On July 4, 1776, the Continental Congress approved the Declaration of Independence, marking the United States’ formal succession from Great Britain.
The Declaration contained revolutionary language[1], written by men willing to use violence and sacrifice their lives to throw off the bonds of tyranny and secure their rights to self-determination:
“...it is the Right of the People to alter or to abolish [Government], and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness.”
The Declaration was an act of war. But it was not the first act of war taken by the Continental Congress.
In fact, over a year earlier, Congress had issued bills of credit (that is, paper fiat money not backed by specie such as gold or silver) to raise and fund its army. These unbacked notes were colloquially known as “continentals.”
“Congress launched its first paper issue of $2 million in late June 1775, and before the notes were printed it had already concluded that another $1 million was needed,” as Murray Rothbard wrote in “A History Of Money And Banking In The United States[2].”
All told, between 1775 and 1779, Congress issued "over $225 million” in continentals, “superimposed upon a pre-existing money supply of $12 million,” per Rothbard.
This rapid expansion of the money supply had debilitating inflationary effects:
“[A]t the end of 1776, the Continentals were worth $1 to $1.25 in specie; by the fall of the following year, its value had fallen to 3-to-1; by December 1778 the value was 6.8-to-1; and by December 1779, to the negligible 42-to-1. By the spring of 1781, the Continentals were virtually worthless, exchanging on the market at
