Even the Pilgrims had credit and debt. In 1641, the Pilgrims consolidated their debts to London creditors through installments (or “estallments,” as they were recorded) of four annual payments. They were backed by financiers and had credit obligations to repay at rates that were often between 30 and 70 percent interest.
Once the Pilgrims arrived and settlements began to spring up, some form of money became necessary.
There was no common currency and many did not bring coins with them. After all, who knew if they were going to live? So what did early settlers use?
The currency of the day was “wampum.” Wampum was usually made from the Northern Quahog, a hard-shell clam known to biologists as Mercenaria. The name “quahog” is a variation of the Native American name for the clam. The quahog got its Latin name in 1758, when the word “mercenaria,” was chosen. Mercenaria is the Latin word for “salary or wages.”
Trade using wampum began as early as 1620 by the Dutch with the local Indian tribes, Narragansetts and Pequots, in New York.
Wampum came to be used extensively for trade by the colonists, but the natives had many other uses for it. They used it to call a council, seat council members in the correct order, speak at the council, elect a chief, depose a chief (the chiefs were always men, but women elected and deposed them), for an adoption ceremony, during mourning, as records and deeds, as gifts and as ornaments.
Once the Dutch began to trade using wampum, the diaries of the 1628 writings of William Bradford, a Pilgrim, reveal general concern:
“But after it grew to be a commodity in these parts, these Indians fell into it also, and to learn how to make it; for the Narragansetts do gather the shells of which they make it from their shores. And it hath now continued a current commodity about this 20 years, and it may prove a drug in time.”
In 1664, Peter Stuyvesant arranged a loan in wampum worth over 5,000 Dutch guilders for paying the wages of workers constructing the New York citadel.
In 1641 Harvard College gladly accepted wampum as payment for tuition and the state of Massachustetes would happily take your wampum for tax payments.
Generally the rate of wampum was six white or three black beads for a penny. As late as 1701, New York State was still recognizing wampum as an official currency.
In the book “The Money Question: The legal tender paper monetary system of the United States. An analysis of the coined money or bank currency system, and of the legal tender paper money system” by William A. Berkey, published in 1876, the history of our American currency and wampum is revealed.
“For many generations after the first settlement of the colonies the work of production was slow and laborious, and the surplus products, at least such as could find their way to foreign markets, were hardly sufficient to procure in return the common necessaries of life.
The small sums of money brought to the country by the settlers were soon exhausted, sent abroad for merchandise, and trade for the most part had to be carried on by the inconvenient method of barter.
The Indians found along the shores of Long Island Sound were more advanced in civilization than those further north, and used a circulating medium of exchange consisting of beads of two kinds; one white, made out of the end of a periwinkle shell, and the other black, made out of the dark part of a clam shell. They were rubbed down and polished, and, when artistically arranged in strings or belts, formed objects of real beauty.
These beads circulated among the Indians as money. One black bead being regarded as worth two white ones, and were known as wampum or wampumpeag.
The colonists came to use them, first in their trade with the Indians and then amongst themselves.
In Massachusetts they became by custom the common currency of the colony, and were made a legal tender for 12 pence.”
What’s Up With Wampum?
Wampum wasn’t the only form of currency used during those times. The money supply fell into five groups.
- Traditional native currencies, such as furs and wampum, that were essential for frontier trading with the indigenous population but thereafter were widely adopted by the colonists themselves. For example, in 1637 Massachusetts declared white wampum legal tender for sums up to one shilling, a limit raised substantially in 1643.
- The so-called “Country Pay” or “Country Money,” such as tobacco, rice, indigo, wheat, maize, etc. – “cash crops” in more than one sense. Like the traditional Indian currencies, these were mostly natural commodities. Tobacco was used as money in and around Virginia for nearly 200 years, thus lasting about twice as long as the US gold standard.
- Unofficial coinages, mostly foreign, and especially Spanish and Portuguese coins. These played an important role in distant as well as local trade. Not all the unofficial coins were foreign. John Hall set up a private mint in Massachusetts in 1652 and his popular “pine-tree” shillings and other coins circulated widely until the mint was forced to close down in 1684.
- The scarce but official British coinage.
- Paper currency of various kinds, particularly in the colonies’ later years.
The History of Credit & Debt - The Pilgrims by Steve Rhode