How to Pay for a Revolution
Massachusetts contributed more soldiers to the Continental Army than the six southern-most states combined. How did we cover the economic costs of their service and of prosecuting a revolutionary war? Part of the answer is found in three items in the Early Springfield Manuscripts Collection at the Lyman & Merrie Wood Museum of Springfield History.
The first item is a $50 note issued by the United States in 1779. Theoretically, the bearer of this note could exchange it for fifty milled Spanish dollars. In the 18th century (and before) the Spanish dollar was an internationally accepted currency, mainly because each silver Spanish dollar coin was weighed and measured in minting to ensure they all had the same weight and high percentage of pure silver -- about 90%. Thus, the paper note would have been valuable IF the bearer could in fact present it and receive silver Spanish dollars in return. However, the reality was that Congress was broke and by 1779 all the states were also trying to fund the war via unbacked paper notes or interest-bearing promissory notes redeemable at a future date.
So, how valuable was $50 in 1779? Historian Matthew Mees estimates that it was equivalent to £12..20s. That would be real money, but not a fortune -- unskilled farm labor was worth £20 or so a year; a skilled artisan made £60-100 a year.
Though the bill was nominally worth $50 in silver, Continental currency was already in an inflationary spiral, so this bill's actual purchasing power was smaller than $50 and falling.
The punched hole in the center of this bill indicates it was redeemed and taken out of circulation.
The second item is labeled as “Bounty Note, Issued by State of Massachusetts Bay, Jan. 1, 1780, for Revolutionary War Services in the Continental Army,” but it isn’t really a “bounty note” in the sense of payment for enlistment. It is actually a “Certificate of Depreciation” issued to a Richard Moor (also spelled “Moore” in the records) for £191 or its equivalent in corn, beef, of sheep’s wool, etc.
It is an example of the world’s earliest-known inflation-indexed bonds, which were issued by the Commonwealth of Massachusetts in 1780. These bonds were created to deal with severe wartime inflation and discontent among soldiers in the Continental Army angry about the decline in purchasing power of their pay.
According to the Massachusetts State Archives, rapid depreciation of currency during the Revolutionary War caused soldiers’ pay to become significantly reduced in value. In response to pleas from the Massachusetts troops in the Continental Army, and from Congress, the Massachusetts General Court passed Resolves 1778-79, c 446 (Feb. 6, 1779), which pledged to adjust wages at the end of the war based on actual prices of commodities. Later legislation set up depreciation tables indicating, by month in which the payment was made, how much reimbursement was owed, based on the value of commodities at that time. Another law authorized the state treasurer to issue notes, like this one, to pay the balances owed officers and soldiers, over future years, with interest. Those officers or soldiers still in service were paid in four equal parts over 1781-1784; those not in service were paid over 1785-1788. However, the state was also authorized to deduct amounts already given to soldiers in the form of bounties, wages, clothing, supplies provided to families, for example.
Apparently, Richard Moor never cashed in his note, since it would have been turned in and would now be housed in the State Archives.
The third item is another example of a Revolutionary War-era bond, issued in 1782 by the Commonwealth of Massachusetts, to pay John Byrnes for money borrowed, at 6% interest, due at maturity on the 1st of January 1786. The handwritten notes on the left side indicate that interest was paid out in four annual installments. The gash indicates the bond had been redeemed.
What these 18th century documents make clear is that while we take our currency (and what backs it) utterly for granted, the Colonials did not. Inflation was a huge problem and the value of currency was not stable. The use of printed paper currency was a real convenience, however each state had its own currency and each valued it differently, creating extra confusion. This pointed out the need to establish a national monetary system.
Revolutionary War debt and the lack of hard currency haunted the new state of Massachusetts for decades after the war and would be a primary cause of Shays’ Rebellion. This had ramifications for the institution of slavery, as well, because a slave was a surrogate for monetary wealth and the value assigned to an enslaved person was more stable than paper currency.
(Barbara Mathews, J. L. Bell, Matthew Mees, Norene Roberts, and the folks at the Massachusetts State Archives contributed to this piece.)