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.
Congress issues Continental currency, June 22, 1775
On this day in 1775, the Second Continental Congress issued $2 million in bills of credit. By that spring, after the American colonies had rebelled against the British crown, the insurgents had realized that they lacked the funds necessary to wage a prolonged struggle.
To deal with the problem, Congress began issuing paper money known as Continental currency, or simply as Continentals. The paper money was denominated in dollars ranging from one-sixth of a dollar to $80. As the revolution progressed, Congress issued more than $240 million in Continental currency.
The currency soon depreciated, giving rise to the phrase “not worth a Continental.” Both Congress and the individual colonies, acting independently, continued to issue “bills of credit.” Paper bills issued by both Congress and the colonies could not be exchanged for gold or silver.
Robert E. Wright, a financial historian, noted: "Some think that the rebel bills depreciated because people lost confidence in them or because they were not backed by tangible assets. Not so. There were simply too many of them.”
Meantime, the British counterfeited Continentals on a massive scale. Benjamin Franklin wrote: “The artists they employed performed so well that immense quantities of these counterfeits, which issued from the British government in New York, were circulated among the inhabitants of all the [colonies], before the fraud was detected. This operated significantly in depreciating the whole mass.”
As George Washington, the Patriots’ commander in chief, noted at the time, “A wagonload of currency will hardly purchase a wagonload of provisions.”
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By 1780, the bills were worth 1⁄40th of their face value. Congress struggled in vain to reform the currency by removing the old bills from circulation and issuing new ones. By mid-1781, Continentals had effectively ceased to circulate as legal tender. Franklin noted that the depreciation of the currency had, in effect, served as a tax that financed the war.
After the Continental currency collapsed, Congress appointed Robert Morris to be superintendent of finance of the United States. In 1782, Morris championed the creation of the first financial institution chartered by the United States, the Bank of North America. The bank was funded in part by commodity-backed money, known as specie, which royalist France loaned to the United States.
The United States started issuing its own banknotes in 1776 after the start of the American Revolutionary War, denominated in Continental Currency. While no legislation authorizing a dollar coin has been discovered, but no resolutions from July 22, 1776 through September 26, 1778 mentioned the one-dollar banknote, suggesting that it was to have been replaced by a coin. 
Benjamin Franklin designed both sides of the coin.  The obverse features the Sun shining sunlight on a sundial, the Latin motto "Fugio" (I flee/fly), and "Mind your business", a rebus meaning "time flies, so mind your business".  The reverse features 13 chain links representing a plea for the Thirteen Colonies to remain united. 
Controversy over coin status Edit
An article in the January 2018 issue of The Numismatist argued that the Continental Currency dollar coin may not have been a coin at all, but a token produced in Great Britain as a souvenir. The article cited the fact that there is no contemporary record of the pieces having been commissioned by the Continental Congress or in the anywhere in the colonies until long after the revolution. 
Elisha Gallaudet engraved the coin dies, according to numismatist Eric P. Newman.  An estimated 6,000 coins were minted, probably in New York. 
Today, about a hundred dollars survive, struck in pewter.  Historians surmise that much of the original mintage was melted due to wartime demand for the alloy.  Only a few silver examples are known to exist. This composition was most likely standard for circulation. However, the idea of a silver dollar might have been scrapped, as the United States had no reliable supply of silver during the war.  Several brass trial strikings are also known. 
As with other early United States coinage, the dies for the Continental dollar coin were hand-punched, meaning no two dies were the same. One of the known obverse varieties was accidentally made with "CURRENCY" misspelled "CURENCY". 
Another variety, known as the "Ornamented Date", was also made with a misspelled "CURRENCY", this time as "CURRENCEY". The blundered die was corrected by punching a "Y" over the "E" and an ornamental figure was engraved over the original "Y". 
The 1787 Fugio cent, the first officially circulated coin of the United States, incorporated many elements of the design of the Continental Currency coin.
An adaption of the Continental Currency dollar coin appears on the reverse of the "Founding Father" variety of the 2006 Benjamin Franklin silver dollar. 
