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All through the period of which we have been speaking, the monetary conditions of the country were in confusion. There were so many different kinds of money in circulation that calculating the value of any piece was a serious arithmetical problem.

There were moidores, doubloons, pistoles, gold Johanneses, English and French crowns, English guineas, and Spanish dollars. The standard in transactions with Great Britain was the pound sterling, but the coins most commonly used were the Spanish milled dollars — Captain Flint's "pieces of eight." In such a state of disorder and depreciation was the currency of the times, and so much did terms differ from state to state, that the dollar was worth six shillings in New England and Virginia, eight shillings in New York and North Carolina, seven shillings sixpence in Pennsylvania, five shillings in Georgia, and thirty-two shillings sixpence in South Carolina.

To make matters worse, counterfeiting was much practiced, so commonly, in fact, that the wary trader might well have taken almost as much time for testing his money as for selling his goods. "Enclosed are one hundred Dollars of new Emission Money," wrote Gerry to King in 1785, "which Colonel Steward desired me to have exchanged for Specie. Pray inform him they are all counterfeit." Good coin, moreover, was too valuable and rare to be allowed to circulate unmutilated. Clipping and shearing were so commonly practiced that, as Washington complained, if an end were not put to the business a pistareen would be converted "into five quarters" and a man be forced to "travel with a pair of money scales in his pocket, or run the risk of receiving gold at one fourth less by weight than it counts."

Some efforts were made to improve the coinage but without immediate result. Gouverneur Morris, while acting as assistant to Robert Morris, drew up a scheme for decimal currency, and Jefferson, at the head of a committee of Congress, considered similar plans. In the summer of 1785 Congress announced that the smallest coin should be of copper, of which two hundred should pass for a dollar, and the "several pieces . . . increase in a decimal ratio," and on August 8, 1786, a full plan of coinage was adopted. Congress endeavored in some measure to remedy the evil by providing for a mint and by fixing the value of the coin to be struck. But it is needless to say that practically nothing was done.

Amid all the genuine distress caused by the war, by heavy taxes, and by the need for a sound and reliable circulating medium, came still greater trouble caused by the restlessness of the people, by the honest-minded but uneasy poor, and by the debtors who sought an avenue of escape. The times were indeed hard for a man that was once down; imprisonment for debt was common; the jails were dreadful and filthy; the processes of the courts were expensive and summary. Some quick method of paying old debts, some way of getting rid of the truly formidable consequences of either idleness or misfortune, was naturally sought after, and, following the precedents of earlier days, there was a demand for paper money, tender laws, and other measures of relief. The years 1785 and 1786 are therefore marked by the rise of a paper-money party in the states, intent on remedying the supposed evil of the day, "a scarcity of money." To be sure, a good deal of specie had been drawn from the country by the recent heavy importations of merchandise, but the natural result of strenuous efforts to introduce a cheap currency was to drive specie out of circulation. The greater the agitation, therefore, the more serious the difficulty.

The truth is that in this paper-money agitation, we see the most serious danger of those dreary days, when nearly everybody was grumbling, and when the wise and prudent feared even for the foundation of society itself; for with the paper-money faction everywhere were enrolled, not alone the unhappy and the deluded, but also all those uneasy elements that opposed the extension of federal authority and believed in law only as a means of securing some selfish and niggardly end. The paper-money agitation had much more than a mere financial or business significance; here were gathered together the malcontents and the dangerously restless. As conservative men watched the growing discontent they grew closer together and saw more clearly the need of a strong hand and a firm government to insure domestic tranquillity.

While a good many men saw as clearly as the ablest economists of today the impossibility of making something out of nothing, and while many able and honest men argued strongly and vehemently against the criminal folly of trying to supply currency or to restore prosperity by a recourse to the printing-press, thousands of lusty throats clamored unceasingly for relief. Some miscreants had doubtless made money with considerable ease during the war, and there was a reason for dissatisfaction with the money sharps who had taken advantage of the necessities of their neighbors. But the argument of the needy or shiftless was easy: the property of the United States had been protected from destruction by the joint exertion of all, it ought therefore to be the common property of all. The man that opposed this creed was declared to be "an enemy to equality and justice," who should "be swept from the face of the earth." "They are determined," wrote Knox to Washington, October 23, 1786, "to annihilate all debts public and private, and have agrarian laws, which are easily effected by the means of unfunded paper money, which shall be a tender in all cases whatever."

