What Are Continentals?
Continentals refers to paper currency issued by the Continental Congress in 1775 to help fund the American Revolutionary War.
- Continentals refers to paper currency issued by the Continental Congress in 1775 to help fund the American Revolutionary War.
- Continentals quickly lost value, partly because they were not backed by a physical asset like gold or silver, but also due to the fact that too many bills were printed.
- The invention of the U.S. Mint, the federal monetary system, and the U.S. Coinage Act of 1792 all quickly replaced the paper continentals.
Specifically, continentals, which is what the newly minted colonial paper currency was called, were issued from 1775 to 1779 to finance the cost of the war. The currency quickly lost value, partly because it was not backed by a physical asset like gold or silver, but also due to the fact that too many bills were printed. These two factors contributed to the coining of the disparaging term "not worth a continental."
Revolutionaries in the New World colonies floated continentals, due to not having the funding to carry out a prolonged battle against the British crown. In 1775, the Continental Congress issued $2 million in paper bills of credit. The paper notes represented the colonies' first significant currency distribution and bore the images of Revolutionary soldiers.
Continentals were not backed by any tangible asset; they were supposed to hold their value on the Continental Congress's expectation of future tax revenues, which, given that they were in the midst of a war, created more uncertainty than the new currency could withstand.
The Revolutionaries continued printing money and ultimately issued more than $200 million in rebel currency. Within five years, continentals suffered significant depreciation and eventually were practically worthless. To contribute to the devaluation of the continentals, the British produced enormous quantities of counterfeit bills to sabotage the American economy. Afterward, the colonies held considerable debt from the war.
Congress stopped issuing continentals in 1779. By 1785, the continental currency was so remarkably worthless that people just stopped accepting the bills as payment for goods or trades. Economic worries plagued the young nation as its leaders faced the challenges of paying back war debts. The leaders also had to establish the first financial institutions in an attempt to reduce inflation and restore the value of the nation's money.
To stabilize the economy and correct the country’s financial troubles, Alexander Hamilton proposed an idea for a national bank. The national bank would issue paper money and handle the government’s tax revenues and debts, among other functions. His idea came to fruition in Dec. 1791 as the Bank of the United States opened in Philadelphia.
The creation of the national bank led to the adoption of the U.S. dollar (USD) during the following year. The invention of the U.S. Mint, the federal monetary system, and the U.S. Coinage Act of 1792 all quickly replaced the paper continentals. These systems have since evolved to become the nation’s contemporary money system, still in use today. Although the country adopted the USD, it initially circulated only as coins and did not return to using paper currency until 1861.