A Modest Enquiry into
the Nature and Necessity
of Paper Currency
Benjamin Franklin
[1729]
There is no Science, the Study of which is more useful and
commendable than the Knowledge of the true In terest of one's Country;
and perhaps there is no Kind of Learning more abstruse and intricate,
more difficult to acquire in any Degree of Perfection than This, and
there fore none more generally neglected. Hence it is, that we every
Day find Men in Conversation contending warmly on some Point in
Politicks, which, altho' it may nearly concern them both, neither of
them understand any more than they do each other.
Thus much by way of Apology for this present Enquiry into the
Nature and Necessity o/ a Paper Currency. And if any Thing I shall
say, may be a Means of fixing a Subject that is now the chief Concern
of my Countrymen, in a clearer Light, I shall have the Satisfaction of
thinking my Time and Pains well employed.
To proceed, then,
There is a certain proportionate Quantity of Money requisite to carry
on the Trade of a Country freely and currently; More than which would
be of no Advantage in Trade, and Less, if much less, exceedingly
detrimental to it.
This leads us to the following general Considerations.
First, A great Want of Money in any Trading Country, occasions
Interest to be at a very high Rate. And here it may be observed, that
it is impossible by any Laws to restrain Men from giving and receiving
exhorbitant In terest, where Money is suitably scarce: For he that
wants Money will find out Ways to give 10 per cent when he cannot have
it for less, altho' the Law forbids to take more than 6 per cent. Now
the Interest of Money being high is prejudicial to a Country several
Ways: It makes Land bear a low Price, because few Men will lay out
their Money in Land, when they can make a much greater Profit by
lending it out upon Interest: And much less will Men be inclined to
venture their Money at Sea, when they can, without Risque or Hazard,
have a great and certain Profit by keeping it at home; thus Trade is
discouraged. And if in two Neighbouring Countries the Traders of one,
by Reason of a greater Plenty of Money, can borrow it to trade with at
a lower Rate than the Traders of the other, they will infallibly have
the Advantage, and get the great est Part of that Trade into their own
Hands; For he that trades with Money he hath borrowed at 8 or io per
cent cannot hold Market with him that borrows his Money at 6 or 4. On
the contrary, A plentiful Currency will occasion Interest to be low:
And this will be an Inducement to many to lay out their Money in
Lands, rather than put it out to Use, by which means Land will begin
to rise in Value and bear a better Price: And at the same Time it will
tend to enliven Trade exceedingly, because People will find more
Profit in employing their Money that Way than in Usury; and many that
understand Business very well, but have not a Stock sufficient of
their own, will be encouraged to borrow Money; to trade with, when
they can have it at a moderate Interest.
Secondly, Want of Money in a Country reduces the Price of that Part
of its Produce which is used in Trade: Because Trade being discouraged
by it as above, there is a much less Demand for that Produce. And this
is another Reason why Land in such a Case will be low, especially
where the Staple Commodity of the Country is the immediate Produce of
the Land, because that Produce being low, fewer People find an
Advantage in Husbandry, or the Improvement of Land. On the contrary, A
Plentiful Currency will occasion the Trading Produce to bear a good
Price. . .
As we have already experienced how much the Increase of our Currency
by what Paper Money has been made, has encouraged our Trade;
particularly to instance only in one Article, Shi~Building; it may not
be amiss to observe under this Head, what a great Advantage it musl he
to us as a Trading Country, that has Workmen and all the Materials
proper for that Business within itself, to have Ship~Building as much
as possible advanced: For every Ship that is built here for the
English Merchants, gains the Province her clear Value in Gold and
Silver, which must otherwise have been sent Home for Returns in her
Stead; and likewise, every Ship built in and belong ing to the
Province, not only saves the Province her first Cost, but all the
Freight, Wages and Provisions she ever makes or requires as long as
she lasts. . . . Now as Trade in general will decline where there is
not a plentiful Currency, so Ship~Bwlding must certainly of
Consequence decline where Trade is declining.
Thirdly, Want of Money in a Country discourages Lab0uring and
Handicrafts Men (which are the chief Strength and Support of a People)
from coming to settle in it, and induces many that were settled to
leave the Country, and seek Entertainment and Employment in other
Places, where they can be better paid. For what can be m9re
disheartning to an industrious labouring Man, than this, that after he
hath earned his Bread with the Sweat of his Brows, he must spend as
much Time, and have near as much Fatigue in getting it, as he had to
earn it. And nothing makes more bad Paymasters than a general Scarcity
of Money. And here again is a Third Reason for Land's bearing a low
Price in such a Country, because Land always increases in Value in
Proportion with the Increase of the People settling on it' there being
so many more Buyers; and its Value will infallibly be diminished, if
the Number of its Inhabitants diminish. On the contrary, A Plentiful
Currency will encourage great Numbers of Labouring and Handicrafts Men
to come and Settle in the Country, by the same Reason that a Want of
it will discourage and `drive them out. Now the more In habitants, the
greater Demand for Land (as is said above) upon which it must
necssarily rise in Value, and bear a better Price. . . . Now the Value
of HouseRent rising, and Interest becoming low, many that in a
Scarcity of Money practiced Usury, will probably be more inclined to
Building; which will likewise sensibly enliven Business in any Place;
it being an Advantage not only to Brickmakers, Bricklayers, Masons,
Carpenters, Joiners, Glaziers, and several other Trades immediately
employed by Building, but likewise to Farmers, Brewers, Bakers,
Taylors, Shoemakers, Shopkeepers, and in short to every one that they
lay their Money out with.
