Money in the Colonial Americas

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Money in the Colonial Americas

Money, as it is understood today, originated three thousand years ago in China, where coins known as cash were introduced to represent the tools and lengths of cloth previously used for exchange. The practice spread in the ancient world as a number of Greek states adopted coinage, and in 285 b.c.e. the Romans began to produce their famous denarius.

As the power of Rome spread, its coins replaced primitive tribal "tool" currencies—in Britain, for example, iron bars—establishing a tradition that resulted in all of Europe having adopted a monetary regime based upon silver coins by the Middle Ages. In Spain the regular minting of gold coins, too, began in the fourteenth century, and the Lisbon mint began to produce the gold cruzado in 1457 from gold obtained by barter in West Africa.

Christopher Columbus (1451–1506) carried this monetary tradition with him to the New World in 1492. During the first three decades of Spanish exploration and settlement a variety of Old World coins circulated in the Caribbean. The most important were the maravedí (the smallest unit of Spanish account currency) and the real (a unit worth thirty-four maravedís), particularly after 1497, when Queen Isabella I (1451–1504) approved currency regulations making the standard unit of account the peso de oro worth 375 maravedís. Her regulations also specified the bimetallic relationship between gold and silver as 1:10, although this ratio was frequently adjusted and by the eighteenth century became 1:16.

Gold, derived from both treasure and alluvial deposits, was much more abundant than silver in the Caribbean and Central America. However, the conquest of Mexico and Peru not only increased the volume of gold bullion in circulation, but also made available vast quantities of silver, first as booty and by midcentury from mining. At Cajamarca, for example, the ransom given to Francisco Pizarro (ca. 1475–1541) by the Inca ruler Atahualpa in 1533 yielded 6,087 kilograms (13,420 pounds) of gold and 11,793 kilograms (26,000 pounds) of silver (one fifth of which—the quint—was sent to Spain for the king).

As the magnitude and wealth of the mainland territories became clear, King Charles I (1500–1558) of Spain ordered in 1535 the creation of the first American mint in Mexico, beginning the production of America's first silver coin, the peso of eight reales, known to posterity as the piece of eight. Santo Domingo was granted a mint in 1542, and others opened shortly there-after in Lima (1565), La Plata (1573), Potosí (1574), and Panama (1580), followed in the seventeenth century by Santa Fe de Bogotá (1620) and Cuzco (1697). The expansion of the frontiers of empire in the eighteenth century, coupled with a dramatic increase in silver production, led to further mints opening in Popayán (1729), Guatemala (1731), and Santiago (1743). Later still, in the first two decades of the nineteenth century, several more mints were established in Mexico, Venezuela, and New Granada, partly in response to the movements of armed forces during the independence period.

During the almost three centuries that coins were minted in Spanish America, there were several significant attempts to standardize coinage and its production. From 1729 all mints were under direct crown control. More significantly, during the reign of Charles III (1716–1788), a sustained campaign was mounted to call in old coins, many of which were clipped and defaced, for replacement by the ubiquitous peso.

A number of mints, notably those in Peru and New Granada, produced gold as well as silver coins, as did mints in Brazil, where major gold finds from the late seventeenth century inaugurated the "golden age" (1690–1750) and the establishment of mints in Salvador, Rio de Janeiro, and Minas Gerais (literally, "General Mines"). By the mid-eighteenth century peak, they were processing over 3,000 kilograms (6,614 pounds) of gold a year, as gold replaced sugar as Brazil's principal export to Portugal (and indirectly to Britain) before production began to fall.

In Spanish America, by contrast, the late colonial period saw Mexico and Peru exporting record quantities of silver—up to thirty million pesos a year—to Spain. Although no longer as important as in the 1580 to 1630 period, when bullion accounted for 80 percent of the value of exports to Spain, it continued to dominate transatlantic trade (56 percent of its value), as well as lubricating complex networks of regional trade in the Americas and beyond. Chinese silks and porcelain, for example, entered Mexico and Peru, via Manila, in large quantities in exchange for silver.

In addition to registered trade, from which the crowns of Spain and Portugal derived customs dues as well as the quint (lowered to a tenth in Spanish America in 1736 to stimulate mining output), vast but unquantifiable quantities of unregistered gold and silver entered the channels of contraband trade, particularly in the Caribbean, where Jamaica (British from 1656) traded extensively with the Spanish islands and the northern coast of South America. Given Spain's perennial inability to supply either slaves or manufactured goods in the quantities and at the prices required by increasingly sophisticated Spanish-American consumers, ships from British America also began to penetrate this market in the seventeenth century.

British America, like Brazil, had been largely ignored by Spain because of the failure to find there either easily assimilated natives or precious metals. The early British settlers in Virginia, too, were disappointed that gold did not materialize, despite assiduous prospecting. Economic salvation came, of course, in a different guise, with the introduction in 1614 of tobacco from Trinidad; by 1620, 22,680 kilograms (50,000 pounds) of tobacco had been shipped to England for sale at high prices.

Given the scarcity of currency, and the fact that the few silver coins that trickled in from Spanish America were too valuable for small purchases, the early colonists adopted tobacco as the first legal currency in 1619. A century later "tobacco notes" became legal tender in Virginia, and "rice notes" were introduced in South Carolina. The first mint was established in Boston in 1652, producing mainly small silver coins (shillings, sixpences, and threepenny pieces), and other states soon followed this example.

After independence, Vermont and Connecticut began to issue copper cents, thus beginning the dollar system (the word dollar is derived from the German thaler, which the Massachusetts authorities had recognized in 1642 as worth five shillings, like the Spanish peso). And so began the monetary empire of the United States.

see also Mercantilism; Mining, the Americas.