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Early Paper Money of America / North Carolina / 1785 December 29 Act

£100,000 ($250,000) in legal tender Bills of Credit authorized by Dec. 29, 1785 Act. Decorative border and vignettes on the face. The balance of the face and all of the back is typeset. Printed by Thomas Davis on thick paper watermarked NORTH CAROLINA. Test specimens on blue paper. Signers were John Hunt and Absalom Tatom.

6d Thirteen stars [25,000]
1s Wreath [25,000]
2s Plough [25,000]
2s6d Phoenix. MELIOR RESURGO (I return improved) [25,000]
5s Ship near fort. COMMERCE [25,000]
10s Crown and book [25,000] ▷RM◁ 
20s Angel Gabriel and church [25,000] ▷CF◁ 
40s Justice [24,375] ▷RM◁, ▷CF◁ 


North Carolina’s specie notes issued under the May 17, 1783 and December 29, 1785 Acts remained in circulation until 1816, a period of twenty-nine years after the U.S. Constitution prohibited issuance of Bills of Credit by States. Property taxes were first intended to create a sinking fund for specie note redemption along with the proceeds of confiscated Tory property. The State remained in such poor financial condition that redemption of its specie notes was of low priority. At the Nov. 2, 1789 Session of the State Legislature, specie notes were ordered to be redeemed in specie by January 1, 1791, but this Act was repealed at the Nov. 1, 1790 Session because the State had no available specie. Thereafter the State’s annual sinking fund was eliminated year by year from 1792 through 1810 and no specie notes were redeemed. These notes had depreciated 20% below specie value and so remained. By 1800 about $300,000 (equal to a face value of £166,667) were in circulation.

In 1804 when the legislature incorporated the Bank of Cape Fear and the Bank of Newbern with the right to issue circulating notes the State of North Carolina realized that profits from banking might pay the State’s debts (including the specie notes). Whereupon in 1805 the State Bank of North Carolina was incorporated with a capitalization of 8,000 shares at $50 each, the first $10 payable in specie, the next $10 “in the paper currency of this State at the rate of ten shillings for a dollar,” and other installments as the directors would determine. The State could subscribe to 2,000 shares but was to be loaned part of its subscription payment by the bank. Half of the State’s dividends were to be used to redeem its paper money. This scheme was so impractical that it was repealed at the November 1806 Session. During the same session the State granted itself the right to buy an aggregate of 250 shares in the Bank of Cape Fear and the Bank of Newbern if those banks agreed to accept in payment for the shares the currency which the State had in its treasury. This was equivalent to putting more State paper money in circulation and the plan was rejected.

At the November 1810 Session the State Bank of North Carolina was again incorporated with the right of the State to buy 2,500 shares out of 16,000 at $100 each, payable in U.S. Bonds then owned by the State and any balance to be paid in specie at the convenience of the State. The 1783 and 1785 specie notes were to lose their legal tender status when the bank opened. Other subscribers could pay for their shares to the extent of one-fourth in State currency. All dividends due the State were to be used to pay off the State currency. This plan failed to materialize and at the November 1811 session the Bank was required to redeem all State currency by Dec. 18, 1816 and not to recirculate, any which was received.

When the War of 1812 caused a small change shortage the State approved $82,000 in fractional Treasury Notes at the November 1814 Session in violation of the United States Constitution and used the notes to buy 410 newly issued shares in the Bank of Cape Fear and 410 in the Bank of Newbern. After Jan. 1, 1816 the 1783 and 1785 specie notes were to lose their legal tender status at these two banks but not at the State Bank of North Carolina. The Bank of Cape Fear and the Bank of Newbern had their charters extended and their capitalization increased on condition they would redeem the 1783 and 1785 specie notes if the State Bank of North Carolina dissolved before Dec. 18, 1816. The Governor was ordered to remove all legal tender status of the 1783 and 1785 issues when the redemption was accomplished. At the November 1816 Session $80,000 more fractional Treasury bills were authorized to be issued by the State and to be used to pay the State’s obligations at the State Bank of North Carolina. Thus the 1783 and 1785 specie notes were finally discharged by the substitution of new illegal issues of North Carolina paper money, but necessity had dictated this action.

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