To some people, paper money isn’t worth the paper it’s printed on. It simply isn’t money in any real sense. But to everyone else, a wad of folding stuff is what they desire.
It first made an appearance, as far as we know, during the Tang Dynasty in China in the 7th century. It lasted in one form or another for 650 years or so, but was abandoned around the middle of the 15th century, after the inevitable inflationary booms and busts got too tiresome to deal with.
Over two centuries after China abandoned paper money, the West began experimenting with it.
In 1689, Massachusetts was still an English colony, and used the pound as currency. Back home in England, the Glorious Revolution had recently taken place. England was a protestant nation once again, and business carried on as usual. Business as usual, of course, meant war with the French.
The Nine Years’ War had spread out of Europe and in to the American colonies. One of the many troubles with war, of course, is that it is an expensive undertaking, and often requires novel financial solutions. Paying for war with France is responsible for the creation of the Bank of England and the imposition of income tax, for example.
So to pay for its troops, Massachusetts decided it would print paper notes to give to the soldiers in lieu of pay, which could be redeemed later. And on this day in 1690, they went into circulation.
Initially, a note of six Massachusetts shillings would buy you one Spanish dollar. But it didn’t take long for inflation to get a grip. By 1737 so much money was floating around it was virtually worthless. To buy a Spanish dollar by then, you would need 22 shillings and sixpence.
Nevertheless, other colonies, such as Pennsylvania, followed suit. But it would be another 107 years before the Bank of England printed its first pound note (again, to finance war with France).
Also on this day
Harold Macmillan gave his famous ‘wind of change’ speech on his visit to Africa on this day in 1960, marking a change in Britain’s colonial policy. Read more here.