All this mad reasoning was in some degree the natural product of a war against authority, a war which had brought social upheaval and was based on ideas of personal right and liberty antagonistic to authority. As soon as those who had profited by the disturbed conditions, or who had fallen into extravagant or negligent habits, saw that conditions were resuming their old form, that the industrious were to reap the fruits of their industry, and that the indolent and improvident were likely to suffer the natural consequences of idleness and sloth, they began to cry out against the existing order. First, the grant of full pay for five years to the Revolutionary officers was the object of attack; then the weight of public taxes, the scarcity of money, and the cruelty of creditors who were calling for their dues. Thus paper money was the panacea for all their ills. "Don't be influenced by anybody's talking and nonsense," said one patriotic debtor, addressing his fellow citizens in Connecticut. "Choose for yourself. Choose then without favor or affection men of simplicity, not men of shrewdness and learning; choose men that are somewhat in debt themselves that they may not be too strenuous in having laws made or executed for collection of debts, nothing puts a poor, honest man so much out of ready money as being sued, and the sheriff is after him. Choose such men as will make a bank of paper money, big enough to pay all our debts, which will sink itself (that will be so much clear gain to the state)." When a great body of men are preaching the righteousness of the confiscation of property, the stability of society is threatened, even though the method of confiscation is simply the depreciation of the currency for the benefit of the discontented poor.

Some of the states, in spite of the popular excitement over supposed financial ills, refused to go back to paper. Connecticut had issued paper at the outbreak of the war, but was now well out of the trouble and steadfastly refused to burn her fingers anew. Massachusetts was feeling sorely the derangement of her trade, and within her borders were thousands of surly malcontents who grumbled without ceasing and threatened unsparingly; but she, too, was not allured into seeking peace and prosperity by the practical confiscation of credits. New Hampshire, Virginia, Delaware, and Maryland likewise resisted, though in each was a powerful party eagerly working for paper.

The cheap-money faction in Virginia was strong and persistent, but fortunately, the state contained a body of capable men who were not afraid to enter the conflict and to call things by their right names. One of the noteworthy points of Virginia politics was the fact that the best men had from the beginning been leaders, had taken part in political controversy, and were not accustomed weakly to yield obedience to the shouts of an uneasy mob. When in 1775 men like Thomas Hutchinson were driven from Massachusetts and the other colonies, the sober men of property in Virginia were the leaders of the populace.

In 1786 the head of the conservatives in the Virginia legislature was Madison. He was at his best in discussing a subject like this, which did not require great knowledge of finance or of practical business, but did need a clear mind, a sound conscience, a patriotic spirit, and an ability to see the relations between legislation and morality. At no time in his career, perhaps, did Madison do more valiant or more valuable service for his country than in these trying days of the Confederation when there were so many social and political perils on every hand. He was able, industrious, and full of confidence, one of that company of young men to whom the upheaval of the Revolution had given opportunity, and who did so much for establishing the Union and setting her feet on the way to prosperity. His delicate perceptions, his scholarly tastes, his historical and legal knowledge, his simple appreciation of right, and his sense of justice, were now devoted to the interests of his country. He did not hesitate to declare that the issuing of paper money was pernicious, that it sowed dissensions among the states, destroyed confidence between individuals, discouraged commerce, enriched sharpers, vitiated morals, reversed the end of government, which is to reward the best and punish the worst, and that if Virginia followed the example of other states in adopting paper, she would help to disgrace republican government in the eyes of mankind. Virginia, to her honor, announced by her house of delegates that an emission of paper money would be "unjust, impolitic, destructive of public and private confidence, and of that virtue which is the basis of Republican Government."

