by Annette Hinkle
We all take money for granted. Not in the “haves” vs “haves not” sense, but in the fact it exists. Even in this age of ATMs and credit cards, U.S. currency in the form of the greenbacks and coinage in our wallets still plays a big role in how we get through our day — be it picking up groceries after work or paying the kids’ weekly allowance.
Historically speaking, the first US coins were minted in 1793 — but a lot of commerce went on in this country before then. So what did colonists do when they needed a pound of coffee or a new work shirt?
That question first piqued the interest of East Hampton’s Frank Sorrentino while on a trip to Colonial Williamsburg with his children years ago.
“We were in a general store where the merchant had a ledger and a journal of what they sold,” he says. “I started to think. This is not a very simple economy.”
It was those ledgers — a tally of debits and credits along with a separate journal of the going rate for goods and services — that functioned as a barter economy for early Americans.
“If you were a farmer with a bushel of corn, that was worth something and you could trade it for something else,” says Sorrentino. “The barter system was the only way to buy or sell commodities. What made it very interesting, people would agree on prices, but after while, in commerce they had to keep track of who owed what. Commodity money came about.”
And when those accounts were finally settled, debtors would pull out the change purse to make good — but it wouldn’t be with American money.
“I bought a book about Colonial Williamsburg while I was there and they had a list of all the coins they found from excavation — Dutch, Spanish, German, French and some they couldn’t recognize,” he says. “All these foreign coins were in this economy. How did they do it?”
How they did it will be the focus of “Foreign Coins and Money Substitutes in Colonial America” a talk by Sorrentino this Saturday at the Sag Harbor Whaling and Historical Museum. Offered in conjunction with the museum, the Custom House, the Sag Harbor Historical Society and the Eastville Community Historical Society in his presentation, Sorrentino will explain how foreign coins influenced trade, how merchants kept track of customer accounts and show examples of currency from the colonial period.
Sorrentino has become something of a local expert on this topic, having further indulged his Williamsburg curiosity by delving into the local merchant and whaling ledgers in the Long Island Collection at the East Hampton Library. In his research, he discovered a key reason for the barter system in the 17th and 18th century America was a severe shortage of coinage.
“It was illegal to take English silver or gold coins out of England. They wanted to keep them in the country,” says Sorrentino. “So when the British took over New Amsterdam from the Dutch and had colonies from Maine to South Carolina, it wasn’t British coins, but Spanish American coins that made the world turn. Over two billion coins were made in central and South America — Bolivia, Peru and Mexico City – starting in the late 1500s.”
Though Spanish American coins were the dominate currency, they weren’t the only coinage in circulation and complicating matters was the fact that the agreed upon value of the coins varied from colony to colony.
“I started studying the ledgers to find what the value of these coins were,” says Sorrentino. “A lot of them were silver, some gold and copper. Merchants weighed them — because they were silver they had a specific value. Weight and what percent fine silver could put a value on a coin.”
“That’s a nice simple story,” he adds. “But I ran into some complexities.”
Those complexities included the value the British mint placed on the most popular coin — the Spanish milled dollar — in its own system of pounds, pence and shillings, compounded by the fact that colonies were independently setting their own values for the coin based upon how desperately they needed coinage.
“Every colony had a different value for that Spanish coin which complicated the commerce,” explains Sorrentino. “New York said there are very few coins, how do we get more? The British said it’s worth 54 pence. We’re going to say it’s worth 96 pence, we’ll gear the whole economy to overvalued coins.”
“Then, New England would raise the value of the same coin. You had five different systems of value,” he says. “A New Yorker in New Jersey has the same coin but it’s a different value. How do you deal with that as a merchant? How can one person go from one colony to another and buy something to eat?”
That’s why commodities played such a huge role in the early American economy. In his research, Sorrentino also explored the nature of money substitutes — from tobacco and nails, to locally manufactured Native American wampum (another highly valued currency) made from qhohog shells and periwinkle which was formed into hollow beads and strung together.
“The Dutch were big promoters of wampum,” he explains. “Wampum started with Native Americans, but because of the success, towns started saying you could pay taxes in wampum. Then there was inflation when the Dutch brought in mechanical drills that could greatly increase the production of wampum.”
Some things, it seems never changes.
“The hardest concept to understand is how the colonies operated on imaginary money,” says Sorrentino, who adds that despite the tracking of wampum, shillings or pounds, money rarely actually changed hands. “Everybody had an account book. The merchants were the first bankers.”
And because Sag Harbor had New York State’s first Custom House, Sorrentino naturally spent time going through the ledger books there to see how it all worked.
“In the enactment of the first laws in Congress, there was a big section on the custom houses – this is where the U.S. got money to pay off its debts by charging fees on imports into the country,” says Sorrentino. “A director of the custom house had to know the value of all currency, whether it was from the Levant, the Middle East or London. All these coins had to be understood and known.”
While local colonies in Massachusetts began printing paper money as early as the 1690s, it wasn’t backed by real silver. It wasn’t until 1792 that the US passed the first law to create a mint in Philadelphia and the first US coins followed in 1793. But foreign currency continued to play a crucial role in the country’s economy and remained legal tender well into the 19th century.
“By 1795, we were minting some silver dollars. But foreign coins were used in circulation until 1857,” says Sorrentino. “That’s when they got demonitized.”
Sorrentino admits there’s now a lot of research behind that initial curiosity which got him started on all this in the first place. While the history of commerce and currency in this country is complicated — he promises to keep Saturday’s talk to an hour or so.
“People will at least get the feel for how things were in that day and how ingenious they were,” says Sorrentino. “It was a very difficult arrangement and an interesting time in our history.”
“Foreign Coins and Money Substitutes in Colonial America” begins at 4 p.m. on Saturday, October 6 at the Sag Harbor Whaling and Historical Museum, 200 Main Street, Sag Harbor. The presentation is co-sponsored by the Custom House, the Sag Harbor Historical Society and the Eastville Community Historical Society.