Posts Tagged ‘paper money’

Economic Fads of 1797

Posted in General, On This Day on February 27th, 2009 by Eugene Finerman – 2 Comments

February 27th

On this day in 1797 paper money became respectable.  However reluctantly, the Bank of England began issuing one pound notes.    The Bank had circulated notes in large denominations since its founding in 1694.  You certainly would not expect a duke to risk a hernia carrying  5000 Guineas.  But one Pound Sterling was a relatively trifling sum.  It might amount to three weeks’ salary for the average British laborer, but Jane Austen could have lost that much on a bad hand of whist and scarcely notice.

But the British government insisted on the issuance of one-pound notes.  John Bull was reserving his bullion for the ongoing, apparently endless war with France.  The government had a burgeoning debt, and even Admiral Nelson could not loot enough to make up the deficit.  So if Britain needed a circulating currency, it would have to make due with these new paper notes.  In theory, the pound notes could eventually be redeemed for their value in gold; one just had to wait until the government permitted it.  (That turned out to in 1821, the year of Napoleon’s death; Waterloo and St. Helena’s apparently were not sufficient to justify the return of gold coins.)

At least the staid, conservative Bank of England finally gave paper money a solvent reputation.  While America was undergoing its first throes of independence, in the zany period under the Articles of Confederation, individual states were issuing their own currency; no wonder that the preferred legal tender of the times was foreign coins.  Among the excesses of the French Revolution was the establishment of a paper currency, the Assignats, valued on land confiscated from the Catholic Church.  It really was not the most practical currency; how do you break change for a diocese in Provence?  (A liter of vin, some jambon and pain, and six dioceses in Bretagny?)  Worse for the Assignat’s value, the French Treasury thought it had the freedom of the press; it kept churning out the notes until they were worthless.  After that fiscal disaster, it is surprising that France’s other revolutionary gimmick–the Metric System–still had any credibility.