On June 22, 1775, Congress issues $2 million in bills of credit.
By the spring of 1775, colonial leaders, concerned by British martial law in Boston and increasing constraints on trade, had led their forces in battle against the crown. But, the American revolutionaries encountered a small problem on their way to the front: they lacked the funds necessary to wage a prolonged war.
Though hardly the colonies’ first dalliance with paper notes—the Massachusetts Bay colony had issued its own bills in 1690—the large-scale distribution of the revolutionary currency was fairly new ground for America. Moreover, the bills, known at the time as “Continentals,” notably lacked the then de rigueur rendering of the British king. Instead, some of the notes featured likenesses of Revolutionary soldiers and the inscription “The United Colonies.” But, whatever their novelty, the Continentals proved to be a poor economic instrument: backed by nothing more than the promise of “future tax revenues” and prone to rampant inflation, the notes ultimately had little fiscal value. As George Washington noted at the time, “A wagonload of currency will hardly purchase a wagonload of provisions.” Thus, the Continental failed and left the young nation saddled with a hefty war debt.
A deep economic depression followed the Treaty of Paris in 1783. Unstable currency and unstable debts caused a Continental Army veteran, Daniel Shays, to lead a rebellion in western Massachusetts during the winter of 1787. Fear of economic chaos played a significant role in the decision to abandon the Articles of Confederation for the more powerful, centralized government created by the federal Constitution. During George Washington’s presidency, Alexander Hamilton struggled to create financial institutions capable of stabilizing the new nation’s economy.
Duly frustrated by the experience with Continental currency, America resisted the urge to again issue new paper notes until the dawn of the Civil War.