Today in History—February 3: When Rebellion Was the Mother of Invention

On this day in 1690 (or possibly 1691, depending on which historical records you trust), the Massachusetts Bay Colony printed £40,000 in paper money—something no government in the Western world had ever done.

This wasn’t the colony’s first flirtation with fiat: In December (of 1689 or 1690) Massachusetts authorized a cautious test run, printing £7,000. February’s much larger issue marked the first time that paper money entered wide circulation in the West, and it opened the door to a bold monetary experiment.

The backstory is classic colonial Massachusetts: inventive and deeply unimpressed with royal rules.

The English crown forbade its colonies from minting money. Coinage was a royal prerogative—money was literally stamped with the king’s authority. Massachusetts (always the problem child) opened a mint anyway, in 1652. Bribes, gifts, pleading, and polite disobedience kept it running for a few decades. 

Then the crown cracked down. In 1684 the mint was closed by royal order, and Massachusetts’s charter was revoked. The colony’s habit of acting like a semi-sovereign state had forced the crown’s hand.

Without a charter, colonists technically no longer owned their land. All property reverted to the king. They were living on royal soil, at royal pleasure, and the king was clear that Massachusetts would not be minting more coins.

This became a problem when England went to war with France. (Again/still.)

Massachusetts raised soldiers to help the British fight the French in Canada, with the expectation that the campaign would pay for itself.

It didn’t. There were no spoils, and the unpaid army edged toward mutiny. The crown promised to reimburse the colony eventually, but eventually did not solve the immediate problem.

With the mint closed and coins scarce, Massachusetts improvised. The colony issued paper notes—basically IOUs—redeemable for coins later. Each note was worth two shillings sixpence, but paper is easy to alter, and some colonists soon invented twenty-shilling notes.

There was a bigger problem. Paper has no intrinsic value. Unlike coins, paper money is worth only what people believe it’s worth. And belief is fragile.

Depreciation started immediately. By May the government capped the print run. By October £10,000 in notes had been collected as tax payments—and destroyed. Within a year, the notes had lost almost 40 percent of their value.

Despite all that, the idea caught on, and other colonies started printing money. By the time the American Revolution rolled around, the habit was ingrained. It came with consequences: George Washington’s Continental Army nearly starved at Valley Forge because of paper money’s depreciation.

But that’s a story for a different day.