Counting on the Continental Currency
On June 22, 1775, the Continental Congress issued the first Continental currency in the form of $2 million in bills of credit. At the time paper money was almost a rarity as most people preferred hard currency. Actual coins made of silver and gold. Unfortunately, there was not enough of the hard specie, as it was called, in the colonies to pay for the war.
The paper money was backed only by the promise of future tax revenues and fluctuated badly from the start. The value rising and falling based on the performance of the Continental Army against the British. It did not take long for the up and down to become simply a down as rampant inflation, lack of faith in the currency and the British penchant for counterfeiting (Read more about that here! Or in the hardcover annual here.) made the paper not even worth the paper it was printed on.
By 1781 the exchange rate was $225 to $1. ($225 in Continental currency for $1 of hard specie.) This was at a time when the average Continental Army private made $5 a month in Continental scrip. If they were paid at all. Most men had received little if any pay since 1778.
Joseph Plumb Martin, a soldier from Connecticut, relays in his memoirs a story where to earn a little extra (having not been paid in many months) he assisted in a roundup of runaway slaves that had fled to the service of British after the siege at Yorktown in 1781 had ended. “… the fortune I acquired was small, only one dollar; I received what was then called its equivalent, in paper money, if money it might be called, it amounted to twelve hundred (nominal) dollars, all of which I afterwards paid for one single quart of rum; to such a miserable state had all paper stuff, called-money- depreciated.”
Twelve hundred dollars for a quart of rum, and we thought prices were high today. The struggle to pay for the war is an epic tale for another time. It almost came to pass that counting on currency was almost a disaster.