Emissions totaling $25,000,000 payable in Spanish milled dollars, or the equivalent in gold or silver, was authorized by Continental Congress resolutions passed at Yorktown on April 11, May 22 and June 20, 1778 and resolutions passed at Philadelphia on July 30 and September 5, 1778. This issue is known as the Yorktown issue. Because of the extensive counterfeiting discovered in the May 20, 1777 issue this issue includes new engraved border cuts on the obverse and on the reverse newly redesigned letter type, typeset ornaments, border designs and new nature prints. Also, because of inflation denominations below $4 were eliminated and $20 and $40 notes were added. Even with the new designs there was extensive counterfeiting so that these bills were included in the January 2, 1779 recalled mentioned above in the May 20, 1777 issue. Also, this was the first issue which was not even accepted at face value by the Continental Congress at the date of issue. By April of 1778 the Congress officially valued the currency at $2.01 in Continental dollars for $1 in specie. The devaluation of continental currency had begun in most states as early as January 1777, by April of 1778 in some states the exchange was as high as $6 continental to $1 specie. Printed by Hall and Sellers who moved to Yorktown with the Congress from September 30,1777 - June 27, 1778. The paper, made at Ivy Mills in Chester County, Pennsylvania, contained blue fibers and mica flakes. Detector bills were printed on blue paper. Denominations include the: $4, $5, $6, $7, $8, $30 and $40.
Signers: [faded], William Adcock.
Size: 72 x 95mm (front border design: 69 x 92.5mm back border design: 68 x 90mm).
Comments: Numbered and signed in brown ink. The emblem on the front shows a beaver gnawing down a tree with the motto: "Perseverando" (By perseverance). The nature print on the back is of a sage leaf. Paper contains blue threads and mica flakes.
Provenance: EANA mail bid auction 1/13/96 lot 305. Purchased through the Robert H. Gore, Jr. Numismatic Endowment.
Signer: William Sheaff (in red) .
Comments: Numbered and signed in light red ink. The emblem on the front shows a harp with thirteen strings with the motto: "Majora minoribus consonant" (The larger are in harmony with the smaller). The nature print on the back displays three sage leaves. No images of the back is available. The paper contains blue threads and mica flakes.
Courtesy of Early American Numismatic Auctions, Inc. Images used with permission from their on-line auction catalog for the auction of April 20, 1996, lot 397.
Congress issues Continental currency - HISTORY
A HISTORY OF AMERICAN PAPER MONEY
FROM COLONIAL BILLS TO SILVER AND GOLD CERTIFICATES TO EVEN A $100,000 NOTE, AMERICAN PAPER MONEY HAS UNDERGONE MANY CHANGES THROUGHOUT ITS HISTORY.
The Massachusetts Bay Colony issues the first paper currency to pay for military expedition costs. Other colonies soon follow this practice.
1775 CONTINENTAL CONGRESS CURRENCY
Paper money is issues by the Continental Congress to finance the Revolutionary Way.
The Congress charters The Bank of North America, in Philadelphia, as the first national bank.
Congress sets the dollar as the monetary unit of the United States.
1791 FIRST U.S. CENTRAL BANK
Congress licenses the first Bank of the United States for a 20-year term as a fiscal entity for the U.S. Treasury.
1792 FEDERAL MONETARY SYSTEM
Federal Monetary System is established with the creation of the U.S. Mint.
1816 SECOND U.S. CENTRAL BANK
Congress charters the second U.S. Central bank for the 1816-1836 period.
Private banks issue their own paper currency, as there was no formal U.S. central bank and minimum regulation. Bank notes are easily counterfeited.
1861 CIVIL WAR "GREENBACKS"
In an effort to finance the Civil War, the Congress authorizes the U.S. Treasury to issue paper month in the form of "Demand Notes", also called "greenbacks".
1862 FIRST $2, $50, AND $100 BILLS MADE AS LEGAL TENDER NOTES.
Legal Tender Notes, or U.S. Notes replaced Demand Notes and were made from 1862 to 1971
1865 ESTABLISHMENT OF U.S. SECRET SERVICE
The U.S. Secret Service is created as a bureau of the Treasury to prevent counterfeiting and protect the national currency.
1877 BUREAU OF ENGRAVING AND PRINTING
All U.S. currency begins to be printed by the Treasury's Bureau of Engraving and Printing
1878 FIRST SILVER CERTIFICATES
Silver certificates start being issued in exchange for silver dollars.