Fourthly, Want of Money in such a Country as ours, occasions a
greater Consumption of English and European Goods, in Proportion to
the Number of the People, than there would otherwise be. Because
Merchants and Tradeers by whom abundance of Artificers and labouring
Men are employed, finding their other Affairs require what Money they
can get into their hands, oblige those who work for them to take one
half, or perhaps two thirds Goods in Pay. By this Means a greater
Quantity of Goods are disposed of, and to a greater Value. . . .
As A plentiful Currency will occasion a less Consumption of European
Goods, in Proportion to the Number of the People, so it will be a
means of making the Balance of our Trade more equal than it now is, if
it does not give it in our Favour because our own Produce will be
encouraged at the same Time. And it is to be observed, that tho' less
Foreign Commodities are consumed in Proportion to the Number of
People, yet this will be no Disadvantage to the Merchant, because the
Number of People increasing, will occasion an increasing Demand of
more Foreign Goods in the Whole.
Thus we have seen some of the many heavy Disadvantages a Country
(especially such a Country as ours) must labour under, when it has not
a sufficient Stock of running Cash to manage its Trade currently. And
we have likewise seen some of the Advantages which accrue from having
Money sufficient, or a Plentiful Currency.
The foregoing Paragraphs being well considered, we shall naturally be
led to draw the following Condusions with Regard to what Persons will
probably be for or against Emitting a large Additional Sum of Paper
Bills in this Province.
- Since Men will always be powerfully influenced in their
Opinions and Actions by what appears to be their particular
Interest: Therefore all those, who wanting Courage to venture in
Trade, now practise Lending Money on Security for exhorbitant
Interest, which in a Scarcity of Money will be done
notwithstanding the Law, I say all such will probably be against a
large Addition to our present Stock of PaperMoney; because a
plentiful Currency will lower Interest, and make it common to lend
on less Security.
- All those who are Possessors of large Sums of Money, and are
disposed to purchase Land, which is attended with a great and sure
Advantage in a growing Country as this is; I say, the Interest of
all such Men will encline them to oppose a large Addition to our
Money. Because their Wealth is now continually increasing by the
large Interest they receive, which will enable them (if they can
keep Land from rising) to purchase More some time hence than they
can at present; and in the mean time all Trade being discouraged,
not only those who borrow of them, but the Common People in
general will be impoverished, and consequently obliged to sell
More Land for less Money than they will do at present. And yet,
after such Men are possessed of as much Land as they can purchase,
it will then be their Interest to have Money made Plentiful,
because that will immediately make Land rise in Value in their
Hands. Now it ought not to be wondered at, if People from the
Knowledge of a Man's Interest do sometimes make a true Guess at
his Designs; for, Interest, they say, will not Lie.
- Lawyers, and others concerned in Court Business, will probably
many of them be against a plentiful Currency; because People in
that Case will have less Occasion to run in Debt, and consequently
less Occasion to go to Law and Sue one another for their Debts.
Tho' I know some even among these Gentlemen, that regard the
Publick Good before their own apparent private Interest.
- All those who are any way Dependants on such Persons as are
above mentioned, whether as holding Offices, as Tenants, or as
Debtors, must at least appear to be against a large Addition;
because if they do not, they must sensibly feel their present
Interest hurt. And besides these, there are, doubtless, many
wellmeaning Gentlemen and Others, who, without any immediate
private Interest of their own in View, are against making such an
Addition, thro' an Opinion they may have of the Honesty and sound
Judgment of some of their Friends that oppose it (perhaps for the
Ends aforesaid), without having given it any thorough
Consideration themselves. And thus it is no Wonder if there is a
powerful Party on that Side.
On the other Hand, Those who are Lovers of Trade, and delight to see
Manufactures encouraged, will be for having a large Addition to our
Currency: For they very well know, that People will have little Heart
to advance Money in Trade, when what they can get is scarce sufficient
to purchase Necessaries, and supply their Families with Provision.
Much less will they lay it out in advancing new Manufactures; nor is
it possible new Manufactures Should turn to any Account, where there
is not Money to pay the Workmen, who are discouraged by being paid in
Goods, because it is a great Disadvantage to them. . . .
And since a Plentiful Currency will be so great a Cause of advancing
this Province in Trade and Riches, and increasing the Number of its
People; which, tho' it will not sensibly lessen the Inhabitants of
Great Britain, will occasion a much greater Vent and Demand for their
Commodities here; and allowing that the Crown is the more powerful for
its Subjects increasing in Wealth and Number, I cannot think it the
Interest of England to oppose' us in making as great a Su1n of Paper
Money here, as we, who are the best Judges of our own Necessities,
find convenient. And if I were not sensible that the Gentlemen of
Trade in England, to whom we have already parted with our Silver and
Gold, are misinformed of our Circumstances, and therefore endeavour to
have our Currency stinted to what it now is, I should think the
Government at Home had some Reasons for discouraging and impoverishing
this Province, which we are not acquainted with. . . .
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