This day in history: The colony of Massachusetts issued the first paper money in the Americas on this day in 1690. "Apart from medieval China, which invented both paper and printing centuries before the West, the world had never seen government paper money until the colonial government of Massachusetts emitted a fiat paper issue in 1690." Murray Rothbard
"Prior to this, settlers in America used silver coins. In 1652, the Massachusetts Bay Colony began minting their own coins, even though it was against British law. The British eventually shut down this mint, leaving few of these coins in circulation. Then in 1689, the British wanted their American settlers to fight the French in Canada. However, they rarely sent money to the colonies, so there wasn’t any money to pay the soldiers with. The British government then came up with a new idea – to issue certificates instead of coins. Each piece of paper represented the value of coin and could be redeemed at a later time for 'real money.'" Source
However, the temptation to inflate this currency was too great to bear. "As early as February 1691, the Massachusetts government proclaimed that its issue had fallen 'far short' and so it proceeded to emit £40,000 of new money to repay all of its outstanding debt, again pledging falsely that this would be the absolute final note issue." Murray Rothbard
More money printing ensued, and after more than 20 years, prices rose so dramatically that the tide of opinion in Massachusetts began to turn against paper money, and that the result of it was a doubling of prices.
During the Revolutionary War, the Continental Congress issued new paper money known as Continentals. However, the value of this currency depreciated so dramatically that it lead to the phrase, “not worth a continental.”
Paper (fiat) money always fails. "Fiat money is inflationary. Its buying power dwindles over time, and history has shown that this entropy is almost as irreversible as gravity. Fiat money enriches a select few at the expense of many others. The first to get new money benefit to the detriment of latecomers. What's more, fiat money fosters speculative bubbles and capital misallocations that culminate in crises. This is why economies boom and bust. Fiat money lures states, banks, consumers and firms into the pitfall trap of excessive debt. Sooner or later borrowers find themselves in a deep hole with no way out. Fiat money is easy to come by so the state can finance its adventures and misadventures. Easy money; easy come, easy go. And the government keeps growing as it keeps spending." Source
See also The History & Mystery of Money & Economics-250 Books on DVDrom
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