16 October 2012

Revolutionary War Debt - Not Worth a Continental

The Whiskey Rebellion by William Hodgeland, 2006, Excerpts

The debt to American investors, which lay at the heart of the drama, took the form of interest-bearing notes issued chaotically by the Congress and various state legislatures to raise cash for the war. Those creditors kept reminding Congress that their investment in the war had been patriotic and should be rewarded as such. The Congress, representing sovereign states, had no power to tax anyone. Every state was therefore supposed to levy taxes to retire a proportionate amount of Continental paper. 

The colonies had been suffering a thirty-year economic slide, which was now a full-on depression. People in the countryside were desperate. States couldn’t collect taxes and were already failing to make agreed-upon requisitions of funds to Congress. So Congress printed more and more of its poorly supported paper. As early as 1776, everybody knew Continental paper would depreciate deeply, and by 1780 the Congress had to stop printing it. The bills soon traded at a rate of $125 in paper to $1 in coin. After passing out of circulation, they sold to long-shot gamblers at five hundred to one. The countryside filled up with broke, indebted veterans of a long war.

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