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In the early 18th century, the flow of gold, silver, and hard coin out of the colonies to pay for goods created scarcities of ready cash. Consequently, the first act authorizing an issuance of paper money was passed in Pennsylvania in March 1723, and in the three lower counties the following month. These prints bills of credit were to be loaned out in order to facilitate easier trade, and at the same time generate interest capital to help retire the public debt. The bills were turned over to the Trustees of the Loan Office in each county; they were then loaned out and secured by first mortgages on real estate, the principal to be repaid in eight years. Upon repayment, the paper money was then destroyed.
The program was so successful that new issues, or ‘emissions,’ were made every five or six years thereafter, in increasingly larger amounts. In 1777, Continental currency was formally approved as acceptable for debtors’ repayments, but by 1781, Continental issue was losing its value so rapidly that this practice was discontinued.
The last issuance of such paper money occurred in 1777, but the loan offices were active until 1792. All bills of credit were to be surrendered by August 1, 1785, but renewed mortgages were permitted as needed for a seven year term. In 1792, the trustees were told to collect all unrenewed mortgages by February 7th of that year, and to not make any further loans.

See also RG 0730, Continental Loan Office/U.S. Loan Office, for records of a federal agency with similar financial activities.

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1 Richard S. Rodney; Colonial Finances in Delaware.

jrf; March 27, 1989

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