Today, banks have lobbyists and economists to convince the central banks to create money. In 1786, no such niceties existed and a New Hampshire farmer, Moses French, tired of New Hampshire’s economic mess, became leader of a small army determined to force the government to adopt an easy money policy.
In 1786, the currency situation in New Hampshire was chaotic. With the American Revolution over and the state operating on its own, the government was under pressure to decide what money would be recognized and honored and what was worthless.
In an early attempt to keep the peace, the legislature ruled that all currencies would be acceptable in trade and for payment of taxes. The result, perhaps somewhat predictable, was that debts were paid with useless paper currency and money was printed as needed. The result was that many currency holders began refusing to part with cash that they expected would hold value and refused to accept payment in other currencies that they doubted.
With no cash to circulate, the economy — other than bartering — became very sluggish. Colonial state governments were accustomed to issuing ‘bills of credit’ to help increase the money supply. These bills were similar to modern currency and were accepted for payment of debts and taxes.
Frequently there was a great tug of war over whether bills of credit should be issued, as they tended to deflate the value of the British pound. Wealthy merchants who had amassed a stockpile of pounds would typically resist creation of bills of credit as it would reduce their wealth.
However, in the chaos and straightened circumstances after the war, the citizenry needed a reliable supply of currency and the British certainly weren’t sending any. This is where Moses French entered the picture. French was a farmer from Hampstead and was elected head of a band of some 200 men who armed themselves and rode to Exeter to prod the legislature forward at point of a gun.
The legislature had considered issuing bills of credit to ease the crisis, and 30 towns had endorsed a petition demanding that the government do just that. The legislature, meanwhile, was still siding with those who already had a pile of money.
On September 20, 1786, French presented the petition to the legislature at Exeter and a three-way standoff ensued. Samuel Livermore, leader of the General Court, appointed a committee to meet with the protesters on the issue. John Sullivan, leader of the senate, had studied law under Livermore. But he disagreed with his old teacher. Sullivan led the Senate in declining to join in the meeting. Sullivan, a revolutionary war general, had been richly rewarded by the French for his service (and his votes in the early Congress) and likely was in no dire need of a local currency.
Moses French, meanwhile, was accompanied by junior officers from the revolution from Londonderry and other western parts of the state.
Sullivan agreed to meet the rabble and explain his position. It would be improper, he said, for the government to meet and discuss issues with the men while under threat of violence. Further, he noted, he would summon the loyal militia to disperse the crowd. This he did, and after a full night holed up in its meeting house at gun point, the members of the legislature were finally allowed to go free and return to their homes when rescued by more than 1,000 militia.
No one was injured in the insurrection, and several of the leaders were taken prisoner. All, however, eventually left the matter behind them with an apology, and charges at later trials were dismissed.
With the ratification of the U.S. Constitution in 1788, the issued died once and for all when states were formally prevented from issuing bills of credit — a power which was given only to the federal government.