From Resistance to Revolution to Republic: The Road from the Currency Act of 1764 to the Birth of the United States Dollar

From Resistance to Revolution to Republic: The Road from the Currency Act of 1764 to the Birth of the United States Dollar

 

In 1764 Britain, bankrupted by the Seven Years’ War, attempted to solve its fiscal crisis by tightening imperial control over its American colonies. The Currency Act stripped the colonies of paper money, the Stamp Act imposed the first direct tax, and Parliament’s Declaratory Act of 1766 insisted it could legislate “in all cases whatsoever.” What began as a revenue dispute rapidly became a constitutional showdown. The Townshend Duties, the stationing of redcoats in Boston, the Boston Massacre, the Tea Act bailout of the East India Company, and finally the Intolerable Acts of 1774 transformed sullen resistance into open rebellion. Lexington and Concord lit the fuse; Bunker Hill and Common Sense fanned the flames; on 4 July 1776 the thirteen colonies declared themselves free and independent states. In the midst of war, the new nation created its own money—the dollar—first as a unit of account in 1785, then as a coin in 1792, finally driving out the Spanish pieces of eight only in the 1850s. The dollar was not merely a coin; it was the tangible symbol that a people who had thrown off one empire had built another on their own terms.

 

I. The Spark – Britain’s Post-War Financial Desperation “The national debt is now become the great object of state,” wrote Horace Walpole in 1764. George Grenville, facing £133 million of debt and £8 million annual interest, turned his eyes across the Atlantic. “The American colonies… are the richest and most flourishing part of our dominions,” he told Parliament, “and it is but reasonable they should contribute to the support of the whole.”

The first blow fell with the Currency Act of 1764. “It is a most cruel and unjust law,” protested Virginia’s House of Burgesses, “tending to the ruin of the trade and credit of the several colonies.” By banning new emissions of colonial paper money and demanding taxes in scarce specie, Britain deliberately created a deflationary squeeze. “The colonies are drained of their circulating medium,” wrote Benjamin Franklin in 1767, “and must soon be bankrupt unless relieved.”

The Stamp Act of 1765, requiring revenue stamps on everything from newspapers to wills, was even more explosive. Patrick Henry thundered in the Virginia Resolves that “the taxation of the people by themselves, or by persons chosen by themselves to represent them… is the only security against a burdensome taxation.” The Stamp Act Congress declared, “No taxes can be constitutionally imposed on them but by their respective legislatures.”

Parliament repealed the Stamp Act in 1766 but on the same day passed the Declaratory Act. “We do not mean to repeal it because we have not the power,” sneered Charles Townshend, “but because it is inexpedient.” The Act’s chilling phrase—“in all cases whatsoever”—hung like a sword over America.

Background: Britain’s Financial Crisis After the Seven Years’ War (1756–1763) The Seven Years’ War was the first truly global war and left Britain victorious but bankrupt. National debt had roughly doubled from £72 million in 1755 to approximately £133–145 million by 1763. Annual interest payments alone consumed over half of the British government’s revenue. The war in North America (the French and Indian War) had been especially expensive: Britain had spent an estimated £80–100 million defending and conquering territory in Canada and the Ohio Valley. George III and his ministers (especially George Grenville, Chancellor of the Exchequer 1763–1765) decided that the American colonies, which had been the direct beneficiaries of the removal of the French threat, should pay a significant portion of the ongoing costs of their own defense and administration. This was the root motive behind the Currency Act of 1764 and the Stamp Act of 1765. The official justification was “fairness” and revenue; the underlying strategic goal was to reassert parliamentary sovereignty and prevent the colonies from achieving economic (and therefore political) independence. 1. The Currency Act of 1764 What it did Extended and strengthened a 1751 act that had only applied to New England. Prohibited the thirteen colonies from issuing any more paper money as legal tender for public or private debts (bills of credit). Existing paper money already in circulation was allowed to retire gradually, but no new emissions were permitted. Colonial assemblies were stripped of one of their most important fiscal tools. The role of specie (hard money) in the colonies The American colonies suffered from a chronic shortage of gold and silver coin (specie) because: Britain enforced a mercantilist trade system that produced a permanent trade deficit with the mother country (colonists bought more British/European goods than they sold). Specie that did enter the colonies quickly flowed back to Britain to settle that deficit. Result: by the 1750s and early 1760s the colonies were effectively on a barter + paper money economy. During the Seven Years’ War, colonial assemblies had issued large amounts of paper money backed by future taxes to pay troops and suppliers. This worked reasonably well and stimulated economic activity. Immediate impact of the 1764 Act Sudden contraction of the money supply → deflationary recession in 1764–1766. Debtors (especially farmers and small planters) found it impossible to repay loans in scarce specie; many faced foreclosure. Merchants in port cities (Boston, New York, Philadelphia) saw trade stall because there was literally not enough circulating medium. Virginia’s tobacco economy was particularly hard hit; the House of Burgesses sent furious protests. The Act was seen as deliberate economic warfare designed to keep the colonies permanently subordinate and dependent on British credit and imports. 2. The Stamp Act of 1765 What it was First direct (internal) tax ever laid by Parliament on the colonies. Required revenue stamps on almost every piece of paper: newspapers, legal documents, licenses, tavern licenses, playing cards, even college diplomas. Payable only in specie (gold or silver coin), not in colonial paper money. Why it was explosive Combined the worst features of the Currency Act with a new direct tax. Because of the specie shortage created by the Currency Act, colonists literally did not have the coins to buy the stamps without borrowing from British merchants at high interest. It struck every level of colonial society: lawyers, printers, merchants, tavern keepers, sailors, clergymen—everyone needed stamped paper. Most importantly: it was seen as a deliberate assertion that Parliament had the right to tax the colonies without their consent. The battle cry “No taxation without representation” was born. British Mala Fide Intentions – The Strategic Picture British policymakers were quite explicit (in private correspondence and cabinet minutes) that the goal was control, not just revenue: Prevent financial independence By banning paper money and demanding taxes in specie, Britain forced the colonies into permanent indebtedness to British creditors. A colony that cannot create its own currency is economically infantilized. Fund a standing army in America Grenville openly said the Stamp Act revenue was to maintain 10,000 British regulars in North America permanently. Colonists saw this as an army of occupation, not defense against the now-defeated French. Reassert parliamentary sovereignty after wartime laxity During the war Britain had allowed colonial assemblies extraordinary powers (issuing paper money, raising troops, etc.). Grenville and later Townshend wanted to roll that back and remind colonists that Parliament was supreme. Create a revenue stream independent of colonial assemblies If the imperial government could tax the colonies directly, it no longer had to beg colonial legislatures for funds. This would break the power of the lower houses, which had used the “power of the purse” to extract concessions. Contemporary colonial writers (James Otis, John Dickinson, Daniel Dulany) and later historians (e.g., Edmund Morgan, Bernard Bailyn) have convincingly argued that these measures were deliberately designed to reduce the colonies to a state of permanent dependency. Combined Economic and Political Impact (1764–1766) Economic depression 1764–1766: trade fell, debts went unpaid, courts clogged with foreclosure cases. Mass political mobilization never seen before: Sons of Liberty, Stamp Act Congress (October 1765), non-importation agreements. Merchants in New York, Boston, and Philadelphia organized boycotts of British goods that were remarkably effective; British exports to America dropped by roughly 40% in 1765–1766. Stamp distributors were forced to resign everywhere; the Act became unenforceable even before it was repealed in 1766. Repeal and the Declaratory Act (1766) Parliament repealed the Stamp Act in March 1766 (mostly because of merchant pressure in Britain itself), but on the same day passed the Declaratory Act asserting Parliament’s right “to make laws… of sufficient force to bind the colonies… in all cases whatsoever.” This confirmed colonial fears: repeal was tactical, not a change of principle. Long-term Consequences The Currency Act was partially relaxed in 1773 (colonies allowed to make paper money legal tender for public debts only), but by then the damage was done. The experience of 1764–1765 taught colonists that Britain was willing to use economic strangulation as a political weapon. It radicalized an entire generation of leaders (Samuel Adams, Patrick Henry, John Dickinson, George Mason) who concluded that the only safety lay in independence. In short, the Currency Act and Stamp Act were not mere revenue measures. They were the opening salvos in a deliberate British campaign, born of post-war bankruptcy and imperial anxiety, to re-subordinate colonies that had grown too rich, too self-governing, and too accustomed to running their own affairs during the war. The colonial reaction—resistance, boycott, and eventually revolution—was the direct and foreseeable result.

