How Wilmington Got its Name – And a Lesson for International Trade
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Foreign trade ends up being cleared through international money – a currency that the world accepts as final payment, even in places where it is not legal tender. Using its own domestic money allows a country to expand domestic credit even as, at the same time, it clears accounts with foreign counter-parties using international money. The pre-revolutionary colonies and then the United States of America found that they could build a domestic credit system if they were able to have the international money needed for foreign trade held offshore. When the U.S. attempted to incorporate the use of the international money from trade into its domestic finance, the result was default and severe devaluation.
In the 18th century Anglo-Dutch world, no one with international money – gold and silver coin – in hand world doubted that the Indies and the Americas offered wonderful possibilities for gain. When he died in 1754 in Philadelphia, Charles Willing left a fortune made from speculations in land and trade in the New World. With the help of his cousin and their investments in shipping and property development, Willing turned 1,000 pounds into an estate of 20,000. They had even established a town in their own name that survives to this day – Wilmington, Delaware.
Neither Charles nor his cousin thought the 20-fold increase in wealth over 26 years was miraculous, not when the Dutch East India Company’s dividends were averaging 18% a year. What was extraordinary was the Willing family’s farsighted determination to solve the problem they called “the exchange”. The real estate lots in what became Wilmington might be sold at handsome profits; but the payments received would be in colonial notes and bills. Those could rarely, if ever, be exchanged for coin and only at punishingly steep discounts; but for their shipping business, the Willing firm needed international money. They could pay for export goods in Philadelphia using domestic credit and paper currency; they needed coin to buy foreign cargos. Without purses that had gold and silver, their ship captains were entirely dependent on barter arrangements in overseas ports. To sell the cargos outbound from Philadelphia, they had to find those foreign merchants who would do swaps.
English merchants had accepted these same terms of trade in their dealings with the American colonists. American planters would finance their imports from England by pledging their annual crop production. Individual shipments of tobacco and other crops would be consigned to London merchants for sale, and the proceeds would discharge the planters’ debts. (Thomas Jefferson never quite accepted the practical necessity of American banks, even after he joined Madison and others in supporting the second Bank of the United States. Why did Americans need them? Through his factor in London, he sold his tobacco and secured his purchases and did not “have dealings in finance more than once a year”.)