A synopsis of the book Trade and Currency in Early Oregon by James H. Gilbert
As the fur trade matured in Oregon in the early 1800’s, beaver pelts acted as the currency because of their growing scarcity. With population rising and agriculture becoming the dominant economic activity, wheat took over as the main currency by the 1840’s. This soon developed into a “wheat standard” where stores would extend credit based upon wheat held in deposit. Portland was but a blip on the map at this point.
This all changed with the Gold Rush in California. Demand for timber and agricultural products gave a boon to Oregon’s economy. The state’s population grew rapidly with Portland becoming the center of new export activity. The extraction of gold in California found its way to Oregon, quickly replacing wheat as a vehicle for trade and credit. In February of 1849, the Oregon Legislature allowed minting of “a 5 and a 10 pennyweight piece valued at 5 and 10 dollars respectively.” That makes cents.
Discovery of gold in the Rogue River Valley in Southern Oregon in 1852 helped spur an already strong economic expansion. Gilbert presents examples of how prices rose in Oregon City to levels similar to those of the 1960’s or 70’s—a hundred years later. Oregon found itself deficient in agricultural laborers and capital as the gold rush drained resources.
This all came to a head in 1854 when trade declined causing an economic slowdown. Mines that had productive capacity were still unable to meet their financial obligations. Gilbert uses the term depression to characterize the period from 1854 to 1857 that witnessed a move away from gold mining back to timber and agriculture. The easy "store" credit from the prior decade that resulted in a despression led delegates to Oregon’s constitution in 1857 to include Article XI, Section I: nor shall any bank, company or institution exist in the state with the privilege of making, issuing or putting into circulation any bill, check, certificate, promissory note or other paper, or the paper of any bank company or person to circulate as money.
By the time the Civil War started in 1861, Oregon’s “solid gold” currency butted heads with the printing presses of the East. In order to pay for the war, the U.S. began introducing more and more greenbacks into the economy. At first, patriotism compelled Oregonians to accept greenbacks at face value, illustrated by passage of the following: “Resolved, that we, the labouring and producing citizens of The Dalles and vicinity pledge ourselves to trade only with persons who are patriotic enough to take the faith of the government at par.”
I find this funny. Because of the loss of gold and overproduction of greenbacks, cities quickly turned against the inflationary currency. Salem soon accepted greenbacks at 90% of face value. By January 1863, Portland businesses used the prevailing terms of San Francisco which at that point were 84% of face value. By March of 1863, because of the seemingly useless value placed on greenbacks, the Oregonian considered anyone trading in the government’s inflated paper a “cheat.”
In 1863, when Linn County tried to remand taxes to the State in paper greenbacks, Mr. Cooke, the Secretary of Treasury, denied receipt and demanded payment in gold coin. An Oregon court upheld the Treasury, but in 1864, counties tried again. By this time, greenbacks were discounted by 65%. Oregon sued Lane County for payment in specie; the decision was upheld by the Circuit Court and later by Oregon’s Supreme Court. By 1868, the case reached the U.S. Supreme Court resulting in a landmark decision that allows states to accept whatever currency they want. This decision is the reason why I came across this book and holds mainly implications for a state’s ability to fight against a currency whose purchasing power is being eroded by inflationary acts of the Federal government.
In the end, 1/20th of 1% of greenbacks found their way into Oregon and Washington, and whereas gold and silver had practically disappeared from the currency of the East, it is estimated that fully $25 million in gold coin remained in circulation on the Pacific Slope.
Perhaps 2007 will be the year Oregon once again has to fight back against inflated paper.
Happy New Year!