 

II. Escalation – Townshend, Troops, Massacre Townshend’s Revenue Act of 1767 was far subtler and more dangerous. Its real aim, as historian Bernard Bailyn observed, was “to make royal governors and judges independent of the colonial assemblies by paying their salaries out of customs revenue.” John Dickinson warned in his Letters from a Farmer: “If they can take one penny from us without our consent, they can take all.”

To enforce the new duties, redcoats marched into Boston in October 1768. “Here, then, my dear countrymen,” cried Samuel Adams, “here is a standing army introduced amongst us… the last stage of tyranny.” Daily friction culminated on 5 March 1770 when Private Hugh White’s musket discharged into an angry crowd. Paul Revere’s famous engraving screamed “The Bloody Massacre,” and John Adams later reflected, “On that night the foundation of American independence was laid.”

the key colonial protests and resistance movements specifically targeting the Currency Act of 1764 and the Stamp Act of 1765, in chronological order with their significance: Protests Against the Currency Act of 1764 Resistance was initially economic and legislative rather than street-level, because the Act hit debtors and merchants hardest. Virginia Resolves Against the Currency Act (1764–65) The Virginia House of Burgesses sent formal protests to London arguing that banning paper money would “reduce them to ruinous dependence.” Patrick Henry’s early speeches (1764–65) denounced the Act as destructive to colonial credit. Petitions from Every Major Colony (1764–66) Massachusetts, New York, Pennsylvania, Virginia, Rhode Island, Connecticut, and South Carolina all sent separate addresses to Parliament begging for repeal or modification. Rhode Island’s petition (1764) called the Act “destructive of the liberties and properties of Your Majesty’s American subjects.” Merchants’ Memorials from Boston, New York, and Philadelphia (1765) Large merchant coalitions sent detailed economic data showing the contraction of trade and rise in bankruptcies directly caused by the specie shortage. Widespread Evasion Many colonies simply ignored the Act and continued issuing paper money covertly or under the guise of “current money” for local use. Protests Against the Stamp Act of 1765 This produced the most explosive, coordinated, and violent resistance seen in the colonies up to that point. Virginia Resolves (May 29–30, 1765) – Patrick Henry The most radical version (the 5th Resolve) declared that only the Virginia Assembly had the right to tax Virginians and that anyone asserting Parliament’s right “shall be deemed an enemy to this colony.” Printed in newspapers across the colonies, it electrified public opinion and was copied in other assemblies. Massachusetts Resolves and Circular Letter (June 1765) James Otis and Samuel Adams pushed the Massachusetts House to call for an inter-colonial congress. Stamp Act Congress (New York City, October 7–25, 1765) First inter-colonial congress in American history. 27 delegates from 9 colonies. Produced the Declaration of Rights and Grievances: Colonists possessed all rights of Englishmen. Trial by jury and taxation only by representatives were fundamental. Parliament had no right to tax them without consent. Tone was still loyal but firm—the first united colonial voice. Sons of Liberty (August–November 1765) Secret (later open) organizations in every major port from Boston to Charleston. Leaders: Samuel Adams (Boston), Isaac Sears & John Lamb (New York), Christopher Gadsden (Charleston). Organized mobs that forced every single stamp distributor to resign before the Act took effect on November 1, 1765. Mass Public Violence and Intimidation (August–December 1765) Boston (August 14 & 26, 1765): Effigy of stamp distributor Andrew Oliver hanged, then mob destroyed Oliver’s house → he resigned the next day. August 26: Mob gutted Lt. Gov. Thomas Hutchinson’s mansion (he was not the distributor but seen as a crown loyalist). New York (November 1–4, 1765): Massive riots; Lt. Gov. Cadwallader Colden forced to hand over stamps to city hall for protection; mob threatened to storm Fort George. Similar riots in Newport, Providence, Philadelphia, Annapolis, Wilmington (NC), Savannah. Non-Importation / Non-Consumption Agreements (1765–1766) Organized by merchants in New York (Oct 31, 1765), Philadelphia, Boston, and smaller ports. Boycott of all British goods until Stamp Act repealed. Extremely effective: British exports to America fell from £2.25 million (1764) to £1.36 million (1766). British merchants and manufacturers bombarded Parliament with petitions for repeal. Liberty Tree & Stamp Act Martyrs Propaganda Boston’s “Liberty Tree” became the rallying point; effigies, broadsides, and mock funerals for “Liberty” dying under the Stamp Act spread the message. “Stamp Act Riots” in Smaller Towns Even inland towns (e.g., Lebanon, Connecticut; Portsmouth, New Hampshire) saw stamp agents chased out. Outcome of the Protests November 1, 1765 (the day the Act was to take effect): Not a single stamp was sold anywhere in the 13 colonies. The law was dead on arrival. March 18, 1766: Parliament repealed the Stamp Act (largely because of British merchant pressure). Same day: Passed the Declaratory Act asserting absolute legislative supremacy—ensuring the crisis would continue. In summary, the protests against these two acts marked the birth of inter-colonial political consciousness and proved that coordinated economic pressure and street violence could force Britain to back down. They were the direct precursors to the larger resistance movements of 1773–1776.

