Non‐legal‐tender paper money: the structure and performance of Maryland's bills of credit, 1767–75

Authors:
JAMES CELIA, FARLEY GRUBB
Published Online:
18 Feb 2016
DOI:
10.1111/ehr.12278
Pages:
1132–1156
Volume/Issue No:
Volume 69 Issue 4

Additional Options

In this article, Maryland's non‐legal‐tender paper money emissions between 1765 and 1775 are reconstructed to determine quantities outstanding and redemption dates, providing a substantial correction to the literature. Over 80 per cent of this paper money's current market value was expected real asset present value and under 20 per cent was liquidity premium. It was primarily a real barter asset and not a fiat currency. The liquidity premium was positively related to the amount of paper money per capita in circulation. This paper money traded below face value due to time‐discounting, rather than depreciation. Past scholars have simply confused depreciation with time‐discounting.

© Economic History Society 2016

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