The Specie Bank.

Another bank was proposed to counteract the Land Bank. It was called the Specie Bank, and was to issue,£120,000 in notes redeemable in fifteen years, in silver, at 20s. per oz. Both went into operation, but, in 1740, Parliament declared the old Joint Stock Companies' Act, passed after the South Sea bubble (1720), to be of force in the colonies. Both banks were therefore forced to wind up.

The Land Bank resisted its fate by social and political intrigues, and became a political issue between its friends and its enemies. The large merchants had refused its notes, but the small dealers had taken them, and,£35,582 were out For a thorough-going application of the paper theory, nothing has ever been proposed anywhere, much less put in operation, which could equal this. A note for $I payable twenty years hence in gold without interest, when interest is 3 per cent., is worth 55 cents, or, if interest is 6 per cent, 31 cents. If payable in any one of a dozen commodities it is payable in that one which twenty years hence may be the cheapest. At what rate, then, ought a man who to-day gives wheat for the note to make the exchange? These notes were based on nothing, floated on nothing, and represented nothing definable. The system of money which consists in “ basing,” “floating,” and “representing” was, therefore, here in perfection.

The governor made war on this bank with all his energy, as unlawful and pernicious, contrary to the act of Parliament and to his instructions. Finding that some civil and military officers were engaged in it, he removed them. This called forth a protest from Samuel Adams and John Choate, as an invasion of personal liberty. There can be no doubt that the bitterness engendered by this conflict was one great cause of the Revolution. Two great economic errors were amongst the causes of that war. One, the attempt of the colonies to issue paper in which they were in error as to the question of political expediency; the other, the attempt to carry out the “ colonial system,” by which the colonies were used as means of aggrandizing the mother country, in which the latter was at fault. There is no tribunal to decide such questions. They work themselves out in history.

The instructions forbidding the governor to allow paper issues contained one exception. He might issue for the expenses of government. This was the gap through which the issues were still continued, though, more moderately. In 1741 all outstanding notes were to be cancelled. As that year approached, it was found impracticable to call in all in one year by tax, no steps in that direction having been taken. Taxes were provided for retiring them in 1741, '2, and '3. At the same time the governor was allowed to approve issues beyond £30,000 for expenses, to tide over the withdrawal of the old. A new set of bills was now issued to circulate at the “ideal” rate of 6s. 8d. per oz. silver. These now became the “ new tenor,” and those of 1737, “ middle tenor.” Subsequently it became necessary to distinguish “ new tenor first,” and “ new tenor second.” Similar stratification existed in the paper of Rhode Island and Connecticut. If the new tenor bills depreciated they were to pass at current rates, that is, were not legal tender for their face. The depreciation was to be ascertained and published by commissioners, but these persons were restrained by public opinion from ever stating the depreciation at its true amount. One commissioner who did rate it truly was overwhelmed by a storm of abuse. The new tenor bills fell to 7s. 9d. per oz., but were hoarded. In 1741 old tenor were at 29s. per oz.; new tenor Massachusetts, 9s. 8d.; new tenor Connecticut, 8s.; new tenor Rhode Island 6s. 9d.; old Specie Bank of 1733, one-third better than colony bills; Specie Bank of 1740, issued at 20s. per oz., were at that rate; Land Bank not quotable. Mr. Hutchinson, the historian, and subsequently governor of Massachusetts, very wisely advised Governor Belcher to try to put down the Land Bank in some other way than by invoking the authority of Parliament. Colonial independence was enlisted on the side of the bank, and insurrection was feared.

In 1743 Massachusetts proposed to the other New England colonies to appoint commissioners to agree on joint action for doing away with the bills. They refused to do so. “ Money” was now scarce as ever again, the better kinds of paper being hoarded, and only the worst paper of all the colonies circulating in any. The governor of Massachusetts, in 1744, said that of,£400,000 Rhode Island bills in circulation £380,000 were in Massachusetts. The people of the latter colony had lost £25,000 on this sum in nine months. In 1744 the amount of bills in Massachusetts was scarcely diminished.