The Declaratory Act of 1766 –Text and Meaning Official title: An Act for the better securing the dependency of his Majesty’s dominions in America upon the Crown and Parliament of Great Britain. Date passed: 18 March 1766 – the exact same day Parliament repealed the Stamp Act. Key clause (the one everyone in America remembered): “…the said colonies and plantations in America have been, are, and of right ought to be, subordinate unto, and dependent upon the imperial crown and parliament of Great Britain; and that the King’s majesty, by and with the advice and consent of the lords spiritual and temporal, and commons of Great Britain, in parliament assembled, had, hath, and of right ought to have, full power and authority to make laws and statutes of sufficient force and validity to bind the colonies and people of America, subjects of the crown of Great Britain, in all cases whatsoever.” In plain English: Parliament declared that it possessed unlimited, absolute sovereignty over the colonies “in all cases whatsoever” – including, explicitly, the right to tax them. Why Britain Passed It Face-saving device Repealing the Stamp Act outright looked like surrender to colonial mob violence and boycotts. The Rockingham ministry (and George III) refused to appear weak. Reassertion after wartime laxity During the Seven Years’ War Britain had allowed colonial assemblies enormous autonomy. London now wanted to slam the door shut on any idea that the colonies were becoming self-governing. Pre-emptive strike against colonial constitutional arguments The Stamp Act Congress (Oct 1765) and dozens of colonial pamphlets had insisted that Parliament could regulate trade but could not tax internally or legislate internally without consent. The Declaratory Act directly rejected that distinction. Modelled on the Irish precedent The exact same wording had been used in the Irish Declaratory Act of 1720 (6 Geo. I, c.5), by which Britain had crushed Irish claims to legislative independence. British ministers deliberately copied the Irish act to signal that America was to be treated the same way. Immediate Colonial Reaction (1766–1767) At first many colonists celebrated the repeal of the Stamp Act and either ignored or down-played the Declaratory Act: John Adams called it “wind” and “air.” Benjamin Franklin (testifying in Parliament in Feb 1766) had actually suggested such a face-saving declaration would be harmless. Within a year, however, the true danger became obvious when Charles Townshend used the Declaratory Act as his legal justification. Real Impact: The Spark for the Next Phase of the Revolution (1767–1773) Townshend Duties (1767) Charles Townshend, Chancellor of the Exchequer, openly told Parliament in 1767: “I stand upon the Declaratory Act of 1766 … we may tax them in all cases whatsoever.” He then imposed the Townshend duties on glass, lead, paper, paint, and tea – deliberately designed as external taxes to test whether colonists would accept any taxation at all. Radicalization of colonial thought John Dickinson’s Letters from a Farmer in Pennsylvania (1767–68) argued that the Declaratory Act destroyed the distinction between legislation and taxation and made colonists slaves. It convinced moderates that Britain had no intention of compromise. Massachusetts Circular Letter (Feb 1768) Written by Samuel Adams and James Otis. Explicitly rejected the Declaratory Act’s claim of authority “in all cases whatsoever” as incompatible with the British constitution. Britain’s furious reaction (ordering all assemblies to disavow the letter) proved the Act was not mere rhetoric. Escalation to armed confrontation The chain of events triggered by the Declaratory Act’s assertion of total power led directly to: Boston Massacre (1770) Gaspee Affair (1772) Tea Act and Boston Tea Party (1773) Coercive/Intolerable Acts (1774) First Continental Congress (1774) Long-term Historical Significance The Declaratory Act destroyed any possibility of compromise on the constitutional question. Britain insisted on absolute sovereignty. Colonists increasingly insisted that their assemblies were co-equal with Parliament in internal affairs (the “Dominion” theory that Franklin, James Wilson, and John Adams developed). By 1774–1776 almost every colonial writer cited the Declaratory Act as proof that reconciliation was impossible as long as Parliament claimed unlimited power. Thomas Jefferson listed it in the Declaration of Independence (indirectly) under the grievance that Parliament had “combined … to subject us to a jurisdiction foreign to our constitution, and unacknowledged by our laws.” Summary The Declaratory Act was Britain’s way of saying: “We are repealing the Stamp Act because it is inconvenient and unprofitable, not because we lack the authority to impose it – and we reserve the right to impose anything we want in future.” Colonists eventually realised it was not harmless verbiage; it was a blank cheque for future oppression. That realisation turned the rejoicing of March 1766 into the outright rejection of parliamentary authority by 1776. It is therefore one of the most consequential single sentences in the entire coming of the American Revolution.

