Commodity Money: Introduction

When the Puritans first arrived in the colony of Massachusetts Bay in 1630 much commerce was conducted through barter, swaping one item for another. This greatly restricted trade as each of two people had to have equivalent items the other person wanted and with which each was willing to part. The cumbersome nature of such transactions crippled business. In October of 1640 John Winthrop wrote in his journal:

"The scarcity of money made a great change in all commerce. Merchants would sell no wares but for ready money, men could not pay their debts though they had enough [i.e. capital], prices of lands and cattle fell soon to the one half and less..."

One of several examples of this problem is the case of Francis Hudson and James Heydon, operators of the Charlestown ferry. On October 27, 1648 they petitioned the Massachusetts Bay General Court and were awarded the privilege of refusing transportation to anyone who could not pay in advance of departure. This step was necessary because several passengers had nothing with which to pay the ferrymen. Not that the passengers were destitute, but rather they simply did not have any small change available. Similarly, there were several stories of servants and tradesmen who were let go because there was not enough ready money to pay them. Winthrop mentions the dilemma of a man from Rowley who was forced to sell two oxen so he could acquire hard currency to pay his servant the wages he was due. The master then reluctantly dismissed the servant so he would not be forced to sell off more cattle in order to meet the next year's wages.

To alleviate this problem the General Court took several steps. On March 4, 1635 they passed a law that full bore musket balls would be allowed to pass as farthings, but no one was required to accept more than 12 pence worth at a time (as there were four farthings to a penny, this would be 48 balls). On September 27, 1642 the General Court went further by establishing standard prices for specific farm products that could be used as commodity money to pay taxes. A bushel of wheat was valued at four shillings (4s), a bushel of rye or peas was three shillings and four pence (3s4d) while Indian corn was valued at two shillings and six pence (2s6d) a bushel. Similar price lists were established in each colony. In 1690 in Massachusetts a barrel of pork was valued at £3 while a barrel of beef was £1 12s6d, a bushel of wheat was 4s6d, while a bushel of barley or peas went for 4s, a bushel of Indian corn was 3s and a bushel of oats was valued at 1s6d. In New Jersey in 1692 a barrel of beef was valued at £1 10s, winter wheat was 4s a bushel, Indian corn was 2s a bushel, while butter was 6d a pound and tobacco was 3d a pound. For New Hampshire we have three consecutive lists for 1707-1709. In 1707 wheat was 4s6d a bushel rising to 5s in 1708 and 1709. Barley also rose from 2s6d in 1707 to 3s for the following two years, while a bushel of peas remained stable at 4s. Among the local products in the New Hampshire lists was a cord of pine boards, which was valued at 25s in 1707, 27s in 1708 and 30s in 1709.

These products were know as "pay" or "country pay" and were legalized at specific rates so they could be used to pay taxes. Sometimes these items were used for private transactions, usually at a one third discount from the established rates, and were called "pay as money."

One of the major problems with commodity money was quality. Individuals tended to use or sell their best products while their poorest products would be offered as commodity money. Additionally, even good quality commodities would deteriorate if retained too long. This situation caused several arguments concerning the value of the commodities being offered. In order to alleviate this situation in 1654 the plantation of New Haven adopted a law requiring, "...a viewer of corn, that in case of difference may judge whether it will be dressed and merchantable or no..." The concept of an official adjudicator was adopted by the entire colony of Connecticut in 1674 with the commission extended to pork and grains.

Another major problem with commodity money concerned transportation costs. When paying taxes with bushels and barrels of produce the taxpayer was required to bring the commodities to the colony treasury. Massachusetts passed a law expressly allowing individuals to rest cattle on open land when they were being herded to Boston for tax payment. In Connecticut a schedule of transportation allowances was published to reimburse the taxpayer for his services. This situation was somewhat alleviated in 1670 when Connecticut taxes could be paid to the local deputy, who was required to store the items in his barn. However even then a credit was allowed to the taxpayer. According to a Connecticut law of 1702 for every bushel transported from Windsor to Hartford there was a 2d allowance, from Farmington to Hartford the allowance was 3d, and from Stonington to New London there was a 2s allowance for every £1 in commodities and proportional rates for other locals ("and so proportional for longer or shorter carriage").

An important commodity money product in the south was tobacco. As early as 1619 tobacco had been designated as the official currency of Virginia at the rate of 3s per pound for the best grade of tobacco and 1s6d per pound for second quality leaves. Tobacco was used for taxes and all other transactions. In 1634 the Virginia Assembly established a schedule of fees to be paid by the court to the sheriff for specific services enumerated in pounds of tobacco; the sheriff was to paid ten pounds of tobacco when he made an arrest and he was to receive twenty pounds of tobacco if he had to take someone to the pillory. Tobacco was also the major crop in early Maryland and to a lesser extent in New Jersey and the Carolinas. In 1698 Maryland passed a law against deceptive packing by making it illegal to pack inferior leaves in the bottom of a hogshead of tobacco while placing higher quality leaves on the top. A similar law was adopted in Virginia in 1705.

