Historical Inquiry


I've got a question that I should probably research, but I'd be interested in an answer. Why were Americans so afraid of paper money two hundred years ago? Obviously paper money is popular now (c.f. the repeated failure of the dollar coin) but they really distrusted it in the period around the founding. I was reminded of this question because I was reading the Federalist Papers for Constitutional Law and Madison, in one of them, argues for the importance of curbs on the popular will. Among the specific popular (and evil) causes that Madison argues need to be prevented are "the repudiation of debt, the equal division of property, and the printing of paper money." So bankruptcy laws, International Communism, and the Federal Reserve.

So what gives? Concerns about hyper-inflation? Concerns about regular inflation? A feeling that paper money wasn't real money? Distrust of the printing industry? Campaign contributions from America's Mining and Metallurgy firms? (Interesting side-note: Benjamin Franklin was an early and strong advocate for paper money. When the government eventually decided to print paper money, they gave the contract to mint the money to Benjamin Franklin. So the American tradition of kickbacks for lobbyists goes back to the days of powdered wigs)

Also, can you imagine if they'd written a ban on paper money into the constitution? You'd have to pay with change every time you went to the store! In fact, we probably wouldn't have a concept of change, since all money would be coins, except in relation to those weird foreigners, with their squirrelly paper money.


Imagine, please, the Civil War as a crisis brought on by the impractical solid-money system. The North invented the debit card, the South invented the reinforced heavy-duty pants pocket, and the two were never reconciled. Abe Lincoln tried with his famous grand gesture, but unfortunately when he freed the coins from everyone's pockets they just called him a thief and knocked him over the head with a brick. Hardly a unifying day, that was.

I should know precisely how to answer this, as I once took a course that covered this topic. Unfortunately, it was an English course, and we spent most of the time deconstructing tropes like 'imping' (something about paper currency gaining illusory value on the wings of imps). But yeah, I think the basic idea was that paper = inflation = sin. Also, Poe's story "The Gold-Bug" won a contest in "Dollar" magazine and was all about the currency debates, somehow.

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This page contains a single entry by Zach published on January 12, 2006 11:01 PM.

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