Can someone explain to me this passage in Ben Franklins autobiography? I get the sense it's some kind of bond? I don't have the economic chops to get it and that on top of the slightly inscrutable writing style have left me stymied.
"I then suggested a method of doing the business without the governor, by orders on the trustees of the Loan office, which, by law, the Assembly had the right of drawing. There was, indeed, little or no money at that time in the office, and therefore I propos'd that the orders should be payable in a year, and to bear an interest of five per cent. With these orders I suppos'd the provisions might easily be purchas'd. The Assembly, with very little hesitation, adopted the proposal. The orders were immediately printed, and I was one of the committee directed to sign and dispose of them. The fund for paying them was the interest of all the paper currency then extant in the province upon loan, together with the revenue arising from the excise, which being known to be more than sufficient, they obtain'd instant credit, and were not only receiv'd in payment for the provisions, but many money'd people, who had cash lying by them, vested it in those orders, which they found advantageous, as they bore interest while upon hand, and might on any occasion be used as money; so that they were eagerly all bought up, and in a few weeks none of them were to be seen."
So one of the chronic problems of the Colonies was lack of cash money. While rich in land, crops, timber and other assets, most colonies also had great demand for imported goods and few liquid assets. Whatever gold and silver coins were present in the colony tended to leave it quickly to buy imported goods, which were used to expand the production of agriculture (i.e. more land, crops and timber) and such and there were few if any gold and silver mines on the eastern seaboard to replenish the money supply.
A related problem was that the colonial governments themselves had little means of raising capital, even for immediate needs like (in the Franklin example) of spending money on food and supplies for the forces defending the colonies from the French.
So the scheme Franklin undertakes here, is to essentially create some bonds which pay a fixed rate of interest. The interest is paid by excise taxes (taxes on purchasing alcohol or other specific goods) which the legislature controlled, and apparently interest on loans made by the government in paper money. Because people know that this revenue stream is really enough to cover the annual interest on the bonds, the bonds are valuable.
Because the bonds are valuable, the PA legislature can trade them to people for the food and supplies they need to assemble for use of the military defending the colony. But the really cool part is that because they are valuable, those people who take them instead of hard silver or gold cash can in turn trade them to other people for goods and services they would like to buy. So in effect, the bonds are instantly money of a semi-official sort, which helps solve the shortage of money in circulation I describe in the first paragraph.
Additionally, people who had hard cash money have a good incentive to trade it for the bonds, because the bonds are almost money anyways, (i.e. people will take them for goods and services) and why not hold a form of money that also pays interest? And if the government collects some hard money thru this means, it'll buy things and put the money back in circulation, easing the cash shortage.
While the colonies are rapidly growing in population and economically (and the excise or other tax increasing) each year, this kind of financing is fairly viable. Alexander Hamilton used similar approaches to stabilize the finances of the early Unites States after the revolution. There is a lot of political criticism (legislatures that can do this are inherently more powerful) and economic criticism (it encourages speculating) of this solution, but in hindsight we can say that the American Colonies and later the US Government were able to fund their needs while actually helping the economy expand.