Non-Legal-Tender Paper Money: The Structure and Performance of Maryland’s Bills of Credit, 1767-1775

James Celia () and Farley Grubb

No 14-13, Working Papers from University of Delaware, Department of Economics

Abstract: Maryland’s non-legal-tender paper money emissions between 1765 and 1775 are reconstructed to determine the quantities outstanding and their redemption dates, providing a substantial correction to the literature. Over 80 percent of this paper money’s current market value was expected real asset present value and under 20 percent 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 only due to time-discounting and not depreciation. Past scholars have simply confused time-discounting with depreciation.

Keywords: asset money; bills of credit; commodity money; fiat money; land banks; legal tender; liquidity premium; paper money; zero-coupon bonds; 1764 Currency Act (search for similar items in EconPapers)
JEL-codes: E31 E42 E51 N11 N21 N41 (search for similar items in EconPapers)
Pages: 56 pages
Date: 2014
New Economics Papers: this item is included in nep-his, nep-mac and nep-mon
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Citations: View citations in EconPapers (5)

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Working Paper: Non-Legal-Tender Paper Money: The Structure and Performance of Maryland's Bills of Credit, 1767-1775 (2014)
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