CHAPTER IX.
ATTEMPTS AT ADJUSTMENT OF DEBTS. Currency and Banking in the Province of the Massachusetts-Bay | ||
CHAPTER IX.
ATTEMPTS AT ADJUSTMENT OF DEBTS.
Before resuming the chronological narrative of the currency question, it is important that we should devote a short time to the consideration of the adjustment of debts, a subject which had been full of perplexities from the beginning of the issue of paper money, but which during the inflation under Shirley became practically incapable of any just solution.
We have seen that in 1742, Shirley took great pride in the passage of two laws, in the shaping of both of which he believed that his influence had been paramount. The first of these, the supply bill, has already been considered. The second, the act for ascertaining the value of money, belongs to a class of legislation, which requires for its clear comprehension, that it should be examined independently from the question of emissions. The various struggles that took place in Shirley's time in connection with the interpretation and enforcement of this act, are so confusing in their details, and yet at the same time so important in their bearing upon events, that even if the general subject were not entitled to separate consideration, the narration of the facts associated with this attempt to protect creditors would compel independent investigation.
For nearly thirty years the act for the relief of, and to prevent the oppression of debtors, originally passed in 1712, had by various extensions been maintained as the law of the land. Practically, as has already been said, it made old tenor bills a legal tender. Shirley was thoroughly opposed to the principle embodied in this
So long as Shirley entertained these views it was impossible to secure by legislation any further extension of this act. There were, however, several abortive efforts made, in one direction and another, to secure a settlement of the question underlying the act, before a final agreement was reached between the house, the council, and the governor. Two days after Shirley delivered his inaugural address, and probably before his views were thoroughly appreciated, a committee was appointed by the assembly to consider what should be done in view of the fact that the act for the relief of debtors was about to expire, and in the same month an act for ascertaining
We are indebted to this act for a lengthy message of disapproval from Shirley, in which, after mentioning his objection to the bills proposed to be issued, both on account of their form and that they were made a legal tender for debts, he argued that the payment of taxes in commodities laid the province open to prejudicial combinations on the part of those who could control their prices, and then went on to review the situation in detail, and point out the progress of the depreciation of the bills of public credit. He disapproved of the scale proposed for the adjustment of debts, and stated that between 1712 and 1730, exchange had risen from 50 per cent. premium to 250 per cent., and now it was 450 per cent. He also disapproved of the combination of the equitable part of the bill with a
The act for ascertaining the value of money, etc., provided that all coined silver of sterling alloy should pass at the rate of 6s. 8d. per ounce, Troy weight. All private trade and dealings where no other lawful money or thing was expressly contracted for, were to be considered as intended to be in and for the money aforesaid. That is to say, silver coin at 6s. 8d. per ounce was to be the basis of private contracts unless something else was specified.
The effect of the foregoing was, however, modified by subsequent sections which provided that the province bills emitted for the supply of the treasury that year should be taken on the basis of the above rate of silver. For five years from the last day of March, 1742, all debts where no special method of payment was provided, were to be deemed to be upon a silver basis. A debt of six shillings and eight pence could be paid with an ounce
Hutchinson[239] thus describes this act "This was a scheme to establish an ideal measure in all trade and dealings, let the instrument be what it would. The act which passed the court declared that all contracts should be understood payable in silver at 6s. 8d. the ounce, or gold in proportion. Bills of a new form were issued, 20s. of which expressed in the face of the bill three ounces of silver, and they were to be received accordingly in all public and private payments, with this saving, that, if they should depreciate in their value, an addition should be made to all debts as much as the depreciation