1882 FIRST GOLD CERTIFICATES
Gold certificates entitles holders to a pre-determined amount of gold coins. Used from 1882 to 1933
1913 FEDERAL RESERVE ACT OF 1913
The Federal Reserve System is created to regulate the flow of money. New currency is names Federal Reserve Notes.
1914 LARGE SIZE FEDERAL RESERVE NOTES
$5, $10, $20, $50, and $100 notes are issued, with a size larger than today's bills.
1918 LARGE SIZE DENOMINATIONS FEDERAL RESERVE NOTES
Yes, they were real! $500, $1,000, $5,000 and $10,000 large-size notes were issued for public use. In 1969 all notes greater that $100 were retired due to poor demand.
To lower production costs, bill sizes were reduced by 25%, and a consistent design was implemented with uniform portraits on front and emblems or monuments on back.
1934 $100,000 GOLD CERTIFICATES
The highest denomination ever made, these were only used for transactions amongst Federal Reserve banks and were not available to the public.
$1 Silver certificated were the first notes to have the motto "In God We Trust".
1990 NEW COUNTERFEIT DETERRENT METHODS
Micro printing and security threads are developed to deter counterfeiters.
Multiple advanced counterfeit deterrent methods are implemented, first used on the $100 bill. This was the biggest change on paper currency design since the use of small-sized notes in 1929.
2003-2006 UPDATED SECURITY FEATURES
Improved security features and special background colors are created for the Federal Reserve Notes. The $20 bill was the first one to have these features.
2007 NEW $5 BILL WITH AN ALL DIGITAL DESIGN
This was the first time that paper currency had an all-digital design for improve security methods even further.
The new $100 bill is issued, featuring advanced technology to prevent counterfeiting while retaining the traditional look of American currency.
7. Fractional Currency (1862-1872)
Fractional currency, also referred to as “paper coins” and “shinplasters” (as the quality of the paper was so poor that with a bit of starch it could be used to make paper mache–like plasters to be used to treat wounded legs), was introduced by the United States government following the outbreak of the Civil War. These fractional notes were in use between 1862 and 1876, and issued in 3-, 5-, 10-, 15-, 25-, and 50-cent denominations. Fractional currency was used to provide change at a time when people were hoarding gold and silver.
Hyperinflation History: The Continental
The Framers of the Constitution had clear ideas about what was and was not money. As they put it in Article 1, Section 10, “No state shall…coin money emit bills of credit make any thing but gold and silver coin a tender in payment of debts…”. This belief that a sound country required a sound currency — one based on something rare and enduring like gold rather than common and infinitely replicable paper — wasn’t just theoretical. They had first-hand experience with paper money and an uncontrolled printing press thanks to the Continental, the first and shortest-lived U.S. currency.
The year is 1775, and the American Revolution has begun. A rag-tag “army” of farm boys (the Colonies were mostly agrarian back then) is about to defy the world’s most powerful empire, and has to be fed and equipped if it is to stand a chance. Levying taxes would, then as now, be complicated and upsetting to a lot of people, so the newly-formed Congress decides to simply print what it needs. As the Founders and Patriots of America website recounts the story:
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?”.
One recurring theme of currency crises is coercion. When people stop trusting a currency, the issuing government starts to insist. Here’s more on the subject from the Ludwig von Mises Institute:
It is surely some kind of sociological law that the state always blames actors other than itself for the unpleasant consequences of its own activities. In some situations it even goes so far as to stigmatize people for not wanting to enter into transactions that would make them poorer — as when, for instance, they are expected to accept payment for their goods and services in severely depreciated currency.
“Persons who refused to sell their lands, houses, or merchandise for nearly worthless paper were stigmatized as misers, traitors, forestallers, and enemies of liberty,” wrote Charles Bullock in 1900, “but prices continued to rise, as the inflation of the currency proceeded apace.” George Washington condemned “the monopolizers, forestallers, and engrossers,” who he said should be hunted down as “pests of society” and “hanged upon a gallows.”
