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Old March 7th, 2013, 02:21 PM   #1
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Revolutionary War Bonds: how?


How did Revolutionary War bonds work?

Would a $5 bond have been originally purchased for $5 and it would one day be worth more more than $5?

Or would a $5 bond have been purchased for less (say $2.50) and would eventually be worth $5, but not more. ??? Thanks!
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Old March 7th, 2013, 03:22 PM   #2

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First thing to get a grip on is; what is $5?

Economics in the colonies was a messy business. Didn't have much in the way of a banking industry. Specie (coins of gold or silver with inherent value to the metal itself) from European nations served as currency. Specie was constantly in low supply and difficult to get because whatever the colonists could get their hands on was needed for debts. Mostly to English merchants or taxes. Among the primary complaints with the original Stamp Act was its requirement the tax be paid in specie. Virginia planters in particular were quite upset with that provision as they tended to barter tobacco for their main currency.

A War bond (Note issued by either a state or the Continental Congress) is basically a promise to redeem in specie at some time or date according to its terms. This note is redeemable to the bearer and therefore transferable at will. It becomes money. As long as the people have confidence in the State or CC to redeem the note it retains its value. Hopefully never actually getting presented back for actual redemption.

Bank Notes could also be used as money in the same way but I'm not sure anyone in the colonies had a charter to do it. The foundation of hatred and distrust in the banking system goes back to their ability to issue bank notes without sufficient specie to cover them.

Basically, same problem States and the CC had.

Interestingly enough, land warrants earned by soldiers and politicians for service also became transferable and sometimes used as a form of money. Although more just something veterans sold to speculators willing to hold them until the land was surveyed and available for award.
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Old March 8th, 2013, 07:01 AM   #3

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I just noticed an article over at the Journal for the American Revolutoin on the subject of money in the colonies. Me thinks the author knows a bit more on the subject than I.

From Pounds to Dollars - Journal of the American Revolution | Journal of the American Revolution
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Old March 8th, 2013, 07:35 AM   #4

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Quote:
Originally Posted by Baltis View Post
...Specie (coins of gold or silver with inherent value to the metal itself) from European nations served as currency. Specie was constantly in low supply and difficult to get because whatever the colonists could get their hands on was needed for debts. Mostly to English merchants or taxes. Among the primary complaints with the original Stamp Act was its requirement the tax be paid in specie...
Indeed. And one of the main reasons why specie was so scarce in the colonies was the enforcement of the Mercantile System by the Mother Country, which deliberately imposed a negative trade balance on the colonies so that specie would flow into the Mother Country and (presumably) increase her wealth.


Quote:
Originally Posted by Baltis View Post
I just noticed an article over at the Journal for the American Revolutoin on the subject of money in the colonies. Me thinks the author knows a bit more on the subject than I.

From Pounds to Dollars - Journal of the American Revolution | Journal of the American Revolution
Good article. Thanks for posting.
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