As everyone who came over to the plantations needed to build a house, iron nails quickly became a highly sought after commodity and were often used as change. Nails were so scarce that individuals were often forced to build using wooden pegs in place of nails, needless to say, a time consuming operation! Iron nails were the primary product produced at the Hammersmith iron foundry in Saugus, Massachusetts, which opened in 1629, but there was no similar operation for the Virginia plantation. Nails were so scarce abandon houses were often burnt down just so the nails could be retrieved. In order to stop this wasteful practice Virginia passed a law in 1646 offering to pay an owner the cost of the nails so a vacated house would not be destroyed.

Another well know commodity money was the beaver pelt, which traded in Virginia as well as in the Dutch colony of New Amsterdam (New York) and to a lesser extent in New England. The Dutch originally valued a pelt at eight florin but as pelts became more plentiful the value was lowered to six florin. In 1688, twenty four years after the British had taken control of New York, three beaver pelts were valued at forty shillings. (The Duke of York siezed control of New Amsterdam in 1664, see the Dutch coinage section for details). Among the items enumerated in a price list of July 14, 1703 enumerating goods to be traded with the Indians, one beaver pelt could purchase either: five pecks of Indian corn, ten pounds of pork, six fathoms of tobacco, two small axes, a pint of shot, two pints of powder, six knives, twenty skeins of thread or two yards of cotton. The list also gave the exchange rates of acceptable substitutes in terms of beaver pelts, thus a beaver skin equalled the skin of: two foxes, two woodchucks, four racoons, one bear, one otter or five pounds of feathers, while a moose hide was valued at two beaver pelts. Among the other money substitutes mentioned in documents were beer, wine and liquor or the ability to have a person work off a debt as a day laborer.

Clearly commodity money was an expedient but not a desired means of conducting commerce. Soon more beavers were trapped and more tobacco was planted than was necessary. This in turn depreciated the value of the commodity. Transportation and storage costs as well as spoilage were obvious drawbacks to commodity money. To encourage the use of hard currency the Massachusetts General Court decreed taxpayers using coins or specie rather than "pay" would be given a one-third discount off their tax assessment while Connecticut offered a fifty percent discount if one used hard coin rather than commodities.

Although undesirable, commodity money never disappeared. Commodities were regularly used in smaller rural communities, while major centers reverted to "pay" in difficult times such as depression or war. During the depression of 1727 the scarcity of coins and paper currency forced the Massachusetts General Court to establish a long list of twenty five commodities with their legal value for tax payment; the goods ranged from merchantable beef at £3 per barrel, barley or rye at 6s a bushel, peas clear of bugs at 9d a bushel, whale bone six feet long and upwards at 3s6d per pound, cast iron pots and kettles at 48s per hundred weight to good dry tallow at 8d a pound.

During the Revolutionary War coinage was scarce so many items traded for "pay as money" or outright barter. The most widely used commodity money was Indian corn; dried corn could be kept for months and was versatile in that it could be used either as seed or animal feed for chickens, cows or horses or turned into corn meal. An example on the following page states that in 1779 David Mowry purchased a book for five bushels of corn, when a bushel of corn was valued at 12s in silver coins. Throughout the colonial period commodity money was and continued to be an emergency stop gap measure but the need for a more user friendly money substitute was clear.


For further information see Crosby for documents and Mossman for excellent recent coverage. Also see J. Earl Massey, "Early Money Substitutes," in Studies on Money in Early America , ed. by Eric Newman and Richard Doty, New YorK: American Numismatic Society, 1976, pp. 15-24; Curtis P. Nettels, The Money Supply of the American Colonies before 1720, University of Wisconsin Studies in Social Science and History, number 20, Madison: University of Wisconsin, 1934, pp. 202-228; Raymond H. Williamson, "Virginia's Early Money of Account," The Colonial Newsletter , vol 26, no.1 (Jan. 1986) serial no. 72, pp. 927-948; Don Taxay, Money of the American Indians and Other Primitive Currencies of the Americas,New York; Nummus Press, 1970, especially p. 94 reproducing the July 14, 1703 supply list priced in beaver pelts; for some interesting examples from New York see John. M. Kleeberg, "The New York in America Token" in  Money of Pre-Federal America,   edited by John M. Kleeberg, Coinage of the Americas Conference, held at the American Numismatic Society May 4, 1991, Proceedings no. 7, New York: American Numismatic Society, 1992, pp. 15-57 on p. 35

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Section Contents Commodity Money

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