As this project took more definite shape, it aroused great opposition, and in order to defeat it, a project was set in opposition to it for a further issue of colonial bills of credit—not for the expenses of government, but on a new scheme. The colonial government was to prepare and lend out on mortgage, in bills of credit, £50,000, repayable in five annual installments, with five per cent. interest. A public meeting at Boston pronounced in favor of the public bank. All the popular arguments were on its side. The Governor and Council forbade any private company to issue bills of credit for circulation without the authority of the General Court. Nevertheless the bank proceeded to make issues. In 1716 another "public bank" was made. £100,000 "was committed to the care of the county trustees; was proportioned to each county according to its tax; secured by mortgage estates of double the value of the sum borrowed; each loan not exceeding £500 nor being under £25, for ten years, at five per cent., paid annually; the profits to help pay for expenses of government, and the bills to be returned at the end of this period and burnt. Frequent litigations subsequently arose in the settlement of the mortgages for this money."
This is a specimen of the second kind of bank in the colonies, one which was adopted by all but one or two of the colonies and repeated over and over again. The sense of "bank" would be best expressed by batch, because it was applied to the mass of bills provided for and loaned out at one time, under one act of legislation. It would go beyond the limits of our subject to pursue this device as an experiment in currency. It may suffice to say that the colonists, in their issue of bills of credit, had hit upon a fact in monetary circulation which they did not understand and which is not, perhaps, fully understood yet. If they had been contented to use their bills of credit within very strict limits, to be ascertained by experiment, they might have carried on the system indefinitely, with complete success, and have conquered all their troubles from a "lack of a medium." The notion of a cheap money would, of course, have been a pure fallacy. No money can be cheap except to the issuer. If he gets it at the cost of manufacturing bits of paper, and can exchange these for commodities, in as large amounts as he could get for the coins whose names and denominations the paper bears, the currency would be cheap to him; but to those who gave the commodities for it, it would be no cheaper than the coins would have been. The paper currency in the colonies, however, might have overcome the difficulties which were due to lack of communication and transportation, and to obstructive legislation, and might have lifted the community out of barter. What actually happened was that the colonists employed this device without limitation or judgment. They pushed the bills of credit at once into their greatest abuse; which is, that any paper issued at will, unlimited by the hard facts of economic supply, can be multiplied in amount indefinitely. Then, instead of facilitating intercourse, it becomes the worst barrier to intercourse. The loan offices, also, under pretense of providing the farmers with the capital which they needed, only set
