Currency in Colonial America

In modern day society, currency is an imperative part of our everyday living. From purchasing groceries to paying bills, it is integrated into practically every aspect of our culture. It is hard to imagine life without currency as a means of competitive exchange. However, in Colonial America, there were several different types of money used in numerous ways. One means of currency was not dominant over any other until well after the American Revolutionary War. The question arises, how did colonists handle fiscal transactions without a bank system in place? They did so in 3 different forms: Native American wampum, trading goods, and early forms of paper money such as “tobacco notes”. A fully functioning society is dependent upon a strong and opportunistic economy. Currency in Colonial America plays an integral part in forming the structure of society as we know it today.

Currency is defined as circulation as a medium of exchange, a common article for bartering, or paper money in circulation. Dating back to as early as 950 B.C., gift exchange was a glorified practice by the wealthy social class. Native Americans adopted a form of this barter system, which was modified by colonists into one of the earliest forms of banking in America. The most popular form of currency among Native Americans was small beads made from clam shells, called wampum. The word "wampum" comes from the Narragansett word for white shell beads. It was widely used for an informal money system, storytelling, a memory aid, and record keeping. Other uses included marriage ceremonies and in some cases, for religious purposes.

Wampum’s use of money undoubtedly came about as an extension of its desirability for ornamentation. Beads of it were strung together in short lengths of about 18 inches or much longer ones of about 6 feet. Colonists adopted this system from the Native Americans and began accepting wampum as currency. In 1637 the colonists declared it legal tender for smaller transactions: four white beads or two blue beads equaled an English penny. Colonists increased its production immensely causing inflation. In turn, wampum’s fiscal value plummeted. In 1661, counterfeit wampum had become so rampant that it was hardly ever used again.

Another means of exchange among colonists in early America was trading goods and services. This practice became prevalent due to a lack of a consistent form of currency exchange. Early forms of fiscal tender included iron nails, animal skins, wheat, corn, indigo, coal, or cattle. Without a set standard in place, colonists exchanged what was readily and easily available to them. Many exchanged portions of their harvests from personal cash crops to provide means to acquire the goods they desired. Merchants thrived in these times, as they had the tools and skills necessary to produce what was in high demand from the colonists in their area. The problem with this format of exchange was that it creates a double standard. Trading on a barter system is very subjective. Without providing a good or service that is in high demand, it makes trading with others extremely difficult.