IDEAS home Printed from https://ideas.repec.org/p/dlw/wpaper/11-15..html
   My bibliography  Save this paper

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

Author

Listed:
  • 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.

Suggested Citation

  • Farley Grubb, 2011. "The Continental Dollar: Initial Design, Ideal Performance, and the Credibility of Congressional Commitment," Working Papers 11-15, University of Delaware, Department of Economics.
    • Handle: RePEc:dlw:wpaper:11-15.
    as

    Download full text from publisher

    File URL: http://graduate.lerner.udel.edu/sites/default/files/ECON/PDFs/RePEc/dlw/WorkingPapers/2011/UDWP2011-15.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Alvin Rabushka, 2008. "Introduction to Taxation in Colonial America," Introductory Chapters, in: Taxation in Colonial America, Princeton University Press.
    2. Calomiris, Charles W., 1988. "Institutional Failure, Monetary Scarcity, and the Depreciation of the Continental," The Journal of Economic History, Cambridge University Press, vol. 48(1), pages 47-68, March.
    3. Ben Baack, 2001. "Forging a nation state: The Continental Congress and the Financing of the War of American Independence[The author]," Economic History Review, Economic History Society, vol. 54(4), pages 639-656, November.
    4. 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 1015-1021, November.
    5. Grubb, Farley, 2008. "The Continental Dollar: How Much Was Really Issued?," The Journal of Economic History, Cambridge University Press, vol. 68(1), pages 283-291, March.
    6. Davis, Ken & Whittlesey, Norman K. & Huffaker, Ray G. & Butcher, Walter R. & Smith, Eldon D. & Francl, Terry & Smith, Katherine R. & Ravnholt, Eiler C. & Gantz, Eugene & Baquet, Alan E. & Skees, Jerry, 1994. "Letters," Choices: The Magazine of Food, Farm, and Resource Issues, Agricultural and Applied Economics Association, vol. 9(3), pages 1-5.
    7. Telser, L. G., 1995. "Optimal denominations for coins and currency," Economics Letters, Elsevier, vol. 49(4), pages 425-427, October.
    8. Baack, Ben, 2008. "America's first monetary policy: inflation and seigniorage during the Revolutionary War," Financial History Review, Cambridge University Press, vol. 15(2), pages 107-121, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    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.
    2. Farley Grubb, 2016. "Is Paper Money Just Paper Money? Experimentation and Variation in the Paper Monies Issued by the American Colonies from 1690 to 1775," Research in Economic History, in: Research in Economic History, volume 32, pages 147-224, Emerald Group Publishing Limited.
    3. Farley Grubb, 2015. "Common Currency versus Currency Union: The U.S. Continental Dollar and Denominational Structure, 1775-1776," NBER Working Papers 21728, National Bureau of Economic Research, Inc.
    4. Farley Grubb, 2015. "Common Currency versus Currency Union: The U.S. Continental Dollar and Denominational Structure, 1775-1779," Working Papers 15-10, University of Delaware, Department of Economics.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Farley Grubb, 2013. "The Continental Dollar: How the American Revolution was Financed with Paper Money—Chapter 3 Initial Design and Idea Performance," Working Papers 13-10, University of Delaware, Department of Economics.
    2. Farley Grubb, 2011. "State Redemption of the Continental Dollar, 1779-1790," NBER Working Papers 17209, National Bureau of Economic Research, Inc.
    3. Farley Grubb, 2015. "Common Currency versus Currency Union: The U.S. Continental Dollar and Denominational Structure, 1775-1776," NBER Working Papers 21728, National Bureau of Economic Research, Inc.
    4. Farley Grubb, 2015. "Common Currency versus Currency Union: The U.S. Continental Dollar and Denominational Structure, 1775-1779," Working Papers 15-10, University of Delaware, Department of Economics.
    5. Hugh Rockoff, 2015. "War and Inflation in the United States from the Revolution to the First Iraq War," Departmental Working Papers 201516, Rutgers University, Department of Economics.
    6. Farley Grubb, 2008. "The Continental Dollar: What Happened to It after 1779?," Working Papers 08-09, University of Delaware, Department of Economics.
    7. Bouhdaoui, Y. & Bounie, D. & Van Hove, L., 2011. "Central banks and their banknote series: The efficiency-cost trade-off," Economic Modelling, Elsevier, vol. 28(4), pages 1482-1488, July.
    8. Farley Grubb, 2016. "Is Paper Money Just Paper Money? Experimentation and Variation in the Paper Monies Issued by the American Colonies from 1690 to 1775," Research in Economic History, in: Research in Economic History, volume 32, pages 147-224, Emerald Group Publishing Limited.
    9. Farley Grubb, 2014. "A New Approach to Explaining the Value of Colonial Paper Money: Evidence from New Jersey, 1709-1775," Working Papers 14-08, University of Delaware, Department of Economics.
    10. Bouhdaoui, Y. & Bounie, D., 2012. "Efficient payments: How much do they cost for the Central Bank?," Economic Modelling, Elsevier, vol. 29(5), pages 1579-1584.
    11. Prescott, Brian C. & Shy, Oz, 2023. "Cash payments and the penny policy debate," Journal of Economic Behavior & Organization, Elsevier, vol. 208(C), pages 80-94.
    12. Farley Grubb, 2014. "A New Approach to Solving the Colonial Monetary Puzzle: Evidence from New Jersey, 1709-1775," NBER Working Papers 19903, National Bureau of Economic Research, Inc.
    13. Franses, Philip Hans & Kippers, Jeanine, 2007. "An empirical analysis of euro cash payments," European Economic Review, Elsevier, vol. 51(8), pages 1985-1997, November.
    14. Chen, Heng & Huynh, Kim P. & Shy, Oz, 2019. "Cash versus card: Payment discontinuities and the burden of holding coins," Journal of Banking & Finance, Elsevier, vol. 99(C), pages 192-201.
    15. Shy, Oz, 2020. "How currency denomination and the ATM affect the way we pay," Journal of Economics and Business, Elsevier, vol. 111(C).
    16. Joshi Harit & Mukherjee, Saral, 2017. "Transitions in currency denomination structure as supply disruption and demand distortion: Efficiency, Effectiveness and Bullwhip," IIMA Working Papers WP 2017-05-02, Indian Institute of Management Ahmedabad, Research and Publication Department.
    17. Sotiris Vandoros, 2013. "My five pounds are not as good as yours, so I will spend them," Experimental Economics, Springer;Economic Science Association, vol. 16(4), pages 546-559, December.
    18. Peter L. Rousseau, 2013. "Politics on the road to the U.S. monetary union," Vanderbilt University Department of Economics Working Papers 13-00006, Vanderbilt University Department of Economics.
    19. Tschoegl, Adrian E., 2010. "The international diffusion of an innovation: The spread of decimal currency," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 39(1), pages 100-109, January.
    20. Bordo, Michael D. & Vegh, Carlos A., 2002. "What if Alexander Hamilton had been Argentinean? A comparison of the early monetary experiences of Argentina and the United States," Journal of Monetary Economics, Elsevier, vol. 49(3), pages 459-494, April.

    More about this item

    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.;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War
    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H83 - Public Economics - - Miscellaneous Issues - - - Public Administration
    • N11 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - U.S.; Canada: Pre-1913
    • N21 - Economic History - - Financial Markets and Institutions - - - U.S.; Canada: Pre-1913
    • N41 - Economic History - - Government, War, Law, International Relations, and Regulation - - - U.S.; Canada: Pre-1913

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:dlw:wpaper:11-15.. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Saul Hoffman (email available below). General contact details of provider: https://edirc.repec.org/data/deudeus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.