Currency Act facts for kids

The Currency Act was a series of laws passed by the Parliament of Great Britain. These laws were about the paper money used in the American colonies. The main goal was to protect British business people and lenders. They didn't want to be paid back with colonial money that had lost its value.

These laws caused a lot of disagreement between the colonies and Great Britain. Many colonists saw them as unfair. They were even mentioned as a reason for the American Revolution. However, many modern experts who study history and money don't think these debts were the main cause of the Revolution.

Money Problems in the Colonies

From the very beginning, the American colonies struggled to find a good way to pay for goods and services. They spent most of their gold and silver on imports from Britain. This meant they didn't have much real money left.

Colonists tried different types of money:

• Commodity money: This meant using common goods, like tobacco in Virginia, as money. But the quality of these goods was often different. The good quality items were usually sent to Britain, leaving poorer quality ones for local use.
• Specie: This was gold or silver coins. There wasn't enough of this kind of money for everyday purchases.
• Paper money: Colonies started printing paper money, like bills of exchange. This money was often based on the value of land.

In 1690, Massachusetts was the first colony to print paper money. They did this to help pay for King William's War. Other colonies soon followed. By 1715, ten of the thirteen colonies were printing their own paper money.

A problem with this paper money was that it often lost value quickly. This happened because colonies printed too much of it. They printed more than what was taken out of circulation through taxes. For example, by 1740, paper money from Rhode Island was worth only four percent of its original value. This caused hyperinflation, meaning prices went up very fast. British merchants were unhappy because they were forced to accept this low-value money for debts. This led to the first Currency Act in 1751.

The Currency Act of 1751

The first Currency Act was passed in 1751. It mainly affected the New England colonies. These colonies had printed a lot of paper money, called "bills of credit," to pay for military costs during the French and Indian Wars.

Because too much paper money was printed, its value went down compared to the British pound sterling. This inflation hurt British merchants. They had to accept this less valuable money from colonists who owed them money.

The 1751 Act put limits on how much new paper money could be printed. It said that existing paper money could be used to pay public debts (like taxes). But it could not be used to pay private debts (like money owed to merchants).

The Currency Act of 1764

The Currency Act of 1764 took the rules from the 1751 Act and applied them to all British colonies in North America. This new law did not stop colonies from printing paper money. However, it did stop them from making future paper money "legal tender" for public or private debts. This meant people were not required to accept it as payment.

This new rule made it very hard for the colonies financially. They didn't have much gold or silver. Benjamin Franklin, who represented the colonies in London, tried for years to get this Act changed.

The government of New York said the Currency Act made it impossible to pay for British troops, as required by the Quartering Acts. So, in 1770, Parliament allowed New York to print some paper money for public debts, but not private ones. In 1773, Parliament gave this same permission to other colonies. This change allowed colonies to use paper money as legal tender for public debts.

What Happened Next

The Currency Acts caused a lot of tension between the colonies and Great Britain. They were a factor that led to the American Revolution. Almost all colonies, except Delaware, saw these Acts as a "major grievance."

When the First Continental Congress met in 1774, they wrote a Declaration of Rights. This document listed the colonists' complaints about certain British laws. They asked Parliament to cancel the Currency Act of 1764, calling it one of the laws that hurt "American rights."

However, some historians believe that by 1774, the debate over currency was not as big of a deal, especially after the 1773 changes to the Act. The most important effect was psychological. It made many colonists believe that Parliament didn't understand or care about their problems. Colonial leaders started to think that they, not Parliament, were better suited to make laws for the colonies.