Before the United States Constitution existed, the American colonies, in revolt against England united, loosely in an ad hoc assembly, the Continental Congress. This gathering began its meetings on May 10, 1775, in Philadelphia. The Articles of Confederation later formalized its existence.
Eminent historian George Bancroft, in his History of the United States of America from the discovery of the American continent observed:
“Whom did they represent? And what were their functions? They were committees from twelve colonies, deputed to consult on measures of conciliation, with no means of resistance to oppression beyond a voluntary agreement for the suspension of importations from Great Britain. They formed no confederacy; they were not an executive government; they were not even a legislative body. … They had no treasury; and neither authority to lay a tax, nor to borrow money.”
The Continental Congress may not have had the power to borrow money. But it had, “drawing on the acquiescence of the people,” the power to print it. The American Revolution was financed, in large measure, with pure paper currency called “the Continental” which Congress promptly began to print away.
By April 1779, George Washington wrote to John Jay, president of the Continental Congress, “In the last place, though first in importance, I shall ask, is there any thing doing, or that can be done, to restore the credit of our currency? The depreciation of it is got to so alarming a point that a wagon-load of money will scarcely purchase a wagon-load of provisions.”
Later on, Thomas Jefferson privately justified the recourse of the colonists to inconvertible paper money — an event which left him, and most of his contemporaries, paper’s passionate foe — as done in a holy cause “for if ever there was a holy war it was that which saved our liberties and gave us independence.”
The extenuating high motive in the cause of the American Revolution in no way softened Jefferson’s anathemas against paper. He wrote to E. Carrington, in 1788, "Paper is poverty. It is only the ghost of money, and not money itself."
Writing to J.W. Eppes in 1813, Jefferson had this to say:
"Paper money is liable to be abused, has been, is, and forever will be abused, in every country in which it is permitted." … "Paper is already at a term of abuse in these States, which has never been reached by any other nation, France excepted, whose dreadful catastrophe should be a warning against the instrument which produced it." … "The unlimited emission of bank paper has banished all Great Britain's specie, and is now, by a depreciation acknowledged by her own statesmen, carrying her rapidly to bankruptcy, as it did France, as it did us, and will do us again, and every country permitting paper money to be circulated, other than that by public authority, rigorously limited to the just measure for circulation." … "When I speak comparatively of the paper emission of the old Congress and the present banks, let it not be imagined that I cover them under the same mantle. The object of the former was a holy one; for if ever there was a holy war it was that which saved our liberties and gave us independence. The object of the latter is to enrich swindlers at the expense of the honest and industrious part of the nation."
Jefferson and his contemporaries including Washington, Adams, and Madison, were exceptionally virulent in their opposition to a paper dollar inconvertible to gold.
The condemnations of paper currency were so frequent and so hostile as to leave no room for doubt as to the pain it inflicted on society, and, especially, on the most vulnerable members of society. Thomas Paine, whose pamphlet Common Sense built enthusiasm for Independence to critical mass, called for impeachment and the death penalty for any official who so much as proposed paper money in his work Dissertations on government, the affairs of the bank, and paper money,
“It was horrid to see, and hurtful to recollect, how loose the principles of justice were left, by means of the paper emissions during the war. The experience then had should be a warning to any assembly how they venture to open such a dangerous door again. ...
“But the evils of paper money have no end. Its uncertain and fluctuating value is continually awakening or creating new schemes of deceit. Every principle of justice is put to the rack, and the bond of society dissolved. The suppression, therefore, of paper money might very properly have been put into the act for preventing vice and immorality.”
Paine believed that advocacy of paper money justified the severest of penalties, including impeachment:
“As to the assumed authority of any assembly in making paper money, or paper of any kind, a legal tender, or in other language, a compulsive payment, it is a most presumptuous attempt at arbitrary power. There can be no such power in a republican government: the people have no freedom — and property no security — where this practice can be acted: and the committee who shall bring in a report for this purpose, or the member who moves for it, and he who seconds it merits impeachment, and sooner or later may expect it.”
And capital punishment:
“The laws of a country ought to be the standard of equity, and calculated to impress on the minds of the people the moral as well as the legal obligations of reciprocal justice. But tender laws, of any kind, operate to destroy morality, and to dissolve, by the pretense of law, what ought to be the principle of law to support, reciprocal justice between man and man — and the punishment of a member who should move for such a law ought to be death.”
As is always the case with hyperinflation the searing experience of “Depreciation, the evil genius of the republic” made a huge impression on the population… and on the statesmen who soon would be called upon to write, and ratify, the Constitution of the United States of America.
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