History of Money, 1764 1776
Debt Free Money Was a Big Success in the Colonies
The colonists had a shortage of metals for minting coins so they printed paper money called Colonial Script. It was a true fiat currency and was debt free money. It proved to be very successful so successful that it had to be stopped.
Benjamin Franklin "screws the pooch"
While in London Benjamin Franklin fails to persuade the British parliament to allow the use of paper money in the colonies.
Continental Currency is a success
On June 23 two million dollars of Continental Currency was issued with the guarantee that they would be redeemed by taxes upon the return of peace. The paper money was a success and was exchanged freely at its nominal value for gold and silver coin. On November 29 three million more were printed with the guarantee that they would be redeemed by taxation to begin in eight years. The issue was a success and there was no loss of value.
The colonies lose battles, Brithish counterfeiting and the Continental loses value
On February 17 an additional issue of four million notes were released with no real promise of redemption by taxes. It was found that there was no depreciation in the value of the paper currency. On August 13 another five million were released and the total in circulation at that time was fourteen million dollars of paper money.
Military loses to the British started the devaluation of the currency when people started to lose faith in the colonies. Additional issues of paper money accelerated the drop in value.
However the real devaluation in the continental currency didn't begin until the British started to counterfeit the money in an attempt to debase the currency which succeeded.