CONTINENTALS

Continentals were the paper money issued by the United States government during the American Revolution (1775–83). After the Declaration of Independence (1776) was made and before the Articles of Confederation (1781) were approved, the Second Continental Congress governed the new nation and 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. 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, ammunition, and pay soldiers. In order to finance the Revolution, Congress was compelled to issue paper bills that promised holders future payment in silver. But as Congress issued more Continentals, the currency became devalued. There was not enough silver to back up 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 U.S. government. But funds remained 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 were instrumental in the American victory in the revolutionary war.

See also: American Revolution, Articles of Confederation, European Loans, Rag Money