and imposed import/export restrictions on the Colonies early and often (here are some):

Sugar Act (April 5, 1764)

Currency Act (April 19, 1764)

Stamp Act (March 22, 1765)

Quartering Act (Mar. 24, 1765)

Declaratory Act (Mar. 18, 1766)

Townshend Acts (June 5, 1767)

Tea Act (May 10, 1773)

Intolerable Acts (Mar. 31, 1774)

Mounting tensions came to a head during the Battles of Lexington and Concord on April 19, 1775, when the “shot heard round the world” was fired.

It was not without warning; the Boston Massacre on March 5, 1770 and the Boston Tea Party on December 16, 1773 showed the increasing dissatisfaction with British rule in the Colonies.

The Declaration of Independence, issued on July 4, 1776 stated the reasons the Colonists felt com-pelled to break from the rule of King George III and parliament to start a new nation.

In September of that year, the Continental Congress declared the “United Colonies” of America to be the “United States of America.”

France joined the war on the side of the Colonists in 1778, helping the Continental Army conquer the British at the Battle of Yorktown in 1781.

The American Revolutionary War in North America lasted from April 19, 1775 (with the Battles of Lexington and Concord) to September 3, 1783 (with the signing of the Treaty of Paris.)

It lasted 8 years, 4 months, 2 weeks and 1 day; then, the sover-eignty of the United States was recognized roughly by what is now Canada to the north, Florida to the south, and the Mississippi River to the west.

The Peace of Paris is a collection of treaties ending the American Revolution and signed by representatives of Great Britain on one side and the United States, France, and Spain on the other.

Click the following link to a general summary about Taxes, Taxes, Taxes.

Click to access Taxes-Taxes-Taxes-SAR-RT.pdf

The paper money issued by the Massachusetts Bay Colony in 1690 was the first authorized by any government in the Western world. The Massachusetts Bay Colony financed a military expedition to Canada in 1690 by issuing bills of credit.

Over time, each of the thirteen colonies’ governments had emitted their own currency issues, although Great Britain opposed and tried to suppress them. Subsequent military campaigns and other expenses by other Colonies were funded with these bills. In all cases, they were a financial expedient adopted to cover a lack of funds by promising to “pay later.” (American Numismatic Society)

The French and Indian War represented the decisive turning point in British-colonial relations. The Treaty of Paris in 1763 ratified Britain’s undisputed control of the seas and shipping trade, as well as its sovereignty over much of the North American continent east of the Mississippi River, including French Canada.

The British Government had borrowed heavily from British and Dutch bankers to finance the war, and as a consequence the national debt almost doubled from £75 million in 1754 to £133 million in 1763. In order to address this onerous liability, British officials turned to larger import duties on enumerated goods like sugar and tobacco, along with a series of high excise (sales) taxes on goods such as salt, beer, and spirits.

This taxation strategy tended to burden consumers disproportionately. In addition, government bureaucracy expanded in order to collect the needed revenue. As the number of royal officials more than doubled, Parliament delegated new legal and administrative authority to them. Thus, even as British subjects lauded their pre-eminent position in the world, they chafed under the weight of increased debts and tightened government controls.

In 1764, Parliament passed the Currency Act, which banned the use of paper money as legal tender in all colonies. (This effectively took the prohibition of issuance of new bills of credit that had been imposed on New England colonies: Rhode Island, Massachusetts Bay, New Hampshire and Connecticut and extended that prohibition to all of the colonies.)

British merchants had asked for relief from the depreciated currency brought about by deficit financing in Virginia. It was argued that Parliament sought to control currency depreciation against silver and sterling and to ensure its value for payments of debt to British merchants. The Act represented an effort to take control of monetary policy from colonial assemblies.

The colonies faced a chronic shortage of hard money, which was being sent across the Atlantic to pay debts in England. To meet the shortage, they resorted to issuing their own paper money. British creditors, however, feared payment in such a depreciated currency. (JD Lewis)

To protect British merchants and creditors from depreciated colonial currency, this act regulated currency, abolishing the colonies’ paper currency in favor of a system based on the pound sterling.

Effect of the Currency Act

As a result, the colonies suffered a constant shortage of currency with which to conduct trade. There were no gold or silver mines and currency could only be obtained through trade as regulated by Great Britain.

The Act banned colonial paper money as legal tender in private transactions.

Colonial paper money was accepted for public debt payments such as provincial taxes.

It prohibited the extension of paper bills beyond its date of redemption.

The Currency Act did not place limits on the amount of paper money in circulation and on the period of redemption.

Opposition to the 1764 Currency Act started immediately. Colonial governments petitioned its repeal as the postwar economic slowdown was being felt in most colonies.

In 1770 Parliament revised the Act and allowed New York to issue bills as legal tender for all types of debt. In 1773 parliament allowed colonial legislatures to print bills to cover costs and to be used as legal tender.

Click to access Currency-Act.pdf