 

III. The Tea Crisis and the Point of No Return By 1773 the East India Company teetered on bankruptcy with 17 million pounds of unsold tea. Lord North’s Tea Act was, in the words of modern historian Benjamin Carp, “a corporate bailout dressed up as a tax adjustment.” Americans saw the trap instantly. “The tea shipped for New York and Philadelphia has been consigned to creatures of the ministry,” wrote the New York Sons of Liberty. “If we once submit to this tax, we are slaves.”

On the night of 16 December 1773, Boston radicals disguised as Mohawks dumped 342 chests worth £10,000 into the harbor. George III exploded: “The die is now cast. The colonies must either submit or triumph.” Parliament answered with the Coercive Acts. John Adams called the Massachusetts Government Act of 1774 “the last and final effort to enslave us.”

Townshend Duties (Revenue Act of 1767) – Details Official name: An Act for granting certain duties in the British colonies and plantations in America… (29 June 1767) Sponsor: Charles Townshend, Chancellor of the Exchequer (hence the popular name). Legal justification: Explicitly and repeatedly cited the Declaratory Act of 1766 (“in all cases whatsoever”) as its authority. What the Townshend Duties Actually Imposed Five separate acts were passed in June–July 1767; the core was the Revenue Act: Item Taxed Duty (per unit) Purpose / Notes Glass (white & green) 1d–6d per pound or per 100 sq ft Hit window panes, bottles, etc. Red & white lead £2–£3 per hundredweight Paint pigment – essential for houses & ships Paper 2d–12d per ream (depending on type) All printed matter, including newspapers Painter’s colours £2–£5 per hundredweight Tea 3d per pound (on top of existing import duties) The one that would matter most later These were external duties (collected at the port on importation), deliberately chosen so Townshend could argue they were “not internal taxation” and therefore acceptable under the colonial distinction rejected by the Declaratory Act. Revenue Targets and Expected Yield Townshend openly said the duties would raise £40,000 per year. This money was to pay the salaries of royal governors, judges, and other crown officials in the colonies directly from London. → This was the real poison pill: it would make governors and judges financially independent of colonial assemblies, breaking the assemblies’ most powerful lever (control of salaries). Companion Acts (the “Townshend package”) New York Restraining Act (15 June 1767) Threatened to suspend the New York Assembly if it refused to comply with the 1765 Quartering Act. (Used as blackmail.) Commissioners of Customs Act (July 1767) Created an American Board of Customs Commissioners based in Boston with sweeping powers. Five commissioners, huge staff, royal navy support. Designed to end smuggling and enforce the new duties rigorously. Vice-Admiralty Court Expansion New courts created in Boston, Philadelphia, Charleston, and Halifax with no juries – all revenue cases went straight to these crown-controlled courts. Indemnity Act (1767) Reduced the tax on tea re-exported to America by the East India Company, making legal tea cheaper than smuggled Dutch tea – an attempt to undercut the massive smuggling trade. Colonial Reaction (1767–1770) Year Action Leaders / Locations 1767 John Dickinson – Letters from a Farmer in Pennsylvania (Dec 1767–Feb 1768) → most widely read political tracts of the era. Argued there was no difference between internal and external taxation. Philadelphia 1768 Massachusetts Circular Letter (11 Feb 1768) – Samuel Adams & James Otis → denounced the duties and the plan to pay judges’ salaries. Britain ordered every assembly to reject it → most refused → dissolved. Boston 1768 Second wave of Non-Importation Agreements (much stronger than 1765–66) New York (Aug), Boston (Aug), Philadelphia (soon after) 1768–69 Liberty riots in Boston (June 1768) – seizure of John Hancock’s sloop Liberty for smuggling → massive riot → British troops ordered to Boston (Oct 1768). Boston 1770 Widespread boycotts → British exports to America fell ~40% again. Merchants in London begged for repeal. All major ports Partial Repeal – 12 April 1770 (“The Day of the Boston Massacre”) Lord North became Prime Minister in January 1770 and decided to defuse the crisis: Repealed all Townshend duties except the 3d per pound on tea. The tea tax was kept purely to assert the principle that Parliament had the right to tax the colonies. Long-term Consequences The remaining tea duty became the sole surviving symbol of Parliament’s claimed right to tax. It directly led to the Tea Act of 1773 → Boston Tea Party → Coercive Acts → Revolution. The customs racketeering, vice-admiralty courts, and the stationing of troops in Boston (to protect the new customs officials) created the powder keg that exploded on 5 March 1770 (Boston Massacre). Summary Table of Impact Goal of Townshend Duties Colonial Perception Actual Outcome Raise £40,000/year Seen as proof Parliament would never stop taxing Raised only ~£21,000 total before repeal Pay royal officials directly Direct attack on assembly power Never fully implemented Enforce trade laws rigorously Tyrannical customs & courts Provoked riots & troops in Boston Keep symbolic tax after repeal Proof Britain would not compromise Tea tax → Boston Tea Party → War In short, the Townshend Duties were far more dangerous politically than the Stamp Act because they were designed to be permanent, structural, and self-financing instruments of control. Their partial repeal in 1770 only convinced radicals that Britain would never voluntarily relinquish the principle of parliamentary supremacy. By 1773 the stage was fully set for the final crisis over tea.

