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The Continental Currency

Its Amount and Influence

How Long it Was Equivalent to Specie

Its Gradual Depreciation

John Adams On Excessive Issues

Colonial Bills of Credit

Franklin's Foreign Loans and Their Effect on the Paper Currency

Prices of Goods in 1780

The Rates of Foreign Exchange

Final Disappearance of Continental Money from Circulation

Whichever of the financial bills now before Congress may ultimately be adopted, it is certain that the volume of the circulation must receive considerable augmentation and, our ship of State being thus irretrievably launched among the whirlpools, rocks and quicksands of irredeemable paper money, it is at once the duty and the interest of every citizen to learn something of the means by which shipwreck and disaster may be avoided.  If we believe certain members of Congress, the perils feared are all imaginary, and will never be more than the childish fictions of dreaming ignorance. Others. less sanguine, but equally honest, point us to past history and declare that ruin and bankruptcy will certainly overtake the whole country.  Neither of these extreme views is absolutely true. 

Paper money has usually proved a good servant, but always a bad master.  In confirmation of this we have often referred to the English paper money, which during the French war sustained its credit and depreciated on the average less than five per cent.  We now propose to examine a still more interesting example - that of the Continental currency issued in this country during the war of independence.

It has long been the fashion to deride the Revolutionary paper money as the worst example of an irredeemable currency which the world has ever seen.  The history of that financial experiment has yet to be written, and the materials for such a history have to a great degree perished.  Enough, however is extant to show that the Continental currency was not wholly a failure.  And one of the most illustrious statesmen of the Revolution has declared "the Continental victory was largely due to the Continental money, the memory of which should be forever enshrined in the hearts of the people as that of a champion who vindicated the liberties of the American colonies, and fell gloriously in the moment of victory."

We cannot within the limits of this article attempt more than a brief review of some of the most interesting facts relative to this first experiment in America of a national uniform paper currency.  Still, as the country is now, after the lapse of three generations of unexampled prosperity, making a second trial of the same perilous financial policy , we may deduce from our former want of success some lessons which, if wisely regarded by Congress and the people, may spare us some of that public calamity and private suffering the apprehension of which is depreciating the public stocks, enhancing the value of gold, spreading gloom and distrust throughout our commercial classes, and deranging the business machinery of the nation.

The Continental money began to be emitted in the summer of 1775.  The war was then fairly begun; news of the rout of the British at Lexington had just arrived; the battle of Bunker Hill had proved the valer and endurance of our troops in the face of the disciplined, compact and well officered European veterans. The patriotism of the people was truing to the highest pitch; Washington, by universal acclamation, was appointed Commander in-Chief.  Regiments of "minute men" sprung to arms, and committees of safety were organized throughout the country.  The most resolute, unswerving zeal for liberty carried away the population en masse. Every cottage had its musketeer; and every hillside and valley resounded with the din of martial preparation.  Nothing was wanted but money.

From taxation no funds whatever could be raised; for farmers could not sell their produce, commerce was suppressed, the wheels of productive industry stood still, and the whole country was impoverished by the troubles and incipient anarchy of the preceding years.  There was no alternative but to borrow, and no expedient was known capable raising loans except by means of paper money. Congress had, therefore, to constituted itself a bank of circulation and to issue bills of credit, such as in times of financial pressure the individual colonies had for a century or more been accustomed to emit in limited amounts.  The plan was opposed in vain.  A relentless necessity forced its adoption, and there followed such an unexpected and immediate success as for the time silenced every cavilling voice. The new currency was welcomed by the people; for they had long suffered from the scarcity of coin.  Passing freely amount the soldiers and the traders who furnished supplies, it soon received the name of "continental money", both to distinguish it from the bills of credit of the individual States, and also because it was authorized and guaranteed by the Continental Congress.  This embryo national legislature had first met in Philadelphia, about nine months before- on the 15th of September, 1774 - and under its auspices the war, which lasted eight years, was conducted to a victorious termination, at a cost of one hundred and thirty-five millions of dollars, of which as we shall presently see, almost one-fourth was raised by paper money.

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