Plate 12
[Description: 3d. bill, 1744; 2d. bill, 1744]The act for the relief of debtors had expired October 31, 1741. The section in the new act defining the method in which the new bills might be used in the adjustment
The act for ascertaining the value of money seems to have made the debtor class of the community restless, and their efforts for relief began to crop out in various schemes for legislative interference. In December, 1742, an "act to enable debtors to discharge all specialties and express contracts in writing, with province bills according to equity and good conscience", was put through the preliminary stages, but finally failed of passage.[242] In April, 1743, an "act for the equitable payment of bonds and debts contracted before the last day of October, 1741", was bandied about between the board and the house,[243] it being evident from the record that there was a wide difference of opinion between the two bodies as to the character of legislation required in this direction. On the 19th of April, the bill being then in possession of the council at the stage of engrossment, the house sent up to the board asking that it be sent down to them. On the receipt of the bill, they passed a resolve, in the preamble of which they called attention to
Notwithstanding this fact, Shirley stated that the matter was too important for him to give his approval without making some investigation of the subject. He would announce the result of his examination at the next session. This he did on the 27th of May, immediately after the opening of the General Court at the May
On the 8th of June, a resolution was passed by the assembly and approved by the governor, which seems to have been based upon the facts set forth in the governor's speech, in which it was asserted that from 1712 to 1742, it had been the uninterrupted practice of the courts in chancering penalties upon all bonds and mortgages,
On the 27th of May, 1743, Shirley said to the assembly, "I think the General Court in 1736 gave the creditors an expectation that the outstanding bills of the old tenor should be exchanged at the treasury in 1742 for silver at the rate of one ounce for every twenty shillings in bills." In discussing the question of who was entitled to relief, he drew a distinction between hoarders of bills and ordinary creditors. Again, on the 10th of June, 1743, he adverted to this subject in a general review of the currency question and of the effect of the depreciation upon debtors and creditors. He approved of the action taken in chancering bonds and mortgages, but thought the province should make good the loss to creditors. He called attention to the various clauses in the acts authorizing the emission of bills, under which liability on the part of the province to maintain the bills at certain standards might be implied. The acts of 1736-37-38 he said made twenty shillings old tenor equal to one ounce of silver, but in 1741, the assembly had reduced this value one-quarter.[248] He thought creditors entitled to some protection against such legislation. He admitted that at the very time that some of these
In the quotation from Hutchinson, relative to the operation of the act for ascertaining the value of money, we have seen that he attributed to the committee of councillors, unwillingness to recognize the actual extent of the depreciation when they were called upon to determine the rate, and that there was doubt whether the house of representatives would have been unbiased. The resolution already referred to, passed by the assembly, April 19th, was embodied in an act in June of that year.[250] An examination of this act will forcibly recall this suggestion.
In the preamble, the facts set forth in the house resolution were repeated. It was asserted that the judges of the superior court, in pursuance of the law, had made inquiry as to the depreciation, by a committee appointed for the purpose, that this committee had lodged a certificate in the secretary's office to the effect that seven shillings and two pence of bills of the last form and tenor were equal to one ounce of silver, whereby an addition of six pence was made upon every debt of six shillings and eight pence. No such depreciation, it was
It was, therefore, enacted that debts contracted since March 31st, 1742, or that should be contracted after the date of the act, were to be deemed equal to the value at which the bills passed when the debts were contracted. Depreciation which took place between the time of contract and time of payment was to be allowed by the courts, so that the payment should be equal in value to the debt when contracted.