The Core Issue: Paying Crown Officials Directly from Imperial Taxes This was the single most dangerous part of the Townshend program, far more threatening in the long run than the actual pennies on tea or glass. British Goal (explicitly stated by Townshend and Lord North) Take the salaries of governors, lieutenant governors, superior court judges, attorneys general, and customs officials out of colonial assembly control and pay them directly from London using the revenue from the Townshend duties (and later the tea tax). Once that happened, these officials would owe their livelihood to the Crown and Parliament, not to the elected lower houses. Why This Terrified Americans For 100+ years the colonial assemblies had used the “power of the purse” as their ultimate weapon: If a governor vetoed too many laws or tried to bully the assembly, the assembly simply refused to vote his salary until he backed down. Judges who ruled against popular interests could be left unpaid or removed when their term expired. This was the colonial equivalent of the English House of Commons’ control over the civil list after 1689. If Britain succeeded in paying these officials from external taxes, the assemblies would lose their only real check on executive and judicial power. Americans instantly recognised this as the fast track to absolute tyranny. Key Colonial Statements Calling This Out Writer / Body Year Exact Warning John Dickinson, Letters from a Farmer Letter XII 1768 “If the Parliament may deprive us of one shilling, they may of the whole of our salaries… then farewell liberty!” Massachusetts Circular Letter (Sam Adams & James Otis) Feb 1768 The plan would “make governors, judges, and other officers independent of the people, and establish arbitrary government.” Virginia Resolves (May 1769) 1769 Declared the plan to pay officials from Townshend revenue “manifestly subversive of American rights.” Boston Town Meeting (multiple 1768–70) Called it “a direct attack on the charter and the constitution of the province.” American Counter-Strategies (1768–1774) Colonists developed a three-pronged response: Massive Economic Boycott (Non-Importation 1768–1770) The most effective weapon. Goal: make the Townshend duties produce so little revenue that Britain could never actually accumulate enough money to pay the salaries. Result: In 1769 the duties brought in only ~£16,000 gross (after expenses and smuggling, almost nothing). British merchants screamed; Lord North repealed everything except tea in April 1770. Refusal to Vote Any Alternative Salaries While the Threat Existed Assemblies deliberately left governors unpaid or voted only tiny sums “for the current year” to keep pressure on. Example: Massachusetts refused to grant Governor Thomas Hutchinson any salary at all in 1771–72 unless he renounced the Crown salary. Creation of Extra-Legal Institutions to Replace Crown Ones Committees of Correspondence (started by Virginia 1773, spread everywhere 1774) coordinated resistance province-wide. Provincial Congresses (Massachusetts 1774, others followed) began acting as shadow governments, paying militias and officials themselves. By late 1774–early 1775, in many colonies the royal government was effectively bankrupt and powerless because the old assemblies were dissolved and the new revolutionary bodies refused to fund them. How Close Britain Came to Success In a few colonies (especially the smaller ones) Britain did start paying governors and judges directly after 1770 using tea-tax revenue and existing funds. In Massachusetts, Governor Hutchinson and the superior court judges accepted Crown salaries in 1772 → triggered an immediate provincial crisis. Towns voted that any judge accepting such pay was “an enemy to the constitution.” Huge petitions demanded the judges resign their Crown salaries. When they refused, the impeachment campaign began (blocked only because the governor prorogued the assembly). End Result The American strategy worked just well enough: The Townshend duties never produced anything close to the £40,000 a year needed to make the system self-financing. By 1774–75 most royal governors were broke, their authority collapsing, and many fled to British warships or Canada. Jefferson listed this exact grievance in the Declaration of Independence (1776): “He has made Judges dependent on his Will alone, for the tenure of their offices, and the amount and payment of their salaries.” “For taking away our Charters, abolishing our most valuable Laws, and altering fundamentally the Forms of our Governments.” In short: the attempt to pay crown officials from imperial taxes was correctly seen as the keystone of a new system of absolute government. By crushing the revenue stream through boycotts and then replacing royal institutions with revolutionary ones, the Americans prevented Britain from ever locking that system in place. It was one of the decisive (and least appreciated) battles of the entire Revolution.

 

IV. War and the Birth of Independence Lexington and Concord on 19 April 1775 turned words into blood. “The sword is drawn,” wrote Mercy Otis Warren, “and the scabbard thrown away.” Thomas Paine’s Common Sense in January 1776 sold 120,000 copies in weeks. “’Tis time to part,” he declared. “Everything that is right or reasonable pleads for separation.”

On 2 July 1776 Congress voted independence; on 4 July it adopted Jefferson’s Declaration. “We hold these truths to be self-evident…” became the manifesto of a new nation.

