Economics and Business


What were Continentals?

Continentals were the paper money issued by the U.S. government during the American Revolution (1775–83). The Second Continental Congress, which governed the new nation after the Declaration of Independence (1776), ran the war effort against Great Britain. The governing body did not have the power to levy taxes, since no constitution had been drawn up yet. So the Congress appealed to each state to contribute to the war fund. However, states that did not face imminent danger—those in which there was no fighting—often did not answer the call. Many of the new nation’s most prominent citizens remained loyal to the British and refused to contribute money to the American patriotic cause. Yet money was needed to buy supplies and ammunition, and to pay soldiers. In order to finance the Revolution, Congress was compelled to issue paper bills, which promised holders future payment in silver. But as Congress issued more and more Continentals, the currency became devalued because there was not enough silver to back up the promised payments. By 1780 there were so many Continentals in circulation that they had become almost worthless. The phrase “not worth a Continental” was used by Americans to describe anything that had no value. To help solve the financial crisis, some patriotic citizens contributed sums of money; in exchange, they received interest-bearing securities from the government. But funds continued to be scarce. The problem of funding the revolutionary effort was not solved until foreign powers stepped in to aid the fledgling nation in its fight against the powerful British. European loans to the United States, notably from France, were instrumental in the American victory in the Revolutionary War.


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