Perhaps this abstract of the act and its preamble may not seem clear, but the preamble can be interpreted in such a way as to render the law intelligible. It will be observed that the discount of the bills is not denied. The assertion is that it did not take place within the period covered by the certificate. If the statement had been made that the rate of silver March 31, 1742, was 7s. 2d. per ounce in these bills, then it would have been clear that under the clause in the law covering the question of depreciation debtors ought not to pay sixpence additional on each 6s. 8d. of their debts. In effect, the assembly says in this preamble, that there has been no discount, because the bills are available for just as much in the purchase of exchange as they ever were, and they
It will be remembered that the act of emission fixed the value of the bill by saying that 6s., 8d. in the bills were equal to an ounce of silver, and this must have determined the courts in fixing the amount of depreciation, whereas, if what the assembly allege in this preamble is true, then the bills must have fallen to the lower rate at once. For proof that this conjecture is true we may refer to a message of Shirley's to the house on the 30th of May, 1743. He was discussing the values set upon the bills by a committee of the superior court of judicature at the February term in Suffolk county; £137, l0s. in bills was said to have been equal on the 28th of February to £100 sterling, and 7s., 2d. was then equal to an ounce of silver.[251] He added that the bills were of no greater value than this at the time of the passage of the act, notwithstanding the fact that they were rated therein at 6s., 8d. They were, therefore, rated in the act at 7 1/2 per cent, above their current market value. It was the intention, he said, that the depreciation should be estimated from the current value of the bill and not from the rate stated in the act.[252]
Under the act which we are now considering the duty was thrown upon the courts of making the allowance for depreciation. The method of doing this was not
From what has already been said it will be apparent that an agreement between the two houses as to how the depreciation should be determined had not been reached without a struggle. The journals of the two bodies furnish us with still further details of this contest, an examination of which may, perhaps, be worthy of our attention. On the 16th of February, 1743-44, the house resolved that whereas it was near six months since the value of public bills in silver or bills of exchange had been fixed under the provisions of the act for ascertaining the value of money, a committee ought to be appointed to consider the rate at which province bills then commonly passed, in proportion to bills of exchange or silver and lay before the court the evidence which governed their conclusion. Under the law as it then stood, the performance of this duty rested primarily with the assembly. This action of the house was, therefore, a mere announcement of adetermination to perform a duty imposed upon the representatives which, however, was probably dictated by a desire to secure a better rating of the bills than had been accomplished by the methods of estimating the depreciation which had actually been employed. In this action the board concurred on the 17th.[253] On the 21st of February the house instructed the secretary to inform the justices of the superior court that such a committee had been appointed, and on the 25th of February a report was presented which proved to be acceptable to the council, but was rejected by the house. Still another report of a committee appointed to ascertain the value of money was
A committee was appointed December 21, 1744, to inquire into the present value of the bills. They reported that in the bills issued since 1741, an ounce of silver was rated at 7s. 6d. and £100 sterling was equal to £142, 10s. in said bills. This was adopted by the council and accepted by the house.[257]
January 11, 1745-46 the house renewed this contest by sending up a vote that the eldest councillor in each of their counties where any of his Majesty's council inhabit be directed to ascertain the present value of the bills of credit of the province agreeably to the law in this case provided. Apparently nothing came of this for on the 25th of June a committee was appointed to ascertain the value of the bills. On the 28th of the same month the house in consequence of the failure of this committee to report, renewed its vote appointing the eldest councillors to perform that duty. On the 23rd of July they sent up to the council to ascertain if they had acted in the matter and learned that no action had as yet been taken. The next day the board voted that, whereas the six months since the last stating of the value of the bills of credit had expired on the 23rd, and some of the councillors appointed by law to state the value of the bills in case of failure of the General Court to do the same were then absent, it should be the duty of John Osborne, Esq., the eldest councillor then in Boston, to forthwith convene the other eldest councillors of the respective counties at Boston and appoint a day as soon as conveniently might be for their meeting in the said affair, that so a rule might be by them determined for the procedure of the courts in making up their judgments according to law.
There was something in this vote that the house did not like and they sent up a messenger to the council with instructions to state to the board the provisions of the law bearing on the question and to add thereto a statement that the house desired that the eldest councillors then in town should notify the other councillors to convene as soon as might be to perform this duty. The record of this conflict between the two houses ends here, but it is probable that in some manner a rate was fixed for the rule of the courts in making up judgments.
On the 2d of February, 1746-47, a committee was appointed to ascertain the value of the bills and this committee, Feb. 13, fixed the rate the same as the last which had been determined, but a question was raised on the next day as to the validity of the action of the council because some of the committee were then absent. The matter came up again March 26, 1747, and a vote of the council then passed was sent down to the house. In the preamble to this vote the council asserted that at the time of the last establishment of the value of the bills, February 18, all the councillors entitled to act were not present. For this reason the action then taken was perhaps not legal. Moreover they went on to say, the agents of the province at the court of Great Britain were then soliciting the reimbursement of the great expenses to which the province had been put in the reduction of Cape Breton. The result of this application would soon be known and in case it was favorable, it might reasonably be expected that the bills of public credit would greatly advance in value. For these reasons, justices were ordered in making up judgments at any time before August 1st, not to allow for depreciation otherwise than they had been wont in conformity
June 18, it was voted that the judges should proceed in making up judgments on the same basis until the 18th of February next, but on the 27th of June, 1747, Shirley refused his assent to this vote. No further action was taken until August 13th, when a committee was appointed to see what they thought necessary to do under the case after August 18th. On the 15th this committee was ordered to report forthwith and on the 18th their report was received and accepted.
