Massachusetts Issues First Paper Money

Context

English colonial policy reserved the minting of coin to the Crown, leaving the American settlements chronically short of specie for trade and public payments. Massachusetts had briefly operated its own mint from 1652 until royal authorities shut it down in 1684 and revoked the colony’s charter, ending even that limited local production of silver coins. By the late 1680s the region operated under the short-lived Dominion of New England, whose collapse after the Glorious Revolution left Massachusetts once again managing its own affairs amid renewed conflict with France.

What Happened

In 1690, during King William’s War, Massachusetts raised troops for an expedition against French-held Quebec under the command of Sir William Phips. The campaign ended in failure, yielding no plunder to offset its costs and leaving the soldiers without pay. With the treasury empty of coin and the Crown offering only future reimbursement, the General Court turned to paper. On 3 February 1690 the legislature authorized the printing of £40,000 in bills of credit—essentially promissory notes receivable for taxes and eventually redeemable in specie. An earlier, smaller test issue of roughly £7,000 had already been ordered in December, but the February emission marked the first substantial circulation of government-backed paper money in the Western Hemisphere.

Aftermath

The notes entered local circulation despite widespread skepticism and immediate attempts at counterfeiting and alteration. Depreciation set in quickly; by October tax collectors had already retired £10,000 of the issue, and the remaining bills lost nearly 40 percent of their value within a year. Nevertheless, the expedient prevented outright mutiny and allowed the colony to meet its immediate obligations. Neighboring colonies facing similar wartime fiscal pressures soon adopted the same device.

Legacy

The 1690 emission established paper money as a recurring instrument of colonial finance, a precedent that proved essential during the Revolution when the Continental Congress and individual states issued vast quantities of bills of credit. Although the notes’ depreciation foreshadowed later controversies over fiat currency, the innovation demonstrated colonial willingness to improvise monetary solutions outside strict British oversight. Historians view the episode as an early expression of American economic self-reliance that helped shape the monetary experiments of the new United States.