Preamble: this is certainly not the first time the United States has gone berserk printing money in order to address its present woes. This habit dates back to the nation’s founding. Here is an excerpt from my Panic, Prosperity, and Progress book on one such instance. You can find the first part here.
As prosperous as the colonies were, the government itself had very little in the way of assets. The public was not inclined to a strong government, particularly given the behavior of the British crown, and it was agreed by the colonial leaders that the issuance of paper money would be more palatable than the creation of a tax to fund the war. The colonists were, after all, already weary of taxes.
The new currency, a Continental dollar, was carefully designed to be difficult to counterfeit, and initially a prudent issuance of $19 million was distributed, with one Continental dollar being on par with one gold dollar. General Washington intended to fight a war of attrition, counting on the British to eventually grow weary of the war, but it would be years before peace would finally be at hand. Thus, there were many years of substantial expenditures forthcoming, and the temptation to simply print up more Continentals to pay the soldiers and suppliers was hard to resist.
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