Early American Colonists Had a Cash Problem. Here's How They Solved It
Money, or the lack thereof, was a persistent problem in colonial America. The colonists were under the control of Great Britain, where the legal tender was both gold and silver, known as a bimetallic system. Yet British coins circulated only rarely in the colonies. The colonists had an unfavorable balance of trade with the mother country, meaning that the value of the goods they imported from England greatly exceeded the value of the goods exported back. Most specie that flowed into the colonies through trade quickly flowed back to England in payment for these goods. Nor did the colonists have access to specie through any domestic gold or silver discoveries. In order to have a functioning economy, the colonists were forced to turn to other commodities for use as money. Spanish coins, from trade with the West Indies and Mexico, circulated freely in the colonies as legal tender. While goods were officially valued in British pounds, in their day-to-day transactions colonists more com...
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