Excerpted from " A Brief History of Community Currencies" by Tim Cohen-Mitchell..........
One of the first monies circulated in North America was wampum, shells that were used by the Indians for trade. Wampum was later used by early European settlers as small coinage, and in Massachusetts in 1641, "was made legal tender, subject to some limits asked to the size of the transaction, at the rate of six shells to penny," the penny being the British standard (3).
"The shells came in two denominations, black and white, the first being double the value of the second... the acceptability of wampum depended on its being re-deemed by the Indians in pelts. The Indians, in effect, were the central bankers for the wampum monetary system, and beaver pelts were the reserve currency into which wampum could be converted. This convertibility sustained the purchasing power of the shells. As the 17th century passed and settlement expanded, the beaver retreated to the ever more distant forests and strains. Pelts ceased to be available; wampum ceased, accordingly, to be convertible and thus, in line with expectation, lost its purchasing power. Soon it disappeared from circulation except as small change" (ibid)
Counterfeiting of wampum also contributed to its downfall, with some unscrupulous traders painting the less valuable white shells with black pitch to double their value.
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