In a plan allowing the taxes of the year to be paid in tobacco, or, more properly in "inspectors receipts or notes for good merchantable crop tobacco," Madison reluctantly acquiesced, for fear that "some greater evil under the name of relief to the people would be substituted." His yielding was, perhaps, a characteristic piece of weakness, but it should be noticed that the plan of having government warehouses was one of long-standing, that tobacco receipts or "promissory notes" had not uncommonly circulated as money within a limited area in the colony, and that, in fact, this great, fragrant crop had in great measure played the role of gold and silver in the financial history of the colony. The plan of issuing receipts that in fact constituted money was not so very different from the system in force in the latter part of the nineteenth century, whereby "silver certificates" were given out as receipts for a deposit of bullion.

Even in New Hampshire, where the sound-money party finally won a decisive victory, and where there was on the whole a peaceful and law-abiding spirit, there were days of distress and anxiety. The state was heavily in debt, was almost hopelessly behind in its payments to the federal treasury, and was not entirely recovered from the past demoralization of its currency. The air was filled with complaints of the discontented, with grumblings over taxes, and with denunciation of courts and lawyers. "Your Supplicants have great cause to Mourn," declared one petitioning town, "when by Reading and Information they are Convinced of the happiness, those People enjoy . . . Whose Legislative Bodies have emitted a Paper Currency." But when the people considered ''the immense Treasures" expended in the war, "the hosts of their beloved fellow Citizens" that had fallen, "the rivers of human blood with which the earth" was "wantonly crimsoned," and when they reflected that though the "din of war" was no more heard, they could not find the " golden prize — the dear earned promised happy day," then they were disconsolate indeed. Instead of the "blessings of peace," though they sought them "diligently with tears," they found misery; they were in a "labyrinth of difficulty and distress, like Issachar of old crouching under the weight of complicated burdens."

In September of 1786 an armed mob some hundreds strong, demanding paper money, asking for distribution of property, and clamoring against the government, surrounded the meeting house in Exeter, where the legislature was in session, and threatened to hold the lawmakers prisoners till their demands were complied with. Fortunately, the citizens of Exeter and the neighborhood were not in a mood to sympathize with rioting. The mob, first frightened by stratagem into retreat, was the next day dispersed by a band of citizens and militia. Thus the state was saved from disgrace if not from humiliation. Even before the insurrection, the legislature had determined to submit a paper-money measure to the towns of the state for their approval. In spite of the clamor of those who pointed to the "Elysian fields" in other states as "contrasted with the bondage" of New Hampshire, good sense prevailed; the measure was emphatically rejected by the people.

The conservative party, therefore, in the end, was safely victorious, but the mob that disturbed the peace of placid little Exeter was but illustrative of the dangers of the time. There was inflammable material in every state. The hoarse laments of the unhappy, who wished for the promised days of plenty and complained that gold and silver had "taken wings and flown to the other side of the Atlantic," who demanded that ease and prosperity be brought to each man's door by legislative enactment, were heard not alone in the grumbling town meetings of New Hampshire.

Under the sway of the paper-money party, seven states entered on the difficult task of legislating their people into financial blessedness by the simple means of making money, a task which many seemed to believe was the most useful employment of popular government. Of all the states, Rhode Island, with a talent for the dramatic, adopted the most radical measures. The condition of the state was doubtless distressing, for nowhere else had the war wrought such havoc. Newport had been a flourishing seaport before the Revolution: hundreds of vessels each year sailed thence to Europe or to the West Indies, or carried cargoes of rum to the slave coast, to bring back across the Atlantic the black ivory of Africa. Many scores of little trading ships sailed from Narragansett Bay to traffic along the coast. There were then in Newport oil and candle factories, ropewalks, sugar refineries, and as many as twenty-two distilleries to produce the New England rum that formed the great staple of trade. At the close of the war, the town was almost in ruins and its commerce shattered. Trade was beginning to revive in a measure, and Providence was gaining something of what Newport had lost; but the state had great burdens, much augmented by a spirit of independence, fault-finding, and absurd self-assurance.