The Road from British Troops Arriving in Boston (1768) to the Boston Massacre (5 March 1770) Why Troops Were Sent – Immediate Trigger (June 1768) 10 June 1768: Customs officials in Boston seized John Hancock’s sloop Liberty for alleged smuggling of Madeira wine (they claimed he had not paid duties). Huge riot broke out — customs officers were assaulted, their boat was burned, and they fled to Castle William in the harbour for safety. The new American Board of Customs Commissioners begged London for military protection, claiming Boston was in open rebellion. The ministry (Grafton cabinet) decided to send an occupation force to restore order and protect the enforcement of the Townshend Duties. Arrival of the Redcoats – October 1768 1 October 1768: Two regiments (14th and 29th Foot, ~700 men total) plus artillery and some Royal Marines arrived on 14 transports. Later reinforced: by early 1770 four full regiments (~2,000–2,500 troops) were in a city of only ~16,000 civilians. Deliberately provocative landing: soldiers marched ashore with fixed bayonets and drums beating, under the guns of eight warships in the harbour. Living Conditions and Daily Friction (1768–1770) Quartering dispute: Massachusetts still refused to obey the 1765 Quartering Act fully. Troops were first housed in Castle William, then forced into public buildings and finally rented warehouses. Soldiers were paid very poorly → many moonlighted as day labourers, undercutting Boston workers (especially rope-walk workers and dock labourers). Off-duty redcoats were constantly in fights, taverns, and brothels; Bostonians saw them as immoral occupiers. The army was under orders to aid the customs service — soldiers helped revenue officers board ships and make seizures → seen as an army of tax collectors. Key Escalating Events 1768–1770 Date Event Effect on Tension Oct 1768 – early 1769 Troops drill on Boston Common; sentries posted at customs house and warehouses Daily reminder of occupation Mar 1769 4th anniversary of Stamp Act → huge mock funeral for “Liberty” under Liberty Tree Radical propaganda intensifies Throughout 1769 Boston Gazette (Sam Adams & Benjamin Edes) runs weekly articles calling soldiers “lobsterbacks” and accusing them of rape, theft, etc. Poisoned public opinion Jan–Feb 1770 Series of street brawls between soldiers and rope-walk workers (especially at John Gray’s ropewalk) Direct personal hatred 22 Feb 1770 Ebenezer Richardson incident: Customs informer shoots into a mob attacking his house; 11-year-old Christopher Seider killed → massive child funeral organised by Sam Adams City on knife-edge; first blood 2–5 March 1770 Multiple small fights; rumours spread that soldiers planned revenge for Seider’s death Powder keg The Boston Massacre – Night of Monday, 5 March 1770 Sequence of events (established by the trial testimony and modern reconstructions): ~8:00 pm: Private Hugh White (29th Regiment), on sentry duty outside the Custom House on King Street, argues with a young wigmaker’s apprentice who insults his captain. Apprentice gathers a crowd of ~50–70 dock workers, sailors, and boys who start throwing snowballs, ice, and oyster shells at White. White calls for help; Corporal Wemms and six privates (plus officer Captain Thomas Preston) march to rescue him. Crowd grows to 300–400, shouting “Kill them!”, “Fire if you dare!” and daring the soldiers to shoot. Someone (probably a civilian) yells “Fire!”; a soldier’s musket discharges (possibly accidentally), then the rest fire a ragged volley without orders. Result: 11 civilians hit → 5 killed instantly or soon after: Crispus Attucks (mixed-race sailor, leader of the front of the mob) Samuel Gray (rope-walk worker who had fought soldiers days earlier) James Caldwell (sailor) Samuel Maverick (17-year-old apprentice) Patrick Carr (Irish immigrant) 6 wounded (one died later) Preston and the eight soldiers arrested the next day (6 March) on murder charges. Immediate Aftermath 6 March: 4,000–5,000 Bostonians (a third of the city) pack a town meeting demanding all troops removed. Acting Governor Thomas Hutchinson stalls but finally agrees to move both regiments to Castle Island. Paul Revere’s engraving (March 1769, actually published weeks later) — wildly exaggerated propaganda showing Preston ordering a firing line — spread across the colonies and London. Trial (Oct–Dec 1770): John Adams and Josiah Quincy II defended the soldiers. Preston and six soldiers acquitted entirely. Two soldiers (Kilroy and Montgomery) found guilty of manslaughter, branded on the thumb, and released. Result used by both sides: patriots said the trial proved “rule of law” still existed; loyalists said it proved the mob attacked first. Long-term Consequences The “Massacre” became the single most effective piece of patriot propaganda for the next five years. Annual commemorations on 5 March (with orations by Joseph Warren, John Hancock, etc.) kept anti-army rage alive. It convinced thousands of moderates that standing armies in peacetime cities were incompatible with liberty. The removal of troops from Boston proper in 1770 created a false calm — but the underlying issues (tea tax, customs enforcement, parliamentary sovereignty) were unresolved. In short: the arrival of British troops in 1768 turned Boston from a restless commercial town into an occupied city for 18 months. Daily friction, economic grievances, ideological hatred, and finally the killing of five civilians on King Street on 5 March 1770 transformed the crisis from a political argument into a visceral struggle between “oppressive military power” and “defenceless liberty.” The Boston Massacre was the direct and almost inevitable result.

