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Date: | Fri Mar 31 17:18:37 2006 |
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In response to Anne Mayhew's points about early America. The
depreciation on the New England currencies was prettty substantial
in the 1600s. Later, Massachusetts and Connecticut did okay, but
Rhode Island went whacko, practicing what I jokingly call public
finance by arbitrage by issuing lots of paper currency and taking
advantage of the circulation throughout New England and the lag
until the other colonies readjusted (don't ask me why they didn't
take all RI currency at a discount to begin with; I haven't spent
time analyzing this, I'm just going by the price movements and
the political infighting up there).
The supposed indebtedness of the colonies with regard to the
Continent and Britain is grossly exagerated. The Chespeake colonists
were in a lot of debt -- but that was a GOOD thing, not a BAD thing.
That is, their contacts in Britain were carrying them because it was
profitable -- if a person takes out a very very big mortage for a
very very big house, we don't say that they must be in bad shape
financially -- that could be a sign that their income/wealth position
is very high. Right? And that was true through most of the colonial
period for the Chesapeake. There were specific problems with debt
collection toward the end of the colonial period, but that is a
separate issue.
The middle colonies did fine with their paper money emissions.
Pennsylvania had less inflation that at any other period in its
history. The point that is often missed is that the DOMESTIC
economy was flourishing in this region during this period.
In terms of a learning curve, what I found fascinating then,
and still find fascinating, is the discussion in pamphlets and
letters to the newspapers about how you decide how much is enough.
So Adam Smith was right about the rise in value of the
colonial wealth -- but wrong about colonial currency in general.
Not the only one.
(Oh -- the experience with the Continentals was very different --
there was about 4 years of hyperinflation followed by three years of
hyperdeflation, and then it all settled back into the same arrangement
as before.)
-- Mary Schweitzer
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