Rhode Island had been founded as a home of the "otherwise minded," and for some time it had been playing that role with conspicuous success in both domestic and continental politics. It had already experimented much with paper money, but there were many who had not lost faith in what Jay called "the doctrine of the political transubstantiation of paper into gold and silver." The merchants and tradesmen of the larger towns opposed the issuing of more paper, but the country people as strongly favored it. At the polls the countrymen were successful, and the legislature immediately passed a bill for the emission of bills of credit which were to be issued to the freeholders of the state, on the security of landed property of twice the value of the loan. The scrip was made legal tender in payment of debts. The inevitable difficulties, of course, ensued, for the creditors, reversing the time-worn practice, sought to escape their debtors for fear of being paid in worthless money. To make escape impossible, a law was passed declaring that a debtor might pay into court a sum which he asserted he owed to a creditor and that after due notice to the creditor, the debt should be considered discharged. But this was not enough. The paper depreciated, and the legislature, not to be baffled, passed a bill making it an offense punishable by a fine to refuse to take the scrip.

The condition of the state during these days was deplorable indeed. The merchants shut their shops and joined the crowd in the bar rooms; men lounged in the streets or wandered aimlessly about with no hope of employment. A French traveler who passed through Newport about this time gives a dismal picture of the place: idle men standing with folded arms at the comers of the streets; houses falling to ruins; miserable shops offering for sale nothing but a few coarse stuffs or baskets of gnarly apples; grass growing in the streets; windows stuffed with rags; everything announcing misery, the triumph of paper money, and the influence of bad government. The merchants had closed their stores rather than take payment in paper; farmers from neighboring states did not care to bring their produce and receive nothing but Rhode Island scrip. Some of the countrymen sought to starve the tradesmen into a proper appreciation of the simple laws of finance by refusing to bring their produce to market.

To help enforce the law requiring acceptance of paper in payment, the legislature now went one step further and provided for a summary trial of an offender before a court composed of at least three judges. No jury was to be summoned, but the conviction was to be determined by the majority of the judges. There now occurred a very interesting incident. One John Weeden, a butcher of Newport, refused to accept John Trevett's paper money in payment for meat. In any well-regulated community of reasonable sobriety and sense, a butcher is not expected to sell his meat unless he wishes to, but in Rhode Island, in 1786 such a refusal was a penal offense, and John Weeden, at the instance of Trevett, was haled before the court and charged with breach of the law. He was ably defended by learned counsel, one of whom was James M. Varnum, a lawyer of talent, and for some time a member of Congress.

In a forceful argument to the court, Varnum laid down principles of constitutional law of great significance, which are now recognized as fundamental and all-important in American jurisprudence. "The legislative," he declared, "have the uncontrollable power of making laws not repugnant to the constitution. The judiciary has the sole power of judging those laws, and are bound to execute them; but cannot admit any act of the legislative as law, which is against the constitution." The legislature derives all its authority from the constitution, but must not violate the constitution, as was done by an act depriving citizens of the right to trial by jury. "This court," he said, "is under the solemn obligations to execute the laws of the land, and therefore cannot, will not consider this act as a law of the land." Inasmuch as Rhode Island was still working under its old colonial charter, and had not a new constitution plainly established by the will of the people, Vamum*s contention was peculiarly bold. But the court sustained the argument, declaring that the "information was not cognizable before them." The judgment of the court plainly rejected the statute as void because contrary to the constitutional authority of the legislature.

The lawmakers, outraged by the conduct of the court, summoned the judges to appear before them. At the hearing, the judges ably defended their position, contended manfully for the independence of the judiciary, and asserted the unconstitutionality of the statute. After hearing the defense, the assembly voted that it was not satisfied with the reasons given by the judges in support of their judgment; but the judges were finally allowed to leave the presence of the assembly without further reproof and without impeachment. The court had given to the public a lesson regarding sense, liberty, and the function of the judiciary in a free commonwealth. Though the decision of the court helped to restore confidence and give hope, Rhode Island for some time after this was the prey of prejudice, jealousy, and ignorance. At the next election, only one of the judges of the superior court was re-elected.