The Federal Reserve Bank of Philadelphia has released a new publication entitled Benjamin Franklin and the Birth of a Paper Money Economy by Professor Farley Grubb, an economics professor at the University of Delaware and researcher with the National Bureau of Economic Research. The new publication is based on a lecture given at the Reserve Bank by Professor Grubb on March 30, 2006. The lecture, cosponsored by the Reserve Bank and the Library Company of Philadelphia, was one of many events held in Philadelphia to mark the 300th birthday of Benjamin Franklin.
The new publication describes Benjamin Franklin’s involvement in colonial paper money and his role in the creation of a permanent peacetime paper money supply in the new nation. Franklin arrived in Philadelphia in 1723, the year the first paper money was issued by the colonial government of Pennsylvania. Franklin became a keen observer of and commentator on colonial money. He wrote pamphlets, treatises, and letters about paper money. He designed and printed paper money for various colonies, including Pennsylvania and New Jersey. In 1737, Franklin invented the art of nature printing from leaf casts, using a copper plate press, for transferring a sage leaf image onto the back of paper money bills, a technique intended to thwart counterfeiters.
In his writings, Franklin explained that paper money backed by gold and silver, such as those bank notes used throughout Europe, did not have a permanent value. Rather, the value of paper money backed by gold and silver fluctuated as new discoveries of the precious metals were made. Franklin supported using land, which was more stable in value than precious metals, to back paper money. Franklin argued that paper money backed by land would stabilize the quantity of paper money issued and with it stabilize trade in the colonies. In 1765, Franklin proposed to the British government a universal paper currency in the North American colonies to be backed by land values.
During the Revolution, the Continental Congress issued paper money — the Continental dollar. In 1781, Franklin wrote an essay entitled “Of the Paper Money of America,” in which he argued that the depreciation of the Continental dollar operated as a tax paid by everyone as the money depreciated. In 1783 Franklin wrote a letter to Joseph Quincy in which he claimed that he had predicted the massive depreciation of the Continental dollar and had proposed a better paper money system, but that Congress had rejected it.
Copies of the new publication can be ordered in class sets free of charge from the Federal Reserve Bank of Philadelphia. To order copies, visit the Federal Reserve System’s Public Information catalog online at https://philadelphiafed.org/publications/order-form.