Commodity Money

One of the earliest forms of money, borrowed from the Indians, was wampum, black and white polished beads made from clam shells. Wampum circulated as legal tender for private debts in Massachusetts until 1661 and was used as money in New York as late as 1701. In Maryland and Virginia, tobacco was initially the principal medium of exchange, while other colonies designated as “country pay” (acceptable for taxes) such items as hides, furs, tallow, cows, corn, wheat, beans, pork, fish, brandy, whiskey, and musket balls. Harried public officials were often swindled into receiving a poor quality of “country pay.”

Because it was in an individual’s self-interest to make payments whenever possible with low-quality goods, one of the major problems in using commodity money—besides inconvenience, spoilage, and storage difficulties—was quality control. One of the earliest domestically initiated regulations, the Maryland Tobacco Inspection Act of 1747, addressed this issue. The act was mainly designed to increase the value of tobacco exports from Maryland.14 This move toward quality control ultimately did raise the value of Maryland’s tobacco exports, but it also set firm standards of quality control for tobacco as money. In fact, because paper certificates called inspection notes were given on inspected tobacco, the circulation of money became easier. A Maryland planter in 1753 reported on

[T]he Advantage of having Tobacco Notes in my pocket, as giving me credit for the quantity mentioned in them wherever I went, and that I was thereby at large to dispose of them when, to whom, and where I pleased; whereas, before this Act, my credit could not be expected to go beyond my own Neighborhood, or at farthest, where I might be known. (Maryland Gazette, April 5, 1973, as reported in Schweitzer 1980, 564)

Despite the problems, commodity money was extensively used in the colonies in the seventeenth century. By the early eighteenth century, however, both specie (gold or silver) and paper currency were common in the major seaboard cities, and by the end of the colonial period, commodities—particularly furs—were accepted only in communities along the western frontier.