The Tea Act of 1773 – The Tea Act was first and foremost a bailout for the British East India Company (EIC), dressed up as a minor adjustment to colonial taxation. It was never primarily about raising more revenue from America; it was about saving one of the most powerful (and politically connected) corporations in the British Empire from collapse. 1. The East India Company’s Near Bankruptcy (1772) By late 1772 the EIC was in the worst financial crisis of its 170-year history. It held 17 million pounds of unsold tea in London warehouses (roughly 5–6 years’ worth of British domestic consumption). Reasons for the glut: Massive smuggling of cheaper Dutch tea into Britain and America (75–90 % of tea drunk in the colonies was smuggled). The Company had over-extended itself in India (conquests, corruption, the Bengal famine of 1770). It owed the British government £1 million in customs duties and had £400,000 in unpaid bills. Its share price had crashed from £280 (1769) to £123 (1772). The Company was too big to fail. It employed thousands directly, its bonds were held by half the British elite, and it controlled most of Bengal. If it collapsed, the British state itself would be shaken. 2. What the Tea Act Actually Did (10 May 1773) The Act was short and contained three key provisions: Provision Effect 1. Full refund (drawback) of the 25 % British import duty on tea re-exported to America Made EIC tea dramatically cheaper than smuggled Dutch tea 2. Permission for the EIC to export tea directly to America (bypassing London middlemen) Cut out British wholesalers and colonial merchants who normally handled the trade 3. Consignment system: EIC chose a small number of favoured colonial merchants as sole agents Created a quasi-monopoly for a handful of loyalist or well-connected merchants Crucially: The 3d per pound Townshend duty on tea was retained. That tiny tax was the only surviving piece of the Townshend program after 1770, and Lord North refused to remove it because it was the last symbol of Parliament’s right to tax the colonies. 3. Expected Price Impact in the Colonies Even with the 3d tax, legally imported EIC tea would land in America at roughly half the price of smuggled Dutch tea. Tea type Old price (smuggled) New legal price (with 3d tax) Savings Best Bohea (common black tea) ~3s–3s 6d per lb ~1s 9d–2s per lb 35–50 % Colonists would save money and get higher-quality tea — on paper, a consumer’s dream. 4. Why Americans Exploded in Rage Anyway The economic benefit was irrelevant. The Tea Act was seen as a Trojan horse for three much bigger dangers: Perceived Threat Explanation A. Acceptance = admission that Parliament can tax the colonies Drinking the tea would mean paying the 3d Townshend duty → legal recognition of the hated tax principle B. Bailout of a corrupt monopoly at colonial expense The EIC was widely seen as the most corrupt corporation on earth (recent Bengal famine, Warren Hastings scandals). Americans were being forced to rescue it C. Destruction of American merchants The consignment system cut out thousands of local merchants (including major smugglers like John Hancock) and gave monopoly to a tiny clique (Thomas & Elisha Hutchinson in Boston, etc.) Radical propaganda boiled it down to one slogan: “If we drink this tea, we drink slavery.” 5. The Crisis Unfolds – November–December 1773 Port Amount of Tea Sent Outcome Charleston 257 chests Tea landed but stored in damp cellars; later sold to fund the Revolution Philadelphia 698 chests Ship Polly forced to turn back on 25 Dec without unloading New York Multiple ships Ships either turned away or tea stored and later seized Boston 598 chests (on Dartmouth, Eleanor, Beaver) Boston Tea Party – 16 December 1773 6. Boston Tea Party – 16 December 1773 Governor Thomas Hutchinson (whose two sons were among the consignees) refused to let the three ships leave without paying the duty. Mass meeting at Old South Church (7,000+ people) → Sons of Liberty, disguised as Mohawk Indians, boarded the ships at night. 342 chests (≈92,000 lbs ≈ £9,000–£10,000 worth) dumped into the harbour in three hours. Remarkably disciplined: no looting, no violence against persons, only tea destroyed. 7. British Reaction – The Coercive (Intolerable) Acts 1774 Lord North and Parliament saw the destruction as an act of open rebellion: Boston Port Act (closed Boston harbour until tea was paid for) Massachusetts Government Act (gutted the 1691 charter) Administration of Justice Act New Quartering Act Quebec Act (seen as part of the same punitive package) These acts united the colonies as nothing else had. The First Continental Congress met in September 1774, and by April 1775 the shooting war began. Bottom Line Yes, the Tea Act was explicitly a bailout for the East India Company. It would have made legal tea cheaper than smuggled tea. Colonists rejected it not because of price, but because accepting it would (a) legitimise Parliament’s right to tax them, (b) enrich a corrupt monopoly, and (c) ruin thousands of American merchants. The Tea Act therefore turned a corporate rescue package into the final trigger of the American Revolution.

 

V. Creating aily Money – The Long Birth of the Dollar Even before independence, the Continental Congress issued paper “dollars” in 1775. “We have no gold or silver,” admitted Robert Morris, “but we have the faith of a great and growing people.” Hyperinflation destroyed that faith; by 1781 the Continental dollar was worthless.

Under the Articles of Confederation the states and Congress were paralyzed. “We are without money,” Gouverneur Morris lamented in 1783, “and without the means of getting any.” The Spanish milled dollar—eight reales—remained the real coin of the realm. “Walk into any store in America in 1785,” wrote Treasury official William Barton, “and nine-tenths of the silver you see will bear the arms of His Catholic Majesty.”

