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Massachusetts Issues Paper Money *

New England has a real problem with their money supply: no coins equals no transactions. The colonies have been reduced to using Indian wampum and commodity trading, mostly in tobacco and animal furs. It is illegal to mint coins but the need was so great that a few years ago Massachusetts opened their own mint. The King finally shut it down but the money shortage has remained. There are no real banks in the colonies so they can't issue bank notes. Yet they must pay their soldiers as King William's War against France gets started. Massachusetts issues promissory notes to their soldiers backed by the full faith and credit of the Treasury of Massachusetts. (Stop laughing.) The soldiers can use these notes to pay their taxes so the colonists start using these notes like money. When the Treasurer realizes this, he prints off a lot more paper money. Merchants accept the bills at a discount. This is called "inflation". By 1716, the whole system will collapse and they will go back to coins and commodity trading. Like the definition of insanity, the Treasurer will try it again and again, expecting a different result. [1] [2]

My Take by Alex Shrugged
More is going on here than is apparent. Gershom's Law is at work... bad money pushes out the good. The good coins quickly disappeared under the mattress and were replaced by the increasingly worthless paper money. The Colonial governments were restricted in the ways they could issue money. Governments at this time would back their paper money by grants of land or they would impose the money on the populace, but England did not allow the Colonies to do this. That is why the Colonial governments had to engage in this legal fiction of an I.O.U.. The Colonies' money supply problems were helped by using Spanish pieces-of-eight but that didn't stop the Colonies from printing their paper money. By 1730 North Carolina was circulating 17 different types of money.

Barclays Bank Begins

Two goldsmiths open a bank on Lombard Street in London. The location is not a coincidence. A large population of Quakers live in the area and these goldsmiths are also Quakers. It was not unusual for goldsmiths to open a bank since they already have security measures in place for their work. Thus, providing security services for other people's precious coins is not much of a burden for them. In a few years, one of the banker's daughters will marry a fellow named James Barclay and he will become a partner in the firm. The growth of the bank will be due mostly to the clearing house services they provide to country banks outside of London. These country banks need an agent, someone they can trust to make the money transfers in London, and the religious aspect of the Quaker bankers make them a good choice. By 1776, the bank will be called "Barclay, Bevan and Bening" and by 1896 it will be known as "Barclays and Company." [3] [4] [5] [6]

My Take by Alex Shrugged
This reminds me of how the Bank of America came to be. In 1904, it used to be the Bank of Italy, but what it really should have been called was Amadeo's Safe and Saloon. Amadeo Giannini had experience as a banker but he couldn't talk anyone into backing a bank that catered to the small depositor. He knew that Italians were in the habit of saving their money so he rented out an old saloon and started taking deposits. He took in over $8,000 the first day. The Bank of Italy survived the Great San Francisco Earthquake and was able to make loans to rebuild the city. By 1928, it merged with the Bank of America. The point I'm making is that no one could do the same thing today. There are too many regulations designed to keep depositors safe, but those same regulations lock out the small competitors that used to exist not so long ago. [7] [8]

John Locke Proves that the Mind is a Blank Slate!

John Locke has been hanging out with too many politicians, lately, so he takes a break and sets out to DISPROVE the idea that the human mind is born with certain innate ideas. He believes that the mind is a blank slate, and over time the mind is filled with experiences and ideas. He publishes his "Essay Concerning Human Understanding" and it will become the basis for argument for years to come in philosophical circles and establish the philosophy of Empiricism, the idea that knowledge is based on rational thought, sensory experience, and experimentation. He doesn't get it all right but he is off to a rip roaring start. [9] [10] [11]

My Take by Alex Shrugged
The names of the various schools of thought are probably not important. The point is this. Reason alone is not enough, yet the old way of thinking depended on reason over experimentation. Locke was arguing for the discovery of knowledge based on the senses... essentially we know stuff because we have tried things out to see how they work. If Locke were a computer programmer, he would be called a hacker. The philosopher David Hume built on Locke's ideas and frankly it all sounds like William James' philosophy he called Pragmatism. William James is considered America's first psychologist. I don't think William James coined the term Pragmatism but he certainly made it popular. It is the basis for the pragmatic self-help group Alcoholics Anonymous. If it works, don't fix it. [12]

This Year on Wikipedia

Year 1690, Wikipedia.

See Also


* The asterisk in the section header indicates that it was read on the podcast.
  1. Goldberg, Dror (December 2009). "The Massachusetts Paper Money of 1690". The Journal of Economic History (Cambridge University Press on behalf of the Economic History Association) 69 (4): 1092-1106. http://www.jstor.org/stable/25654034. Retrieved December 3, 2015. 
  2. John Steele Gordon. Empire of Wealth: The Epic History of American Economic Power, An. HarperCollins, 45-47. ISBN 0060093625. 
  3. Quick history -. Barclays (OFFICIAL SITE) (2015). Retrieved on 8 December 2015. “Barclays traces its ancestry back to two goldsmith bankers, John Freame and Thomas Gould, who were doing business in Lombard Street, London in 1690. In 1736, Freame’s son, Joseph took his brother-in-law, James Barclay on as a partner, and the name has remained a constant presence in the business ever since.”
  4. Barclays - Wikipedia (2015). Retrieved on 28 August 2015. “Barclays traces its origins back to 1690 when John Freame and Thomas Gould started trading as goldsmith bankers in Lombard Street, London. The name 'Barclays' became associated with the business in 1736, when James Barclay, the son-in-law of John Freame, one of the founders, became a partner in the business.”
  5. John Freame - Wikipedia (2015). Retrieved on 8 December 2015. “Upon completion of his apprenticeship, Freame went into partnership with Thomas Gould, a fellow quaker. Located in a part of the city where 25% of the population were quakers they were able to build up their reputation - and their business particularly amongst their co-religionists.”
  6. H. S. Foxwell (September 1927). "A History of Barclays Bank". The Economic Journal (Wiley on behalf of the Royal Economic Society) 37 (147): 411-417. http://www.jstor.org/stable/2223554. Retrieved December 09, 2015. 
  7. Bank of Italy (United States) - Wikipedia (2015). Retrieved on 9 December 2015. “The bank was established to serve working class citizens of the area, especially Italian Americans living in San Francisco's North Beach neighborhood. The bank survived the San Francisco earthquake and fire of 1906 and was one of the first to offer loans to businesses to help rebuild the city.”
  8. Amadeo Giannini - Wikipedia (2015). Retrieved on 9 December 2015. “He founded the Bank of Italy in San Francisco on October 17, 1904. The bank was housed in a converted saloon as an institution for the 'little fellow'. It was a new bank for the hardworking immigrants other banks would not serve. He offered those ignored customers savings accounts and loans, judging them not by their wealth, but by their character.”
  9. Grun, Bernard. The Timetables of History: A Horizontal Linkage of People and Events. Simon and Schuster, 316-317. “John Locke: 'An Essay Concerning Human Understanding'” 
  10. Empiricism - Wikipedia (2015). Retrieved on 9 December 2015. “Empiricism is a theory that states that knowledge comes only or primarily from sensory experience.”
  11. An Essay Concerning Human Understanding - Wikipedia (2015). Retrieved on 9 December 2015. “He describes the mind at birth as a blank slate (tabula rasa, although he did not use those actual words) filled later through experience. The essay was one of the principal sources of empiricism in modern philosophy, and influenced many enlightenment philosophers, such as David Hume and George Berkeley.”
  12. William James. The Varieties of Religious Experience: A Study in Human Nature. Being the Gifford lectures on natural religion delivered at Edinburgh in 1901-1902.. Longmans, Green. 

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