Paper Money, or Jesus Christ

"In what was possibly the most audacious attempt to use the Bible to justify relief legislation, an essay appearing in Massachusetts in September 1786 compared paper money to Jesus Christ.  The author permitted paper currency to speak in its own defense, reminding Americans that it had sacrificed its life for them. Even as its own value melted away, the currency recalled, it had funded the war that secured American independence. Paper money then prophesied that, like Jesus Christ, it would soon return. 'I died for their deliverance from foreign foes,' it declared, 'and will rise again to deliver them from their domestick ones." --Woody Holton in UNRULY AMERICANS AND THE ORIGINS OF THE CONSTITUTION

UNRULY AMERICANS
AND THE ORIGINS OF
THE CONSTITUTION
by Woody Holton

A little context: following the end of the Revolutionary War in the 1780s, Americans were forced to pay high taxes so that Congress and the states could pay interest to government bondholders. These bonds were issued by the federal and state governments during the war when public funds were running short. For example, bonds were often issued as payment to Continental Army soldiers. Because of the financial hardship experienced by many Americans during the recession of the 1780s, many of the bonds found their way into the hands of wealthy investors. Unfortunately, many state taxes had to be paid in specie (gold or silver), which was scarce.

There was also a shortage of paper money. Many Americans advocated for the printing of paper money by state assemblies so that taxes would be easier to pay. But legislators were skeptical of this solution. The problem was that paper money had a poor recent history of depreciating in value very quickly. The Continental Congress had issued so much paper money during the war that by 1780, it was almost worthless. It must be conceded that, even though Congress was almost broke by the end of the war, issuing paper money played a major role in enabling them to pay for it. In a way, Congress issuing paper money (i.e. Continentals) was crucial to winning the war.

Paper money's poor history of value stability made wealthy bondholders skeptical of taxes being paid with it--they didn't want worthless paper money for their bond interest income--they wanted stable-valued gold or silver. But paper money would have made it much easier for Americans to pay the high taxes. Property, especially land, was extremely illiquid. If you were a farmer who had to pay a tax of 10% of your property value, but were not able to pull together this sum by selling livestock, produce, or other assets, then you might have to sell your land (often at a fraction of its real value because no one else had money either) just to pay the tax. Paper money made exchanges of goods, such as livestock or produce, much easier. Therefore, raising a tax sum was more easily done with paper money in circulation. Holton describes how farmers and other "ordinary" Americans pressed their state assemblies to issue paper money. Thus, in reading Holton's book, you come to the above bizarre comparison of paper money to Jesus Christ!