Benjamin Franklin and Money: His Ideas on Paper Currency

Nearly three hundred has passed since American colonial statesman, Benjamin Franklin wrote “A Modest Enquiry into The Nature and Necessity of a Paper-Currency” and there is no less a public uproar over paper money today. While it may be true Ben Franklin was hailed as a respected politician and public spokesperson of great honor his day, it may be doubtful that Franklin truly understood the value or worthlessness of paper currency in terms of how using it worked. It is important to consider that the United States, as an official republic had not yet fully been formed in 1729. So, when Franklin penned the 'Enquiry' the nation was still struggling to carve out an identity. 

At this point the common folk as colonists were still new settlers. The society was yet somewhat agrarian and based on craftsmanship. The relationship to the native peoples, most likely somewhat tenuous, kept the white settlers clinging to their close-knit community. Money, in terms of paper currency would have become more important to the rank-and-file citizen when slavery came into full swing. At this point in time however, adoption of the free economic labor system of slavery – relatively speaking, was still in its infancy. Other background information is also important to this discussion. Being beholden to Britain on some level, the American public was probably less concerned about paper money. Securing a day's wage enough to plant decent family crops or put a loaf of bread on the table were probably of most concern. 

Lastly, before addressing the questions pertaining to Franklin's ideas on paper currency, is the matter of his status. One must remember that Franklin was an elite. As such he may not have had much more than politics in mind, when he wrote his famous treatise on paper money. Most likely he may not have had the common people's interest in mind. But hopefully from this point forward, a cogent basis for analysis has been established in rounding out some answers. 

Why did the American colonists lack an adequate supply of currency in the first place? Partly due to some of the listed reasons and influences above. The nation was still in its infancy, and not yet having officially become a sovereign nation. Economics, politics and culture were still being negotiated. One reason how you can tell the economy was still being formed, is by the language Franklin uses when explaining the benefits of why it is so vital to have more paper currency in circulation. Franklin expresses that “if in two Neighboring Countries the Traders of one by Reason of a greater Plenty of Money, can borrow it to trade with at a lower Rate” then somehow this would be beneficial to the people. A fair number of people probably could not even read. And Mr. Franklin is essentially – whether one agrees with him or not – is talking about international trade in services. 

The lack of paper currency simply reflected at that point, an under-developed stage in American history. Only under-developed in the sense the trickle-down effect of capital gain had not yet touched the lives of the majority of the people. Franklin believed that new paper currency issuance will improve their situation by way of an interest advantage in international trade, as aforementioned. Yet who did Mr. Franklin have in mind, in terms of global trade? Mexico? Canada? Native America in any of its tribal sectors? 

Another reason Franklin believed that new paper currency issuance would improve the lives of people had to do with price production. Basically, he thought more paper currency in general circulation would stimulate the economy by encouraging more productivity. Productivity in this light, Franklin refers to animal husbandry and agriculture. The European settlers were perhaps not in a willing and able position to take on mass production of any nationalized agri-business. Once again, it must be remembered that Franklin was an elite. In other words, he was kicking it with Presidents (or future Presidents) and was on a much higher level of literacy as compared to the common folk of the day. 

This is not to disparage or insult the common American colonist. They were hard working, trusting, and not utterly ignorant or uneducated. One reason why Franklin probably believed the influx of new paper currency into the mainstream economy, and circulation, would benefit the majority is because he was a visionary. Franklin had enough sense to understand the current agrarian and craftsmanship-based economy of the common folk. But he could perceive that America would not always be in that position. With all the raw land wealth in his and the Founders' eyes, the potential was great to eventually reap benefits in prosperity from geo-industrial productivity. That is where slavery came in. At its peak would prove to place the American economy overall at a world power. Free labor held the key, however with it came an entire host of problems. Racism and the subjugation against black people would have its lingering and negative effects. Despite such future problems and fallout, Franklin that the increase of paper currency would stimulate the economy.

In encouraging the widespread influx and usage of paper currency, Franklin connected the nation's future prosperity to shipbuilding. This idea suggested a massive industrial economic undertaking that only big government can sponsor. Shipbuilding hints at exploration and/or conquering of additional lands and people. It is important not to forget that the North American land mass was not empty when Columbus landed on its shores. Obviously then, colonial America included a diversity of people already living there. It is interesting and noteworthy that Franklin mentions gaining gold and silver, for rewards in shipbuilding and its associated endeavors. But he doesn't speak of gaining paper currency for the “Province” or government. For it, he speaks of gaining gold and silver. Common sense tells one that is real money, not paper, unless it is backed by a supply of gold and silver. 

Before moving on to the third question and answer a good analysis demands a quote. Franklin stated that it was of “great Advantage” for the “Province her clear Value in Gold and Silver, which must otherwise have been sent Home for Returns.” Did Franklin speak of gathering gold and silver from other people's lands? Or was he mainly concerned that the elites would receive gold and silver, versus paper currency for the people? It is difficult to say. Much debate over his intentions continue to this day.

The last question revolves around Franklin's opinion, regarding who is opposed to paper currency and why. Shopkeepers, day laborers, and craftspersons comprise the bulk of the normal American colonialist at the time. This is vital to keep in mind. But basically, Franklin believed that those who already had “large Sums of Money” would oppose anybody else having free access to increased sums of paper currency. The reason these wealthy would oppose the greater influx of paper currency as money, is because Franklin believed they wanted to retain their power of exclusive access to the lion's share of it. Franklin cried “I say, the Interest of all such Men will incline them to oppose a Large Addition to our Money.” This may not be the real reason Franklin cited opposition by the rich against paper currency. He may have used this argument to pit one class against another. 

In this way, Franklin may have truly held that paper money should be the commoners’ goal. He speaks of investing in the country, and of large-scale international trade which may be of some benefit to some. As long as laborers might find work in shipyards and continue to prosper with craftsmanship this is feasible. Franklin wrongly advises that the common people without 'money' in the form of paper currency will be “impoverished.” Also, Franklin keeps assuming that the average person is a landowner, or landholder and thereby is able to sell their land for profit. More than likely this is simply not the case in colonial America. 

It seems very clear that Franklin knew a large influx of paper currency, in the name of 'money' and for its sake would actually sink its value. A clue to this is when he hinted “It remains now that we Enquire...Whether a large Addition to our Paper Currency will not make it sink in value very much.” Franklin's comments make one wonder that he absolutely knew he was addressing this issue to people who had no clue about finance. A perusal of his essay shows that the people's concerns were for corn, cloth, land, and an immediate means of livelihood. What does that tell you about the early Quakers' need for paper currency? 

Fast-forward to the state of affairs in the modern American economy gone global. Is paper currency truly the issue? Perhaps it is – and has always been a smokescreen – for the powers that be to filter the true value of commodities. Gold and silver to the mind of this writer represents real money.

Reference

University of Virginia. (2013). A modest enquiry into the nature and necessity of a paper-currencyby Benjamin Franklin (1729) [Data file] Retrieved from http://etext.virginia.edu/users/brock/webdoc6.html