|The Breed's Hill Gazette March 2009|
NOT WORTH A CONTINENTAL DOLLAR
By Dan Shippey and Michael Burns
“That’s not worth a Continental Dollar!”
Have you ever wondered what that old saw means? The saying means, simply, that an item has no value. It’s worth nothing. Zip. Zero. Bupkis. And it traces its origins to what was perhaps the most important battle of the Revolutionary War--the battle for funding. Stay with me a moment, and let’s see if we can make a connection or two.
In 1775, a year before they would get around to declaring independence, the 2nd Continental Congress found itself in serious need of money. As George Washington would later write, Americans were,
“Not then organized as a nation, or know as a people upon the earth. We had no preparation. Money, the nerve of war, was wanting.”
The Congress needed to establish credit and secure loans, but most countries with the means to invest didn’t think the rebels surrounding Boston looked like a good investment risk.
Congress’ answer to the money shortage…print it! They started with the idea of printing two million dollars’ worth of paper bills, but quickly decided they needed more. By the end of 1775 they had printed six million. Some of these first bills were engraved by Paul Revere. They were so thick that the British called them “pasteboard currency.” Most bills included wording like,
“This bill entitles the bearer to receive six Spanish milled dollars, or the value thereof in gold or silver, according to a resolution of Congress.”
The only problem was that there was no gold or silver, just ink and paper. It’s believed that the total amount of money in the American colonies in 1775 was twelve million dollars, and none of that was in the hands of Congress. The printing had “created” 50% more money, but that didn’t last very long (hey, war is expensive). They fixed the problem by printing more, with the promise that they would recoup the cash in taxes after the war was over. It was a situation that couldn’t last.
The crisis of war did not end quickly; it continued for eight years. Congress kept printing more imaginary money, but the people started to see that there was nothing backing it. Thus began our young Country’s first experience with runaway inflation. The money that the Congress paid lost its value before it could be spent, causing prices to jump higher and higher. Soldiers found the money they were paid (if they were paid) to be almost worthless. By 1779 $100 worth of real gold or silver would buy $2,600 worth of Continental currency. Hence the term, “Not worth a Continental dollar.” Two years later (1781) that same $100 of gold or silver coins (cold hard cash) could buy you $16,800 in Continental bills.
“Section 10. No state shall enter into any treaty, alliance, or confederation; grant letters of marque and reprisal; coin money; emit bills of credit; make anything but gold and silver coin a tender in payment of debts; pass any bill of attainder, ex post facto law, or law impairing the obligation of contracts, or grant any title of nobility.
It seems that they, at least, did not want to be paid in unsupported paper money. But the damage was done. The first generation of Americans would never again trust paper money. Andrew Jackson was only 9 in 1776, but he saw the damage. He turned his resentment of paper money and the federal bank that printed it into a personal mission to destroy the system. Jackson had the words, “I killed the bank” placed on his tombstone. It’s not difficult to guess how he would feel about appearing on the ubiquitous $20.00 bill today.
Some form of the gold standard (backing the value of paper money with gold or silver) remained in effect in the United States until 1933. At that time, President Franklin D. Roosevelt outlawed (unconstitutionally) all private gold ownership except for personal jewelry. The Bretton Woods System, enacted in 1946, created fixed exchange rates for gold between foreign governments and the United States Treasury. This system remained in place until 1971, when President Nixon ended the Bretton Woods System. Gold and silver no longer stood behind the dollar, and for the first time in history the official links between all major world currencies and real commodities ended.
In the year 2009, the United States Congress, facing an economic crisis, passed a stimulus bill. This bill requires the expenditure of money America does not have and cannot borrow. Sound familiar? Their answer is to print (or electronically create) the money they need. Sound more familiar? If it didn’t work then, why would it work now? I’d love to hear an answer, but I fear the logic of Congress may not be worth a Continental Dollar.