In May 1776 Virginia alleged that the depreciation was attributable to people’s refusal to accept the notes, or to the insistence on higher prices in terms of paper money than in coin, or by “other devices” the following year the Virginia assembly blamed the depreciation on “the pernicious artifices of the enemies of American liberty, to impair the credit of the said bills, by raising the nominal value” of coin. The Massachusetts General Court spoke of “the avaricious conduct of many persons, by daily adding to the now exorbitant price of every necessary and convenient article of life.”
The Connecticut government likewise blamed this phenomenon on “monopolizers, the great pest of society.” It went on to note that “some evil-minded persons, inimical to the liberties of the United States of America, have endeavored to depreciate the bills of credit of this and the said United States,” and that many of its citizens “are so abandoned and lost to all the feelings of humanity as to prey upon the bowels of their country.” According to the legislature of Pennsylvania, “the prices of goods and merchandise are greatly enhanced by the practices and combinations of evil and designing men.”
As the continental depreciated, the states came under pressure to make it legal tender and thus force people to accept it in exchange for goods and services and in payment for debts. The states complied with this request. Rhode Island declared that anyone who would not accept the paper money would “incur the displeasure of the General Assembly and ought to be held and esteemed as an enemy to its credit, reputation and happiness and totally destitute of that regard and obligation he is under to his country and the cause of liberty…. [T]he good people of this colony and America ought to withdraw all communication from such person or persons.” The law varied across the states, but in Virginia, for example, refusal to accept the notes amounted to a cancellation of the debt you were owed other penalties of varying severity were enacted elsewhere. In North Carolina, if you so much as spoke disrespectfully of the paper you were “treated as an enemy to [your] country.”
Naturally, the depreciating continental also led to calls for economic controls in order to contain the upward pressure that the inflation was having on wages and prices. The New England states approved price-control statutes in 1776 and early 1777. The price controls had all the predictable effects, including massive shortages, disruption of the division of labor, and more government moralizing — it was bad people, you see, rather than stupid policy, that was responsible for the economic chaos.
A June 1777 letter from Boston read, “We are all starving here. [P]eople will not bring in provision, & we cannot procure the common necessaries of life.” Two years later, the same person wrote: “We are likely to be starved thro’out Boston. Never such a scarcity of provisions.”
Meanwhile, Continental Congress had repeatedly assured anyone who would listen that the continental currency would one day be redeemed at its face value, and that it was “derogatory” to the Congress’s honor that anyone would spread rumors to the contrary. In March 1780, Congress announced a plan for redeeming the currency at one-fortieth of its face value.
After 1780 the value of the remaining continentals plummeted still further. By early the following year it had reached a ratio of 100 to 1, and in some places it tumbled to 1,000 to 1 — at which point, recalled the New York Herald in 1863, “it expired … without a groan.”
This is the second in what promises to be a long series. See the first, Hyperinflation History: La Terreur, here.
An emission of $5,000,000 payable in Spanish milled dollars, or the equivalent in gold or silver, was authorized by the Continental Congress then meeting in Baltimore because Philadelphia was occupied by British troops. The location of the printers, Hall and Sellers, which had been mentioned on previous issues was left off of this and all subsequent Continental Congress issues. Although this emission is known as the Baltimore issue Newman suspects the bills could have been partly or entirely printed in Philadelphia. This was the last issue to use the phrase "The United Colonies." The paper, made at Ivy Mills in Chester County, Pennsylvania, contained blue fibers and mica flakes. Detector bills were printed on blue paper. Denominations printed were: $2, $3, $4, $5, $6, $7, $8, $30.
Size: 73 x 96mm (front border design: 70 x 92mm back border design: 66 x 87mm).
Comments: The emblem on the front depicts an eagle fighting a heron with the motto "Exitus in dubio est" (The outcome is in doubt). On the back is a nature print of skeletonized elm and maple fruit. The paper contains blue thread and mica flakes.
Provenance: Purchased through the Robert H. Gore, Jr. Numismatic Endowment from the EANA mail bid auction of 4/20/96, lot 393.
Signers: R. Smith, William Spear.
Size: 74 x 96mm (front border design: 71 x 92mm back border design: 68 x 90mm).
Comments: The numbering and second signature are in red ink the first signature is in brown ink. The emblem on the front shows a wild boar charging into a spear with the motto: "Aut mors aut vita decora" (Either death or an honorable life). The nature print on the back is of skeletonized maple fruit and is identical to a nature print used on earlier Pennsylvania currency. The paper contains blue threads and mica flakes.
Provenance: Purchased through the Robert H. Gore, Jr. Numismatic Endowment from the EANA mail bid auction of 11/16/96, lot 486.
Signers: Rinaldo Johnson, Samuel Stringer Coale.
Size: 74.5 x 95mm (front border design: 71 x 92mm back border design: 68 x 90mm).
Comments: The numbering and second signature are in red ink the first signature is in brown ink. The emblem on the front shows a storm at sea with the motto: "Serenabit" (It will clear up). The nature print on the back is of a bettercup leaf. The paper contains blue threads and mica flakes.
Provenance: Purchased through the Robert H. Gore, Jr. Numismatic Endowment from the EANA mail bid auction of 11/16/96, lot 488.
There were three general types of money in the Colonies of British America: the specie (coins), printed paper money and trade-based commodity money.  Commodity money was used when cash (coins and paper money) were scarce. Commodities such as tobacco, beaver skins, and wampum, served as money at various times in many locations. 
Cash in the Colonies, was denominated in pounds, shillings, and pence.  The value of each denomination varied from Colony to Colony a Massachusetts pound, for example, was not equivalent to a Pennsylvania pound. All colonial pounds were of less value than the British, pound sterling.  The coins in circulation during the Colonial Era were, most often, of Spanish and Portuguese origin.  The prevalence of the Spanish dollar throughout the Colonies, led to the money of the United States being denominated in dollars, rather than pounds. 
One by one, colonies began to issue their own paper money to serve as a convenient medium of exchange. In 1690, the Province of Massachusetts Bay created "the first authorized paper money issued by any government in the Western World".  This paper money was issued to pay for a military expedition during King William's War. Other colonies followed the example of Massachusetts Bay by issuing their own paper currency in subsequent military conflicts. 
The paper bills issued by the colonies were known as "bills of credit". Bills of credit were usually fiat money: they could not be exchanged for a fixed amount of gold or silver coins upon demand.   Bills of credit were usually issued by colonial governments to pay debts. The governments would then retire the currency by accepting the bills for payment of taxes. When colonial governments issued too many bills of credit or failed to tax them out of circulation, inflation resulted. This happened especially in New England and the southern colonies, which, unlike the Middle Colonies, were frequently at war.  Pennsylvania, however, was responsible in not issuing too much currency and it remains a prime example in history as a successful government-managed monetary system. [ citation needed ] Pennsylvania's paper currency, secured by land, was said [ by whom? ] to have generally maintained its value against gold from 1723 until the Revolution broke out in 1775. [ citation needed ]
This depreciation of colonial currency was harmful to creditors in Great Britain when colonists paid their debts with money that had lost value. The British Parliament passed several Currency Acts to regulate the paper money issued by the colonies. The Act of 1751 restricted the issue of paper money in New England. It allowed the existing bills to be used as legal tender for public debts (i.e. paying taxes), but disallowed their use for private debts (e.g. for paying merchants).  In 1776, British economist Adam Smith criticized colonial bills of credit in his most famous work, The Wealth of Nations.
Another Currency Act, in 1764, extended the restrictions to the colonies south of New England. Unlike the earlier act, this act did not prohibit the colonies in question from issuing paper money but it forbade them to designate their currency as legal tender for public or private debts. That prohibition created tension between the colonies and the mother country and has sometimes been seen as a contributing factor in the coming of the American Revolution. After much lobbying, Parliament amended the act in 1773, permitting the colonies to issue paper currency as legal tender for public debts.  Shortly thereafter, some colonies once again began issuing paper money. When the American Revolutionary War began in 1775, all of the rebel colonies, soon to be independent states, issued paper money to pay for military expenses.
Thirteen colony set of United States Colonial currency Edit
The Thirteen Colony set of colonial currency below is from the National Numismatic Collection at the Smithsonian Institution. Examples were selected based on the notability of the signers, followed by issue date and condition. The initial selection criteria for notability was drawn from a list  of currency signers who were also known to have signed the United States Declaration of Independence, Articles of Confederation, the United States Constitution, or attended the Stamp Act Congress. [nb 1]