The Genesis of Paper Money in the English Civil War

"Coine is the sinews of warre"
- Urquhart, Rabelais, 1653

The events outlined here between 1625 and 1660 were key times in the development of the use of paper money, and the foundations of English and American law, in the present day.

After King Charles I came to the throne of England in 1625, he began to devise various unpopular schemes for raising money to make war on Spain and France, and to reintroduce an episcopal form of church government in Scotland (which suppressed Puritanism, and was opposed by many Scottish sympathizers in Parliament):

1626: Charles' plan to debase the coinage opposed by Parliament.
1626-1628: "Forced loans", seizing coinage held in the Tower of London.
1628: Parliament's Petition of Right removed the King's right to make forced loans.
1629-1640: Charles I dissolved Parliament in March 1629.
1634: Increased Ship Money taxes.
1637: Trial of John Hampden for refusing to pay ship money stepped up crisis for Charles.
1638: 1st Bishop's war in Scotland against episcopal church government.
1640: Forced purchase on credit, and sale at a loss, of the East India Company's pepper stock.
1640: Seizure of the mint and one-third of the bullion.

In due course, in 1642, the English Civil War began as a result of Parliament's objection set forth in the Petition of Right to the King's right to levy taxes without Parliament's consent.

The Petition of Right is one of the basic documents of English Liberty, that contributes to the heritage of the United Kingdom and well as the United States together with the Magna Carta, Habeas Corpus, and the English Bill of Rights. For a poignant illustration of The English Legacy, see Court TV's Memorandum Opinion and Order document on Paula Corbin Jones vs. William Jefferson Clinton and Danny Ferguson.

Ultimately Charles I was tried, in 1649, and beheaded for treason at Banqueting Hall in Whitehall, London on January 30th.

As a consequence of Charles' seizure of the mint and the commencement of the Civil War, people were frightened into hiring goldsmiths's safes for storage of their valuables. This practice began to grow from about 1633; goldsmiths in London were considered safe because London was a strong supporter of Parliament and Charles could not take London.

With all these personal deposits in their safes, the goldsmiths' notes (receipts) begain to be recognised widely as evidence of their bearer's solvency. It was a small step from there for people to hand over transferrable notes for a certain amount of valuables on deposit as payment, instead of handing over the valuables themselves.

By 1660, the goldsmiths' notes of receipt had evolved into fully-fledged banknotes, and the goldsmiths would pay out monies against a signed order; this was of course basically the same as a modern cheque. And that's just the beginning of the story of paper money.

References

January 22nd, 1998 Updated Jan 3rd, 2007