On the 19th the house voted that they had taken the laws for the more equal payments of private debts into consideration. The rates of silver and bills of exchange were governed by the extravagant prices paid for bills of exchange to make remittances. The price of produce bore no proportion to them. If no special agreement had been made the judgment upon a debt should
On the 28th of August, Shirley again interposed and refused his assent to this determination of values. He assigned certain technical reasons, each of which would have been fatal to the legislation if insisted upon, but none of which would in any probability have been mentioned except for the fact that in his judgment the protection afforded to the creditor by existing laws was by this action arbitrarily set aside. He then alluded to the neglect of the committees appointed by law to ascertain the value of the bills, to make a just allowance for their depreciation from time to time during the past four years or thereabouts as it was their duty to have done.
On the 8th of September the subject was again committed and a report was received on the 19th of October which was adopted in the House on the 20th. The governor gave his consent to the scheme on the 27th.
On debts contracted prior to March 31, 1742, 15% was allowed for depreciation.
On debts contracted between that date and March 31, 1744, 12 1/2% was allowed for depreciation.
On debts contracted between that date and March 31, 1746, 7 1/2%, was allowed for depreciation.
On debts contracted between that date and March 31, 1747, 5% was allowed for depreciation.
No allowance to be made for depreciation where more than 6 per cent. interest was charged.
A report was adopted March 3, 1747-48 bearing on this subject, but we have no details. These are to be found, however, in a report dated November, 9, 1748.[258] It did not meet with Shirley's approval, being so unjust in its operations in his opinion, that it would be better to leave the matter in the hands of the courts. It will, however, serve to show the opinion of the assembly as to the depreciation. The allowances were as follows:
On debts contracted before March 31, 1742, 20%.
On debts contracted after March 31, 1742, and before March 31, 1744, 16 1/2%.
On debts contracted after March 31, 1744, and before March 31, 1746, 10%.
On debts contracted after March 31, 1746, and before March 31, 1747, 6 1/2%.
No allowance to be made if more than 6 per cent. interest charged.
A committee was appointed February 24, 1747-48, to determine the value of the public bills, but we have no report of its action.[259]
A review of the rates which had been fixed from time to time by the committees will enable us to judge of the consistency of the Assembly. These will be found in tabular form on the opposite page.
The pressure in behalf of the debtors found expression in January 1744-45, in the passage of an act in addition to the act for ascertaining the value of money and of the bills of public credit of the province. The
Plate 13
[Description: 4d. bill, 1744; 6d. bill, 1744.]
TABLE OF RATES (See page 192.) |
||||
Date. | Province bills since 1741. | Sterling Equiv. | Silver rate | Reference |
1742-3 | £137 10s. | 100 | 7/ 2 | Mass. Arch., vol. 102, no. 287. |
Sept. 2, 1743 | 140 | 100 | 7/ 4 | Mass Arch., vol. 102, no. 307; Suffolk Files 57,651 |
March 2, 1743-4 | 142 10s. | 100 | 7/ 6 | Mass. Arch., vol 102, no. 338; Suffolk Files, 59,742 |
Dec. 27, 1744 | 142 10s. | 100 | 7/ 6 | Mass. Arch., vol. 102, no. 358; House Journal, at date. |
June 28, 1745 | 142 10s. | 100 | 7/ 6 | House Journal, at date. |
July 25, 1745 | 142 10s. | 100 | 7/ 6 | Mass. Arch., vol. 102, no. 359. |
Jan. 9, 1745-6 | 142 10s. | 100 | 7/ 6 | House journal, at date. |
Jan. 24, 1745-6 | 140 10s. (sic.) | 100 | 7/ 6 | Mass. Arch., vol. 102, no. 359. |
Aug. 8, 1746 | 142 10s. | 100 | 7/ 6 | Ditto, no. 360. |
On the other hand, it was asserted that some legislation was necessary to protect creditors from loss caused by the depreciation of bills since March 31, 1742. To cure this defect in the law special provision was made in the second section of the act.
