Continental Currency was printed in a variety of denominations, this piece being valued at "Eighty Dollars." It was produced by Hall and Sellers of Philadelphia in 177 9. Note the intricate designs on both sides, which was done hopefully to discourage counterfeiting.
NOT WORTH A CONTINENTAL
Treasurer General Thomas P. Curtis relates how the Founding Fathers, with little gold or silver on hand, turned to printing paper money — with disastrous results. The problem worsened when the British cleverly produced counterfeits.
Anyone who has studied the period of the American Revolution and the difficulties facing those who fought for independence knows that one of the major problems was that of finance.
Indeed, this has always been a major problem for governments engaged in a lengthy war and it continues to plague us to this day. Witness Vietnam. There are a variety of answers that have been tried throughout the centuries. A government can tax its citizens (a direct and rather painful way of raising funds). It can borrow money from both its citizens and other nations. Or it can just print more money. The last recourse almost always leads to inflation, but seems to be the least objected to in the short term. Almost all governments have resorted to this expedient.
How To Pay The Bills?
And so it was with our forebears in the American Revolution. The Founding Fathers had to find a way to pay the troops, to buy the necessary supplies to feed the Patriots and attend to the countless expenses offighting the greatest colonial power in the world, Great Britain. How to do so? They had little gold or silver. in hand in 1775. They couldn't tax the citizenry. Each colony was jealous of its rights and few would even consider giving up tax authority to any central government. They couldn't borrow gold from other nations. Up until the arrival of French support after Saratoga, no other nation could expect a "rabble in arms" to pay back any loans. But they could print money — and they did.
On the 10th of May, 1775, the first issue of Continental Currency was circulated, The bills were printed by Hall & Sellers in Philadelphia. They were designed with intricate patterns to make counterfeiting difficult and bore a variety of patriotic mottos in Latin on their obverse.
A special paper was used and the image of a real leaf from one of the local trees was imprinted on the reverse; it was felt that no counterfeiter could duplicate the pattern of God's handiwork. The bill claimed that the bearer was entitled to the designated amount of Spanish milled dollars (the most common coin then in circulation in the colonies) or the value thereof in gold or silver. It didn't explain how one was to collect the hard money thus promised — there being no hard money in the treasury. There were a variety of denominations and one could come up with an eight dollar bill, a seven dollar bill or even the proverbial three dollar bill.
Hard Money Disappears
At first, the bills were accepted at face value. After all, they were issued by Patriots for Patriots. One ominous result, however, was that almost immediately all hard money disappeared. It was a case of Gresham's law, which states that bad money will drive out good money. Who wants to spend their guineas when paper is just as acceptable? The trouble was, of course, that paper wasn't as acceptable and many merchants preferred real money to paper. In fact, this became so frequently the case that Congress had to pass a resolution in January. 1776 that "whoever should refuse to receive in payment Continental bills, should be declared and treated as an enemy of his country and be excluded from inter-course with its inhabitants".
The sad tale of the Continental Currency thereafter was one of more and more rapid depreciation. As the value of the Continentals dropped, Congress had to print more of them — and as more money flooded the countryside, its value dropped even more rapidly. In November of 1776, $19 million had been issued and one could still buy$1.00 worth of goods for $1.00 in paper. By November of 1778, $31 million had been issued, and it took $6.00 in paper to buy the same amount. By November, 1779 $226 million was in circulation and it took $40.00 in paper to buy $1.00 in goods. After that, it was all down hill. In April 1779, George Washington complained, "A wagon load of money will scarcely purchase a wagon load of provisions".
Congress tried desperately to stop this depreciation — with disastrous results. Several laws were passed, requiring citizens to accept the paper money on a par with gold or silver. This attempt at price control had the effect of eliminating goods from the market. Who would offer goods of real value in exchange for near-valueless paper? It was just at that time that George Washington and his men were suffering at Valley Forge — suffering, in great part, because no one had any food to sell to his quartermaster — for paper money. Price controls nearly destroyed our army and might have, but for the heroism of the Continental soldiers.
Why did Congress go on printing money for so long a time rather than attempt some sort of taxation? Just as today, there was a mindset among politicians which made them want to avoid the unpleasant. One member of the Continental Congress was quoted as saying: "Do you think, gentlemen, that I will consent to load my constituents with taxes, when we can send to our printer and get a
wagon load of money, one quire of which will pay for the whole?".
Also, if truth be known, not many understood the reason for the depreciation. As one patriotic old lady remarked in 1777, "What a shame it is, the Congress should let the poor soldiers suffer when they have power to make just as much money as they choose." Many people still think that way today. Rather than grasp the simple fact that if you double the money supply you will reduce its value accordingly, they tend to blame the merchants for raising prices, the natural result of a depreciation of the value of the money.
This "Eight Dollars" currency was printed by Hall and Sellers in 1776.
Needless to say, the British were not reticent about lending a hand in the depreciation of the Continental Currency. For all the efforts on the part of Hall & Sellers to make the bills hard to counterfeit, they were, in reality, rather crude products and it was a simple matter for loyalists and the British government to duplicate them. When countless counterfeits were being added to an already flooded money supply, it's not surprising that the value of the currency kept falling.
And what group was most hurt by this inflation? Not the tories. Although they were required to accept the paper money, they got rid of it as quickly as possible, passing it along to other citizens. Not the politicians. They were the first to get the new issues of money and could spend it before it had lost its value. It was the Patriots, the little folk who supported the cause, who were left holding the bag — a bag full of worthless paper by the end of the war. This was true of my own forebears as well as many, many others. In the Curtis genealogy, the following appears: "When the expedition against Canada was fitted out under Arnold, Obadiah and Martha Curtis loaned their specie (hard money) to the colony and took their pay in Continental paper." They never saw any of that specie again, needless to say.
It was a bitter experience, this paper money inflation during the first years of our existence as a nation. So bitter for those who won that Alexander Hamilton was to write:
"The emitting of paper money is wisely prohibited to the state governments and the spirit of the prohibition ought not to be disregarded by the United States Government." As a result of this and further abuses of paper money during the time of the Articles of the Confederation, Article I, Section 10 appears in our Constitution: "No state shall ... make anything but gold and silver coin a tender in payment of debts."
Postscript. It's a pity that people so quickly forget the lessons of the past. At present, our government (through the Federal Reserve System) is emitting billions of dollars in paper money, irredeemable in anything but more paper money and, if one uses gold as a standard, the dollar is worth five cents in the money of 1920. Will we ever learn?