Financing America's independence
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Why did the American colonies have no chartered banks before 1782?
There were no banks in the in in the colonies because Britain didn't allow them. And Britain also bade the export of British coinage. And so the money supply that we had was a hodgepodge of Spanish dollars and bits and pieces of some British coins, but not many, and things like tobacco warehouse certificates which passed as money. Um, so we were in a very poor shape when it came to the most expensive public policy of all is war.
From the American Bankers Association, this is the ABA Banking Journal Podcast. Today's episode is presented by Q two. Welcome back to this special Fourth of July episode here in the 250th year since the Declaration of Independence was signed in 1776. Looking ahead to the holiday weekend, we wanted to bring you a special bonus episode from our archives, a conversation with John Steele Gordon, who is the From the Vault columnist for the ABA Banking Journal, as well as one of the of America's preeminent business and economic historians. We had a great conversation about the financing of the American Revolution and the role that banks played in both in the Revolutionary War period as well as in the early founding of the United States.
Thanks so much for listening and happy Independence Day. John is best known for his many books of economic history, the uh his book on Hamilton's Blessing, the story of America's national debt, the book The Great Game, about how Wall Street became a major economic power. And my favorite, An Empire of Wealth, The Epic History of American Economic Power. It truly is a must read book for anyone who's interested in the story of business, enterprise, and economics in the United States. And and so we're delighted to have John here with us. You've re you may well have read his work in the Wall Street Journal, commentary, many other publications, in addition to the ABA Banking Journal. John, thank you so much for being with us today.
I'm delighted to be here. I wanted to take some time to talk a little bit about the role that
What financial tools did the Continental Congress use to fund the Revolutionary War?
Banking and finance played in the early years of the fight to win America's independence and to become a not just a politically independent entity, but a a power of its own on the world stage. I think a really fascinating topic for us to explore, to think about for our audience of bankers, that it's a it's one that a little often gets overshadowed by the drama of the Revolutionary War battles or the the excess. excitement over the political debates around the Declaration of Independence, the Continental Congress, the the Articles of Confederation, the Constitutional Convention. This is a but it's a really important topic. So I guess I'll just start by saying, John, when I talk about the the role of banks or finance in the American Revolution, part of the challenge is that there really for most of the war there was no role.
for banks in the revolution because there were no banks in the United States. There were no banks in colonial America. And so as we look at the Continental Congress where the delegates are gathering to make this decision about about independence, marshalling the resources to fight a war against Britain that had already broken out. What tools did the Continental Congress and the Thirteen Colonies declaring independence have at their disposal to ensure that they might be able to win this r war against against Britain. What financial tools did they have to to to prosecute the war?
It's an old Chinese expression that wars are fought with silver bullets. And unfortunately we didn't have any. As you said, there there were no banks in the in in the colonies because Britain didn't allow them. And Britain also bade the export of British coinage. And so the money supply that we had was a hodgepodge of Spanish dollars and bits and pieces of Some British coins, but not many, and things like tobacco warehouse certificates which passed as money. Um, so we were in a very poor shape when it came to the most expensive public policy of all is war. I think the
How did Robert Morris finance the Continental Army and keep it afloat?
I'm not sure they articulated it, but the British had to fight a war with a three thousand five hundred mile supply line and that was a very difficult and turned out too difficult thing for them to do.
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Chapters
8 chapters
1
Why did the American colonies have no chartered banks before 1782?
0:02–2:08
2
What financial tools did the Continental Congress use to fund the Revolutionary War?
2:08–4:11
3
How did Robert Morris finance the Continental Army and keep it afloat?
4:11–5:50
4
What was the role of the Bank of North America as the first central bank?
5:50–7:23
5
How did the Bank of England give Britain a strategic advantage in the war?
7:23–9:41
6
What lessons did the founders take from the Bank of England when creating the U.S. central bank?
9:41–11:30
7
Why did early American leaders oppose a strong central bank and how did that affect the economy?
11:30–13:24
8
How did the post‑war financial system shape the drafting of the U.S. Constitution?
13:24–15:06