The third section was devoted to the benefit of the debtor class. It was asserted that there was a prevailing apprehension that bills of credit of the new tenor were to be esteemed as lawful money. Consequently, many
If when Shirley assumed the reins of government, creditors needed protection against the depreciation of the currency, they certainly needed it all the more when the rise in silver was stimulated beyond all control under the reckless issues made in behalf of the military ventures of the province after 1744. The sympathies of the assembly were, however, with the debtor class, and in 1747, all efforts on the part of the province to protect creditors against depreciation were withdrawn.
The clause in the act for ascertaining the value of money, in which it was in substance provided that ordinary debts were to be adjudged as equal in amount to the silver which could be purchased with the bills in which the debt was nominally estimated, expired by the terms of the act on the last day of March, 1747. In September, 1747, an act was passed in addition to and
In other words, the act was not only not extended, but limitations were put upon its future operations and the method of estimating the depreciation was altered by the inclusion of provisions and other necessaries of life with silver and exchange as standards.
The enormous changes in the values of the bills of credit produced by their rapid depreciation during the years 1746 and 1747, rendered the equitable adjustment of the relation of debtors and creditors more and more perplexing. An act which was passed for this purpose January 27, 1748-49, was disallowed by Shirley and in his speech to the assembly April 8, 1749, he recommended that the matter be left to the courts of judicature. Again at the close of the session, on the 22nd of April, 1749, the assembly made another attempt to legislate upon the subject. Shirley at that tune. informed them that the bill had come before him too late for him to sign it. On the 24th of June, 1749, the governor referred the assembly to his former speeches and messages on the subject. He said with regard to debts contracted since October 31, 1747, that the price of good private bills of exchange payable in London was at that time at the rate of £1,100 in bills of credit of the old tenor for £100 sterling. He was satisfied that there had been no depreciation of the currency since that date notwithstanding the recent exorbitant rise in
The assembly went forward with the consideration of a bill on this subject and apparently did not pay proper attention to his advice, for on the 29th of June, 1749, he refused his consent to a bill for ascertaining the allowance to be made by courts of judicature in rendering judgments on suits for debts payable in bills of credit. The money for the reimbursement of the expenses of the Cape Breton expedition had by this tune been paid over, and was on its way to the province.
Between 1730 and 1745, the price of silver was influenced more by the circulation in this province of the bills of the neighboring governments, than by the local issues of the province itself. The restraints imposed
On the 9th of February, 1743-44, Shirley communicated to the assembly an estimate of the losses incurred by the community through the circulation of these outside bills and said that up to that time no answer had been received to the proposition for a conference which had been submitted on the 22d of June. He had stated to them on the 9th of September, 1743, that there were according to the estimate of competent persons £400,000 in bills of the other governments in circulation in
March 17, 1743-44, a second attempt was made to prevent by legislation the evil of a currency from outside and uncontrollable sources.[269] It was asserted in the preamble of the act then passed that bills of the neighboring governments were then and had been the principal medium of trade and commerce in the province that some of those governments, more especially that of Rhode Island, had frequently made extravagant emissions of their bills, which by depreciating all bills current had worked great injustice to the inhabitants of the province. The circulation of Rhode Island bills issued since 1742, and of the bills of other governments hereafter to be issued, was prohibited in this province under severe penalties. The act was to continue in force for two years. In September, 1746, its operation was extended for three years longer.[270]
On the 10th of January, 1745-46, a memorial of sundry merchants of Boston was presented to the house, in which the danger from the currency of Rhode Island bills, notwithstanding the law then in force, was fully set forth. The petition of the merchants for relief was refused on the 15th of that month. In June, however, the house took the matter up again and on the 5th, the question being submitted whether a committee should be directed to prepare a bill for the revival of the act to
