Rules of Exchange
In every country there is a mode of economy that works.
What does economy mean?
The word economy has its origins in France and Greece from the 16th century and means household management. The definition which applies to our purpose is “the management of resources of a community, country, etc., especially with a view to its production”.
The economy of the American colonies was important to Britain and one of the main reasons the colonies finally decided to break away.
The colonies had become prosperous. Merchants were making money. Trade was improving and, while Britain had a stranglehold on whom the colonies could deal with, those who held the power in the colonies wanted more autonomy. They wanted to make their own decisions. They wanted a chance to purchase goods from other countries without fear of retribution from the Mother Country – in this case – Britain, who demanded singular control over all trade.
The types of currency included – the pence, the shilling (12 pence to a shilling), crown (5 shillings to one crown), and pounds (20 shillings to a pound).
After a certain time, it was illegal to bring British currency to the colonies. Coinage from other counties, such as Spain, were allowed. The Spanish milled dollar, otherwise known as pieces of eight, was acceptable not because it was not English currency, but because of its composition. The metal from certain coins was the real value. The coins were weighed in grams. The owner would evaluate the value of the pieces in order to make a fair exchange.
Even back in the 1700s credit and debit was allowed. Amounts would be written in ledgers, books. All transactions were kept in a “wastebook”. Once the book was filled it was sent to the necessary (to be used as we use toilet paper today). A day book was used to write all information about transactions down. They were written according to dates.
The information in the day book could be used as evidence in court cases if the proprietor needed to stake a claim for monies not paid. It was extremely important for accurate records to be kept and to be written in pen. Pencil faded and then could not be read in court.
A ledger was a leather bound book that listed all clients in alphabetical order. All transactions with each client was recorded in the ledger. This was also written in ink. Back in the 1700s, if there was a fire, the book was saved first, and then the family. After all, if you lost record of what was owed to you, there was no proof of the transactions.
An example of how an exchange works:
Mr. Smith has 5 hogsheads of tobacco. He takes them to the tobacco warehouse to be inspected. The information is written in the ledger and Mr. Smith is given a “tobacco note” which includes the weight, the property, and the mark of the tobacco. Now, Mr. Smith will take this note to Mr. Greenhow’s business who will offer him credit or ready money for the amount. For 5 hogsheads of tobacco, Mr. Smith will get credit for 150 pounds of Virginia money. Mr. Smith’s tobacco now belongs to Mr. Greenhow who will put his name on it. Once the tobacco is sent to Britain to sell, his profit will be converted to British pounds sterling and a credit will be put on his books of his factors. Those assets will purchase goods to bring back to Williamsburg. The advance, difference between the price it will cost to the price you sell it at, will show your profit. For example, if a book costs 1 pound in Britain, you will sell it for 2 pounds in Williamsburg. This is a 100% advance, or profit.
How can Mr. Greenhow increase his wealth? He listens to his community and finds opportunities to benefit himself and his community all at the same time. Here is an example: Mr. Jones is near ruin. He has too much debt and does not know where to go. He goes to Mr. Greenhow for 100 pounds of exchange. Keep in mind that each colony has its own rate of exchange. Now, Mr. Greenhow agrees to the exchange. He will agree to repay Mr. Jones’ debt. He offers a bill of exchange for 150 pounds. Mr. Jones agrees to repay the 150 pounds by a certain date (sounds like our form of loan). Now these funds are exchanged to Mr. Jones’ factor. Unfortunately, Mr. Jones does not repay his debt so he is taken to court. Then he is put in gaol (our form of jail). Fortunately for Mr. Jones, he has assets (free and clear) that he must now give to Mr. Greenhow to settle his debts. Exchanges are done with a multitude of merchants, moving purchases and amounts from one to another. The books are balanced this way. (Ah, so this is where the saying “balance the books” comes from).
How much did something cost in the colonies? The following are just a few items where records show how much they cost. There are many more available through primary sources.
Bacon – 6 pence/pound
Butter – 7.5 pence/pound
Chicken – 6 pence for each one
Eggs – 7.5 pence per dozen
Flour – 2 pence per pound
Brown sugar – 3 pence per pound
Apples – 2 shillings & 6 pence per bushel
Chocolate – 2 shillings & 6 pence per pound
Tea – 12 shillings & 10 pence per pound
Pork – 1 pound, 5 shillings per 100 pounds
Shoe buckles – 11.25 pence per pair
Spectacles – 1 shilling per pair
Necklace – 1 shilling each
Breeches – 6 shillings & 8 pence per pair
Kid gloves – 3 shillings per pair
Man’s hat – 18 shillings
Riding hat with feather – 15 shillings & 2 pence each
Hooped petticoat – 10 shillings each
Pumps, fine stitched – 10 shillings
Women’s damask shoes – 17 shillings & 6 pence pair
Woman’s cloak – 1 pound, 4 shillings
Silk brocade suit – 15 pounds
Wig with queue – 2 pounds, 3 shillings
Scissors – 7.5 pence
Axe – 6 shillings, 6 pence
Gulliver’s Travels book – 5 shillings
Ainsworth’s Dictionary – 2 pounds, 8 shillings
Wax candles – 1 shilling, 3 pence per pound
Smoking chair – 1 pound, 15 shillings
Pistols – 3 pounds, 15 shillings, & 3 pence
Saddle – 1 pound, 16 shillings
Round trip to England – 22 pounds
Foreign coins were accepted as exchange and would be weighed on a scale by the proprietor to assess their true worth. These pieces of coins could be melted down or exchanged again elsewhere for services. Many have heard the saying “pieces of eight”. This referred to how a coin was broken into pieces. Usually into 8 pieces. These pieces could be weighed in grams and valued.