Paper Money Quotes
See {583710} for his grandchild’s variation.
The alternative would have been for the colonies to borrow English money at high interest rates and use that. Or use money from private banks (which occurred later.) Many conservatives are today a little shocked that some of the American Colonies just printed money with no backing but it worked—at least at the local level. A Boston Bank for example, would take a large commission for a Bostonian to convert Pennsylvania money into Massachusetts money. So it was not a very good system for trade between colonies and International trade. But English money was used for that. The colonists pragmatically got the “best of both worlds” and paid as little interest as they needed to. This system is essentially what we use today on a national scale with no gold or silver backing of the money.
He was against paper money. At the time, any bank could issue its own paper money or “banknotes”. However other banks would not redeem the banknotes for the full amount; they would “discount” the note. Usually, the further away the bank was from the original bank, the more discount they took. Interstate commerce was almost impossible. Alexander Hamilton, Jefferson’s nemesis, had a much more modern point of view and fortunately his view prevailed. Paper money could only work if it was issued by a central bank with no discounting by other banks. The paper money had to be “legal tender”.
The same argument can be made against the modern paper money supply. What Jefferson and most of the founding fathers, with the exception of Alexander Hamilton. did not realize was that the major stability of any kind of money was not only the silver or gold that backed it but the political and legal stability of the nation and the size of its productive economy. Where Jefferson was right however is that all these banknotes at the time were issued by local private banks. The Government had no responsibility for paper money and had no knowledge of how much paper money any bank issues and whether or not they had any silver to back it up. Banks didn’t trust other bank’s notes and would only redeem them at a discount. A $10 note from a South Carolina bank might only be worth $7 in New York and $6 in Boston. The early American monetary system was a mess.
1st Baron Macaulay
