Part 6:
The Bank of England, a new institution pretending to be a bank, that was, in fact, a printing press of limitless unbacked money to solve King William’s financial needs. The original objective of establishing English colonies to North America was for England to receive raw materials from the colonies very cheaply and to have the colonies receive the finished goods manufactured (at artificially high monopoly prices) in England. What actually happened was that, over time, the American colonies developed an impressive trading system with not just England, but with other trading partners as well, and even developed an early phase of manufacturing in the colonies. When the King and Parliament attempted to limit such trade with other trading partners, the American colonies perfected sophisticated smuggling enterprises.
For example, a thriving production of rum evolved in the American colonies, involving the importation of molasses from the French, Dutch and Spanish West Indies in the Caribbean.
In terms of early American colonial money matters, the absence of gold and silver led to
a home-grown currency, which by the 1750s, had been developed into a stable paper money medium that worked well because,
(i) its issuance was carefully controlled to match the need to facilitate trade,
(ii) the paper money was backed first by real estate and then other credible collateral such as tax revenues, and
(iii) the colonies were populated by individuals who came from England to find better conditions, including an escape from the frequent booms and busts, bank runs, and heavy losses of depositor’s
money precipitated by the fraudulent activities of the Bank of England and the British government.
In the minds of many American colonists, the irresponsible pattern of money matters in England was looked upon as an important thing to avoid. Unfortunately for the American colonies, in April of 1763, George Grenville assumed the office of Prime Minister of Great Britain, with the promise of cutting back government spending and pursuing a more assertive foreign policy. He instituted a series of Acts that laid the foundation of the American Revolution:
The Currency Act of 1764: Among the various harmful Acts conceived by Prime Minister George Grenville was the decision to allow the Bank of England to expand its operations to include the American colonies. The Act prohibited the colonies from issuing any more paper money, making sure the existing colonial paper money was taken out of circulation through the settlement 10
of payments with which it is involved, and allowing the money monopoly of the Bank of England to take the place of colonial paper money with future issuances of its own unbacked paper money. The negative consequences to the economy of the American colonies were immediate.
The Sugar Act of 1764: The American colonies were building a thriving business in rum production for exportation by purchasing molasses from the French, Dutch and Spanish West Indies in the Caribbean. This lucrative export had a second important benefit: payments for American rum were made in gold and silver, which were a very valuable form of exchange that had provided strong backing to American colonial paper money. The Sugar Act of 1764 created and strictly enforced a tax on molasses coming from non-British colonies, which was meant to force the American colonies to purchase, at a considerably higher price, molasses from its British West Indies sugar operations in the Caribbean, thereby strengthening the monopoly position of its Caribbean sugar operations within the commercial realm of the British Empire.
The Act also ended all colonial export of lumber to non-British sources, which further diminished colonial export revenues and further diminished the critically important payment of key American exports in gold and silver by non-British trading partners.
The British government destroyed the sound financial system of the American colonies by spreading its corrupt and fraudulent financial system to the colonies like a cancer.
The Stamp Act of 1765: But of all the Acts conceived by George Grenville, the Stamp Act caused the most outrage and bitterness among American colonists. That is because it was perceived for what it was: a direct tax on a wide array of items all across the economic spectrum of the colonial economy without their consent, which was a direct violation of the right of every Englishman not to be taxed without having his elected representative be a part of the deliberations that go on in Parliament before any such Act is decided upon. In reference to the first two Acts, Terry M. Mays, in his Historical Dictionary of Revolutionary America (2005), wrote:
“While the passage of the (Currency Act of 1751) is actually prior to the Revolutionary America period, it is important for understanding currency issues in the American colonies and the Currency Act of 1764. The British government passed the Currency Act of 1751 in an attempt to regulate the paper money being issued by the New England colonies. The British did not enforce the act during
the French and Indian War (1754-1763) due to the need for paper money to cover the mounting debt of the colonies.” “The British government passed the Currency Act of 1764 after the war. British
Prime Minister George Grenville persuaded Parliament to pass the Currency Act of 1764, the same year as the Sugar Act of 1764. While the Sugar Act had its greatest impact on the northern colonies, the Currency Act of 1764 added a new dimension.
To be continued:
