Paper Money

If the colonists forgot the lessons of goldsmith bankers, the American Revolution refreshed their memories. To finance the war, Congress authorized the printing of continental bills of credit in an amount not to exceed $200,000,000. The States issued another $200,000,000 in paper notes. Ultimately, the value of the paper money fell so low that they were soon traded on speculation from 5000 to 1000 paper bills for one coin.

It's often suggested that our Constitution's prohibition against a paper economy -- "No State shall... make any Thing but gold and silver Coin a tender in Payment of Debts" -- was a tool of the wealthy to be worked to the disadvantage of all others. But only in a "paper" economy can money reproduce itself and increase the claims of the wealthy at the expense of the productive.

"Paper money," said Pelatiah Webster, "polluted the equity of our laws, turned them into engines of oppression, corrupted the justice of our public administration, destroyed the fortunes of thousands who had confidence in it, enervated the trade, husbandry, and manufactures of our country, and went far to destroy the morality of our people."

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