Trade and Currency in Early Oregon
Jenson Hagen
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!
11:19 a.m.
Jan 1, '07
In Lane County v. Oregon, 7 Wall. 71 (1869), Chief Justice Chase wrote:
Both the States and the United States existed before the Constitution. The people, through that instrument, established a more perfect union by substituting a national government, acting, with ample power, directly upon the citizens, instead of the Confederate government, which acted with powers, greatly restricted, only upon the States. But, in many articles of the Constitution, the necessary existence of the States, and, within their proper spheres, the independent authority of the States, is distinctly recognized.
1:55 p.m.
Jan 1, '07
Fascinating bit of history.
I was thrown off by the author's name. A little googling suggests the book discussed above was written in 1907, so I'm pretty sure it wasn't written by the Jim Gilbert who ran for the Legislature, and wrote the preceding BlueOregon column, 99 years later?
Just checkin'!
Jan 2, '07
thanks for the fascinating post about oregon's historical reaction to national monetary policy. the 1800's were filled with many ideas and attempts to get past the gold standard, but they all failed (eg: greenbacks), failed to come about (or would have failed if implemented) because the gold standard was not our choice. the reason for the gold standard was the needs of trade with europe--mostly germany and the uk. They wanted gold backed currencies, and we were a developing nation that needed their goods--they got what they wanted.
last time you wrote about BRIC, i asked you if you were advocating a return to the gold standard, but you only partially responded with a post about breton woods agreement. i don't see any returning to breton woods agreement; we have gone from a de jure gold standard, to a de facto oil standard. i share your concern about the conservative inflationism of greenspan/bernanke. to deal with the oil caused trade debt over the past 25 years we have traded real wage growth, for inflated paper in the form of liquidity bubbles (stocks, housing... dollar?). as bad as this may have been for the working person, it served the very real need to steadily grow the gdp without radically increasing the need for imported oil. the problem is this system has now hit a wall, foreign investors, wary of the long term stability of our paper assets, are looking for real productive assets (thus, foreign investment in infrastrucure, such as toll roads, and the ports), and we are realizing the the real bottleneck is not oil, but carbon output. what we really need is to move from the de facto oil standard, to a de jure, international carbon equivalence standard which penalizes the currencies of nations that produce too much co2 eq.
unfortunately, i don't see what oregon can do about this, other than continuing to invest in technologies and infrastructure to be ahead of the curve when the time comes. we can regulate emmissions, but we're such a small market that are best bet is to attach ourselves to california via policy. we should also be seriously working on setting aside more forest land--via public ownership, and incentives for private land trusts; that real green will be worth a lot of "green" as a huge carbon sink someday, and will be a huge economic boon to the state.
Jan 3, '07
Thanks for the fascinating history lesson. It may hold relevance for Oregon's future. As to the best currency base--paper, gold, or other--I see no perfect choice. Gold had significant problems for multiple reasons. Paper fiat money relies on a level of self control by the printing power that is chancy at best. As we are learning, a major real currency, though not named as such, is energy production and energy reserves.
9:24 p.m.
Jan 3, '07
Peter,
I'm not sure what currency standard would work best. It seems that scarce commodities, i.e. beaver pelts, wheat, or gold, develop into a currency naturally.
A gold standard would be better than a fiat money standard simply because it would help correct current trade imbalances that have no chance of correcting themselves naturally so long as oil is the biggest source of global imbalances and oil is a dollar-denominated commodity.
With a fiat standard, the dollar depreciates, the price of oil goes up, we pay more for imported oil and . . . whamo, our trade deficit & financial account surplus remain. Not good!
Fiat money is here to remain in my opinion because it suits foreign governments. There will come a day when China, Saudi Arabia, and even Europe realize that they need our resources more than they need our overbloated consumer. It's at that point where they will see the benefit in dumping our dollar, making commodities more expensive for us and less expensive for themselves.
It's at that point that the state of Oregon can request submission of taxes in beaver pelts, wheat or whatever else will be more valuable than the U.S. greenback.
Jan 4, '07
Great, back to the gold standard. So instead of being beholden to the Middle East, we will be dependent on production by South Africa, Brazil, Australia, Canada, Russia, China. What if China wants all of its American dollars in back in gold? How will that affect our economy.
Jan 4, '07
Jenson, this is an interesting and informative presentation. Thanks you for that as for all of your recent posts addressing our economic situation.
peter added some additional interesting comments that raised a honest question in my mind. I know his claim:
we should also be seriously working on setting aside more forest land--via public ownership, and incentives for private land trusts; that real green will be worth a lot of "green" as a huge carbon sink someday, and will be a huge economic boon to the state.
will play well here for emotional reasons. However, does anyone have any hard numbers on how huge, or not, a carbon sink the total possible acreage of Oregon forest land that could be set aside as proposed actually is? This does come across on first read as a possible attempt to just piggyback the forest-land set aside agenda onto legitimate and serious concerns about the global liquidity crisis.
I fully support forest set-asides on their own merit. However, as I think Jenson can attest from the reactions he has gotten to several of his previous well argued posts, folks 'round here are too easily distracted by arguments which make sense emotionally yet in real life don't quite add up.
<h2>(Another thread on the front page at the time of this comment right vividly demonstrates my point. Out of 33 comments + the thread starter, not a single one I could find seriously addressed how much revenue a tax would generate, what that revenue would actually be spent on to mitigate the effects of carbon emissions, and how much mitigation would result.)</h2>