To a certain extent the law makers themselves of this province were responsible for the circulation within its borders of the bills which it was now sought to eliminate from the currency. These bills had repeatedly been recognized as a part of the circulating medium in the various acts which had been passed against counterfeiting, altering and mutilating public bills. The first of these acts, passed in August, 1704, was limited in its operation to the protection of bills of credit of this province.[271] The penalty for making or uttering was that the culprit should be branded in the right cheek with the letter F and should pay double damages or suffer imprisonment. For altering bills it was the same as that for the offence of forgery,[272] to which was added triple damages to the person upon whom altered bills had been passed. In June, 1711, the same penalty was imposed for counterfeiting or altering the bills of the neighboring governments,[273] and in the preamble of the act it was asserted that this action was
In January 1735-36, signs of the reaction against the bills of the foreign governments appear in a new law against counterfeiting public bills from which the bills of the neighboring governments are excluded. The penalty is death without benefit of the clergy.[276]
There is nothing in the preamble of this act to explain why the bills of the neighboring governments were not included, but there must have been some reason for this action and it would be natural to conclude that it was because the assembly was no longer desirous of protecting this outside currency. In the bill passed in February, 1736-37, to prevent the sub-division of public bills for purposes of making change, bills of the neighboring governments were included with bills of this province in the prohibition.[277] To a certain extent this militates against the conclusion drawn above, but it does not alter the fact that the explanation there suggested is not only plausible but under the circumstances, natural.
The action taken by the assembly in February, 1736-37, in the attempt to protect the bills of neighboring governments from mutilation was the last effort of that body which could be interpreted as in any way favoring the circulation of bills of the neighboring governments, although the subject was before the house June 4, 1743, and a committee was appointed to prepare a bill to prevent the counterfeiting of bills of this and the neighboring governments. Nothing came of this, however, and the next steps were those already referred to, in which the attempt was made absolutely to prohibit the circulation of all the recent issues of the neighboring governments.
Lawful money down to 1737 must have been the piece of eight of 17 dwt. at 6s. Silver in this money was rated at 7s. 3f. an ounce. The new tenor money was said to be equal to silver at 6s. 8d. per oz. It would seem as if this must have furnished a definition for lawful money at this point, but the situation is further complicated at a later date by the piece of eight being rated at 6s. in the same act in which the ounce of silver is declared to be worth 6s. 8d.
This is Shirley's method of stating the fact that the first new tenor bills were receivable one for three of old tenor, the second one for four.
This fact was stated by one of the pamphleteers of the day as follows: "At the time of emitting the middle tenor bills the price of silver in bills of the old tenor was twenty-six shillings and eight pence at least per ounce, notwithstanding which twenty shillings in old tenor bills (which would not purchase more than three-quarters of an ounce of silver) was by that act made equal in all public payments to six shillings and eight pence of the middle tenor bills, which by the same act is valued equal to an ounce of silver." An enquiry into the state of the bills of credit of the province of the Massachusetts Bay, etc., etc., 1743, p. 15.
Mass. Bay House Journal, Dec. 27, 1744. The same rates adopted June 28, 1745, and January 9, 1745-46. See House Journal of these dates.
That is to say, to ascertain the allowance to be made for depreciation on debts contracted during the period covered by the original act for ascertaining the value of money.
It will, perhaps, be remembered that the house had, in August, 1748, insisted on measuring the value of the bills in produce as well as exchange, because exchange had risen more than produce. Shirley now takes the reverse position.
The 25th day of March next succeeding fell in 1747, old style, but the last day was in 1748.
Double costs and damages, and also to be set upon the pillory in some market town or other open place, and then have one of his ears cut off, also imprisonment for one year.
CHAPTER IX.
ATTEMPTS AT ADJUSTMENT OF DEBTS. Currency and Banking in the Province of the Massachusetts-Bay | ||