Wampumpeag was a famous currency used by the American Indians, particularly but not exclusively along the eastern seaboard, and became widely accepted by the English colonists. The name of the currency, a bit of a mouthful, was usually shortened to wampum. The peag meant “beads” in the language of the Indians, and the wampum referred to the white color of the beads. The most common color was white but some of the beads were black. Wampum rose to the status of legal-tender currency in 1643 when Massachusetts set the value of the white beads at eight and the black at four to the penny for sums no more than 40 shillings. In 1649 Rhode Island set the value of black beads at four to the penny, but reduced the value in 1658 to eight to the penny regardless of the color of the beads. White beads, however, were taken in payment for taxes at six to the penny. As the white man with improved tools learned to manufacture wampum at a faster rate, the supply increased, and in 1662 Rhode Island ended the acceptance of wampum for payment of taxes.
The shells of clams and other similar bivalves furnished the raw materials for the manufacture of wampum. The estuarine rivers of the northeast of America and Canada made fertile breeding grounds for these clams and bivalves. A typical piece of wampum was a cylindrical bead about one-half inch in length, and about one-eighth to one-quarter inch in diameter. The beads were strung through a hole drilled lengthwise through each bead. The ornamental value of wampum remained an important part of its attraction as a medium of exchange. Wampum strings that traded as money were usually either 18 inches or six feet in length. They were usually counted in cubits and fathoms, but could be divided into smaller values. The black wampum usually traded at twice the value of the white wampum. Both the English and the Dutch made use of this currency. In 1644 Peter Stuyvesant, directory general of New Netherland, negotiated a loan of between 5,000 and 6,000 guilders in wampum, which was used to pay workers who were building a fort in New York.

Several factors caused wampum to gradually lose its value. The Stone Age technology of some of the tribes known for producing wampum had kept the supply somewhat in bounds. The colonists brought with them steel drills that substantially increased wampum production, and the colonists themselves began to manufacture wampum. Also, part of the value of wampum hinged upon its usefulness in the purchase of beaver skins. As these skins declined in value, wampum lost some of its value as well. In a matter of a few years the Indians saw the value of wampum fall by 50 percent, which they interpreted as efforts of the white man to cheat the Indian.
Nevertheless, in New England the demand for wampum remained strong into the eighteenth century. In 1760 J. W. Campbell built a wampum factory in New Jersey and boasted that one person could manufacture 20 feet of wampum per day. This factory remained in operation for 100 years. The manufacture of wampum still contributes to the tourist industry.
The history of wampum as money among the American colonists shows that advanced societies will find a medium of exchange when more official supplies of money are in short supply.

See also:

Hepburn, A. Barton. 1924. A History of Currency in the United States.
Martien, Jerry. 1996. Shell Game: A True Account of Beads and Money in North America.
Taxay, Don. 1970. Money of the American Indians, and Other Primitive Currencies of the Americas.