At the time of the War of 1812, there was no single national paper currency. The U.S. treasury issued “notes,” but so did state-chartered banks and even states. And in August 1814, the government’s finances were in such a shambles that the public credit collapsed – no one would lend the government money.
On December 14, Brigadier Cushing wrote a letter to Secretary of War James Monroe that laid out the practical impact of these circumstances:
From the best information I have been able to obtain it will be impossible to procure funds for the Quarter Masters Department in this Military District, either on drafts on the War Department at Washington, or on Treasury notes at par. The first can hardly be disposed of at any price, and the last have a [doll] rate at from 20 to 22 per cent discount.
The bank paper of New York though much depreciated, passes current in Connecticut, and may be made to answer all the purposes of the Quarter Masters Department in that State at par. It will also pass in this State, but we must give five and a half dollars of it for a cord of wood, or any other article which may be bought for five dollars in New England paper.
It is understood that Treasury Notes may be exchanged in New York at from 5½ to 6 per cent discount, and I can see no method by which they can be made to answer the demand of the Quarter Masters Department in this District to so great advantage as to dispose of them in this way, and furnish the Department with New York paper. I need not add, that without funds of some kind, it will be impossible to get along with the public business.
So, not only did he not have any money, but the money that the government could most easily send him was probably worthless.
One thought on “War of 1812: Money issues, and issuing money”
It’s this sort of thing that helped create Banks of the United States…and later, the Federal Reserve.