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The Continental Dollar: Initial Design, Ideal Performance, and the Credibility of Congressional Commitment

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  • Farley Grubb

    ()
    (Department of Economics,University of Delaware)

Abstract

An alternative history of the Continental Dollar is constructed from the original resolutions passed by Congress. The Continental Dollar was a zero-interest bearer bond, not a fiat currency. The public could redeem it at face value in specie at fixed future dates. Being a zero-interest bearer bond, discounting must be separated from depreciation. Before 1779 there was no depreciation, only discounting. In 1779 and again in 1780 Congress passed ex post facto laws which altered the redemption dates of past Continental Dollars in ways that were not fiscally credible. These laws were the turning point. Depreciation and collapse followed.

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File URL: http://graduate.lerner.udel.edu/sites/default/files/ECON/PDFs/RePEc/dlw/WorkingPapers/2011/UDWP2011-15.pdf
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Bibliographic Info

Paper provided by University of Delaware, Department of Economics in its series Working Papers with number 11-15.

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Length: 31 pages
Date of creation: 2011
Date of revision:
Handle: RePEc:dlw:wpaper:11-15.

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Postal: Purnell Hall, Newark, Delaware 19716
Phone: (302) 831-2565
Fax: (302) 831-6968
Web page: http://www.lerner.udel.edu/departments/economics/department-economics/
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Related research

Keywords: American Revolution; war financing; debt retirement; fiat money; bearer bonds; monetary denominations; congressional spending; currency depreciation; U.S. Constitution; founding fathers; Benjamin Franklin; state tax rates.;

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  1. Farley Grubb, 2007. "The Continental Dollar: How Much Was Really Issued ?," Working Papers 07-09, University of Delaware, Department of Economics.
  2. Van Hove, Leo, 2001. "Optimal Denominations for Coins and Bank Notes: In Defense of the Principle of Least Effort," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 33(4), pages 1015-21, November.
  3. Alvin Rabushka, 2008. "Introduction to Taxation in Colonial America
    [Taxation in Colonial America]
    ," Introductory Chapters, Princeton University Press.
  4. Calomiris, Charles W., 1988. "Institutional Failure, Monetary Scarcity, and the Depreciation of the Continental," The Journal of Economic History, Cambridge University Press, vol. 48(01), pages 47-68, March.
  5. Telser, L. G., 1995. "Optimal denominations for coins and currency," Economics Letters, Elsevier, vol. 49(4), pages 425-427, October.
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Cited by:
  1. Farley Grubb, 2012. "Is Paper Money just Paper Money/ Experimentation and Local Variation in the Fiat Paper Monies Issued by the Colonial Government of British North America, 1690-1775: Part I," Working Papers 12-07, University of Delaware, Department of Economics.

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