Barter Currency.

The colonists began, soon after the settlement of Massachusetts Bay, to use a barter currency, ostensibly because they had not money enough: really because they wanted to spare the world's currency to purchase real capital, which was their true need. The currency history of this country has been nothing but a repetition of this down to the present hour. It has always been claimed that a new country must be drained of the precious metals, or that it could not afford so expensive a medium. The new country really needs capital in all forms. The only question is, whether, being poor and unable to get all that it wants, it can better afford to do without foreign commodities or without specie currency. No sound economist can hesitate how to decide this question. The losses occasioned by a bad currency far exceed the gains from imported commodities. The history of the United States from the landing of Winthrop to today is a reiterated proof of it. The best protection to native manufactures is to keep a due proportion of the national capital in a specie circulation, and do without, or find substitutes for, or learn to make, the things which the people cannot afford to buy from older and more advanced countries.

Credit, in its legitimate forms, is priceless to a new community, but when used in illegitimate forms, as in a pure credit currency, or in a currency into which credit enters as an indefinable element, it makes legitimate credit impossible. This history will do little more than to expose the errors involved in mistaking credit currency for money, and money for capital—errors which are repeated to-day by the new States—and to show the bad results of those errors.

The barter currency was inferior to gold and silver in cost. When corn and beaver, and, in fact, all other products, were made legal tender, no one would pay debts in specie. It was hoarded and paid away for imports.

A barter currency is also the most rapid of all currencies in its depreciation. If a cow will pay taxes, the leanest cow will be given. If corn will pay a debt, the corn which is of poorest quality, or damaged to a certain extent, will be given.

If a large number of commodities are made legal tender, the poorest quality of the commodity, which may be cheapest at the time of payment, will be given. Credit operations are therefore made almost impossible.

Some ludicrous complaints, on the part of the tax-gatherers, scattered up and down in the records, bear witness to the fact that this was all experienced in New England. The more barter currency was used “because money was scarce,” the scarcer money became. Prices rose to fit the worst form of payment which the seller might expect.

Accordingly, in 1640, prices having risen so much that the nominal “penny” in the barter currency had fallen, we find the Massachusetts Courtre-rating wampum at four of the white and two of the black for a penny, to the amount of 12d. Interest was 8 per cent.

During the ten years, then, from 1630 to 1640, the specie brought over, and that gained by trade with the West Indies and Virginia (not yet great) had been steadily exported. Merchants had found the colony a good market. In 1640, Winthrop tells how the merchants came and drained off the people's cash. That he should not have understood the case is not strange, but that people nowadays should not have learned from the experience of two centuries and a half, and the teachings of science, any better than to repeat the same theory, is astonishing.