"'Like the Fish in the Sea, the Greater Will Devour the Less': Money, Banking, and the Fear of Monopolies in Early America"

Early America has long served as a textbook example of how the overissue of paper money leads to depreciation and inflation. Seeking to correct the misconception that money’s value is a simple matter of quantity, economic historian Bruce Smith articulated a “fiscal theory of the price level,” or the notion that the colonial currencies were “backed by future tax revenues.” Today, the expert on this topic is economist Farley Grubb, who likens early American “bills of credit” to zero-coupon bonds, whose market value derived from their future expected value in cancelling a tax obligation. Currency depreciation was a political, not an economic phenomenon.
This paper uses this economics literature as a base for reinterpreting the struggles over currency and banking that roiled South Carolina and Massachusetts politics in the 1730s, when conflicts over money and banking became part of a larger debate over monopoly power and the concentration of wealth at a time of economic transformation. By focusing primarily on the relationship between money and prices, economic historians have overlooked the connections between money, the labor market, and commodity production that constituted colonial political economy. Yet for some contemporaries, there was a direct correlation between monetary mayhem and insufficient labor demand in Massachusetts and between an inadequate circulating medium and violent price fluctuations in South Carolina. In the latter, the money question was inseparable from disagreements over the duty on imported slaves and the employment of enslaved people in the skilled trades. In both places, commentators touted paper currencies and land banks as means to stimulate labor demand, stabilize output and prices, and counter the increasing concentration of wealth. The paper concludes with some tentative answers to a provocative question: what did the Massachusetts Land Bank Controversy of 1739-1741 and the South Carolina Stono Rebellion of 1739 have in common?