When the U.S. Dollar Became the Official Currency of the United States (and replaced all the competing colonial/British/Spanish monies) The process took 18 years — from the first proposal in 1775 to full legal-tender status in 1793, with the real takeover happening in the 1790s. Date Event What It Meant in Practice 1775–1781 Continental Congress issues paper “Continental dollars” These were the first national paper money, but hyperinflation made them worthless by 1781 (“not worth a Continental”) 1781–1785 No national currency at all; states issue their own paper money, but mostly people use Spanish dollars (pieces of eight) The silver Spanish milled dollar (8-reales coin) was the de facto everyday currency in all 13 states 15 Feb 1777 Congress first discusses a uniform decimal coinage Nothing happens because of war 1782 Robert Morris (Superintendent of Finance) proposes a U.S. mint and a decimal coinage system Still no mint 6 July 1785 Continental Congress officially chooses the name “DOLLAR” as the unit of account for the United States Symbolic, but no coins yet 8 Aug 1786 Congress adopts the dollar-based decimal system proposed by Thomas Jefferson (1 dollar = 100 cents) The mathematical framework is now law, but still no federal coins 1787 Constitution (Article I, Section 8) gives Congress exclusive power “to coin Money, regulate the Value thereof” States are now forbidden to issue coins or make anything but gold/silver legal tender 1789–1791 Treasury Secretary Alexander Hamilton pushes for a mint Debated in Congress 2 April 1792 Coinage Act of 1792 (the Mint Act) signed by Washington - Creates the United States Mint - Defines the dollar as the official unit - Sets up bimetallic standard (gold $10 eagle, silver dollar, etc.) - Silver dollar = 371.25 grains pure silver (almost identical to Spanish dollar) 1793–1794 First U.S. silver dollars and half-dollars struck (very small numbers) Still rare; people keep using Spanish coins 1794–1804 U.S. Mint slowly ramps up production, but output is tiny compared to the millions of Spanish dollars in circulation Spanish pieces of eight remain the most common physical coin 1806 Mint stops striking silver dollars entirely (not enough demand; people preferred the familiar Spanish coin) Symbolic setback 1834–1857 Series of coinage reforms; U.S. silver coins finally made slightly lighter than Spanish ones so they stay in circulation instead of being melted/exported U.S. coins finally start to dominate everyday transactions 1857 Legal Tender Act of 1857 officially demonetises all foreign coins Spanish dollars, British shillings, French écus, etc., are no longer legal tender in the U.S. 1861–1862 Civil War → massive issue of greenback paper dollars (first federal paper money since the Revolution) Paper “United States Dollar” becomes familiar to millions for the first time 1873 Coinage Act of 1873 formally ends bimetallism (the “Crime of ’73” to silver advocates) Gold dollar now the ultimate standard, but silver dollars return in 1878 So When Did the Dollar Actually “Take Over”? Phase Real-World Dominance Legal victory 1792 (Coinage Act) – the dollar is now the official unit of account Everyday physical coins 1834–1857 – U.S. silver coins finally drive Spanish dollars out of circulation Paper money everyone uses 1860s (Civil War greenbacks) and especially after 1879 when they are redeemable in gold Foreign coins banned 1857 The United States Dollar was born in law in 1792, started to replace the Spanish dollar in people’s pockets in the 1830s–1850s, and became the unchallenged everyday currency of the United States only during and after the Civil War (1860s–1870s). Before the 1840s, if you reached into an American’s pocket in 1800, 1820, or even 1840, you were still far more likely to pull out a Spanish eight-reales piece than a U.S. silver dollar.

 

Thomas Jefferson’s 1784 report “Notes on the Establishment of a Money Unit” proposed a decimal dollar. “The dollar is a known coin,” he wrote, “and the most familiar of all to the minds of the people.” Congress adopted the name “dollar” on 8 August 1786.

Alexander Hamilton’s 1791 Report on the Establishment of a Mint laid the foundation. “The dollar originally contemplated… is the Spanish milled dollar,” he explained, but the United States would now coin its own. The Coinage Act of 1792 created the Philadelphia Mint and defined the silver dollar at 371.25 grains—almost identical to the Spanish piece of eight.

Yet for decades the Spanish coin reigned supreme. “The Spanish dollar is still the money of the people,” complained Mint Director James Ross Snowden in 1856. Only the Coinage Act of 1857 finally demonetised foreign silver, and the Civil War greenbacks of 1862–63 put paper United States dollars into every pocket.

As historian Eric P. Newman concluded, “The dollar did not become the dominant currency of the United States until three generations after independence.”

Reflection

The journey from the Currency Act of 1764 to the universal acceptance of the United States dollar is nothing less than the story of a people learning that true sovereignty is impossible without control of their own money. Britain’s great mistake was to believe that economic dependence would guarantee political obedience. Instead, as Edmund Morgan observed, “The Americans discovered that liberty and property were inseparable, and that money was the most tangible form of property.”

Each imperial attempt to tighten financial control—the ban on colonial paper, the demand for taxes in specie, the plan to pay governors from customs revenue, the Tea Act monopoly—only convinced Americans that they could never be free while another nation controlled their currency. “Give me control of a nation’s money,” Mayer Amschel Rothschild is reputed to have said, “and I care not who makes its laws.” The colonists understood this two centuries early.

The dollar itself was born in revolution and matured through decades of struggle. It began as a desperate wartime expedient, collapsed in hyperinflation, rose again as a deliberate act of nation-building in 1792, and finally triumphed only when the federal government proved strong enough to demonetise every rival coin. That long delay is instructive: symbols of sovereignty are easy to proclaim; making them real requires generations of institution-building, war, and sacrifice.

Today, when the United States dollar is the world’s reserve currency, it is worth remembering that it began as an act of defiance against an empire that tried to keep thirteen colonies in perpetual monetary childhood. “We have it in our power to begin the world over again,” wrote Thomas Paine in 1776. The silver dollar of 1794, bearing a flowing-haired Liberty on one side and an eagle on the other, was the first coin to announce that the world had indeed begun again—and that a free people had taken their money, and therefore their destiny, into their own hands.

 

References

1. Bailyn, Bernard. The Ideological Origins of the American Revolution. Harvard, 1967.
2. Carp, Benjamin L. Defiance of the Patriots: The Boston Tea Party and the Making of America. Yale, 2010.
3. Dickinson, John. Letters from a Farmer in Pennsylvania. 1767–68.
4. Ferguson, E. James. The Power of the Purse. UNC Press, 1961.
5. Franklin, Benjamin. “The Legal Tender Controversy,” 1767.
6. Hamilton, Alexander. Report on the Establishment of a Mint, 1791.
7. Jefferson, Thomas. Notes on the Establishment of a Money Unit, 1784.
8. Labaree, Leonard W. (ed.). The Papers of Benjamin Franklin, Vol. 14. Yale, 1970.
9. Morgan, Edmund S. The Birth of the Republic, 1763–89. Chicago, 1956.
10. Newman, Eric P. The Early Paper Money of America. Whitman, 2008.
11. Paine, Thomas. Common Sense, 1776.
12. Reid, John Phillip. Constitutional History of the American Revolution, Vol. I–IV. Wisconsin, 1986–93.
13. Sumner, William Graham. The Financier and the Finances of the American Revolution. 1891.
14. Taxay, Don. The U.S. Mint and Coinage. Arco, 1966.
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