News
What type of money do we use to pay soldiers?
Americans today are so used to having a single currency, issued by the Federal Reserve Bank, that many of us generally do not think about money, i.e. the medium of exchange. What type of money do the people use? Is it redeemable in anything? Who issues that money?
These were questions that Americans in the eighteenth and nineteenth centuries regularly dealt with. Should gold and silver serve as money? Should a central bank issue the currency? Should competing private banks issue the currency? Should the Treasury issue irredeemable greenback currency?
What we find, especially with rural Americans in the late eighteenth and early nineteenth centuries, was an immense distrust of paper money, and it shows in several of the War Department documents. Part of the reason for this distrust was the colossal disaster that was the Continental currency during the American Revolution. The Continental money, backed by neither gold nor silver, inflated drastically during the late 1770s and early 1780s, devaluing by as much as 500% from its original value at the time it was issued. This led many Americans to only desire gold and silver – hard money – as currency, for gold and silver did not fluctuate in value and offered security for anyone looking to save money. Thomas Jefferson, Thomas Hart Benton, Nathaniel Macon and Andrew Jackson are only a few of the prominent Americans who distrusted paper money and demanded hard currency in its stead. Even the Constitution, in Article I Section X, declares that the states can only make gold and silver legal tender for the payment of debts.
In a March 9, 1792 letter from Major Isaac Craig in Pittsburgh to the Paymaster General Joseph Howell, Craig informed the War Department Office that the people of western Pennsylvania “are not yet reconciled to bank notes” and prefer to use “hard money” for various trades and dealings. Therefore Craig requested that the War Office send specie – i.e. gold or silver – to his location occasionally for those on the War Department payroll.
Others in the War Department also reported that the citizens and the soldiers receiving pay, preferred specie over bank notes. Major General “Mad” Anthony Wayne wrote a letter to Secretary of War Henry Knox on June 11, 1794, informing him that the Mounted Volunteers of Kentucky did not want to accept paper money in payment and demanded gold and silver. Officer James O’Hara also wrote a letter to Knox on May 17, 1794, requesting that the War Office substitute specie for bank notes when settling accounts in western Pennsylvania.