Wartime Inflation During The American Revolution

Chapter 1: The Aristocracy of the Capital Political • Every state assigned people to maintain offices on the homefront in order to keep its’ internal government running effectively and efficiently • Alexander Hamilton realized that states had too much power and that the central government was lacking enough to keep the nation running smoothly Ideological • Merchants want and need a stronger and stabilized currency. Prices decrease, debts increase • Separation between loose and strict constructionists Economic • British don’t want to issue paper money to avoid possibilities of inflation occurring • Colonials however wanted it and therefore trade fell apart due to the dispute • National bank created in order to solve currency issue (one bank with the same form of currency) • Gold and silver replaced paper currency when needed to • Coins were no longer effective,

The Currency Act of 1764 was a British Law, passed by the Parliament of Great Britain on September 1, 1764, that was designed to control the colonial currency system. This act prohibited the issue of any new “Bills of Credit” and the reissue of existing currency by the American colonists in the thirteen colonies. The reason the Britain Parliament passes this act was because they wanted to control the printing and use of colonial paper money. Also, it was said that British merchants in England wanted to be paid in British currency and not colony currency. The colonists did not like this act and therefore colonial merchants refused to buy goods from Great Britain.

Though this idea was widely disliked president Washington saw the potential and helped Hamilton get the national bank passed. During the rebellions against the heavy taxations on whiskey and other goods, colonists managed to cause the halt of some courts of justice and they were heard calling out for paper currency or equal distribution of property (Doc G). Hamilton managed to pay off the nation’s debt and create a national bank yet very little changed in the nation’s economic system in that time

What were the circumstances that gave rise to the conflict known as the Revolutionary War? The Sugar Act restricted the entry of all foreign rum and reduced the charge on foreign molasses from 6 to 3 pence per gallon while keeping a high duty on foreign refined sugar; The Stamp Act taxed colonists on documents and all printed items;

In 1791, the United States was in debt (due to the Revolutionary War) and each state had a different form of currency. Treasury Secretary, Alexander Hamilton urged the congress to establish the First Bank of the United States in 1791. Alexander created this bank to assist the states in paying their debt from the war and to aid the government in its financial transactions. The First Bank was the largest corporation in the United States and at the time big banking unnerved many Americans. The First Bank of the United States issued paper money to pay any debts owed to the government and taxes.

In the mid-1760’s, several events occurred that would have a lasting impact on both the Americans and the British. Three different acts were implemented that began to spark conflict between the British and the colonists. The three acts were the Sugar Act, the Currency Act, and the Stamp Act. All three of these were implemented by Parliament to benefit them, but the new taxes had a significant negative impact on the colonists. Specifically, the Stamp Act effected the most colonists because everyone, no matter if they were rich or poor, would be impacted.

The Currency Act was passed in 1764. It regulated the amount of paper currency in the colonies. This made everything in the colonies expensive to the colonist, but it made cheap to the English. Another reason is the Quartering Act.

The American Revolutionary War began largely over economic pressures, with colonists in the Thirteen Colonies upset over taxation without representation. Unfortunately, America’s economic situation did not improve with the war or its immediate aftermath. The fledgling United States government suffered from a lack of revenue, the ability to impose taxes, and the enforcement of existing taxes (Baack). Under the nation’s first governing document, the Articles of Confederation, the federal government could only use tariff revenue as a source of funds. In 1786, however, America’s weak economy and lack of government enforcement almost tore the nation apart with Shays’ Rebellion.

“ Yet the general economic picture was far from rosy… independence had drawbacks… state government had borrowed more money during the war than they could ever hope to repay… inflation had been ruinous to many citizens, and congress...failed… to curb economic laws” ( Kennedy, Cohen, Bailey 170). Between 1784 and 1785 depression took a hard turn on Americans. The depression led to low production of goods and the United States was almost bankrupt from all of the debt after the revolution. “The average citizen was probably worse off financially at the end of the shooting than at the start” (Kennedy, Cohen, Bailey 170 ). On top of that Britain wouldn’t allow American ships trade to Britain or the West Indies cutting off American trade.

England at the end of this all had more money coming in than out. The sugar plantations, owned by wealthy people, had to be built. And the building of the plantation cost a lot of money. They also needed supplies, which brought in even more money. England created laws that permitted more money to come in than out.

After the French and Indian War King George III figured there was way too much money spent for the upkeep and supplies of his army. Realizing this King George III wanted to raise the taxes to help replenish the money that was lost during time and this is why the reason for the American Revolutionary War ultimately came down to money. Although the patriots wanted to gain freedom and independence, the

These bank notes would be backed by the large sums of gold and silver that the bank held and would be used as a medium of exchange. Law thought it was the unpredictable supply of gold and silver that was slowing the economy rather than a true economic problem. Law proposed that by switching to paper, trade would speed up due to the increase in currency issued. He created a bank that took deposits in coin, but issued loans and withdrawals in paper. Law 's bank built up its reserves through a stock issue and also made a good profit by handling the government 's financial needs.

Before a single form of currency was established, local banks were allowed to make loans that were issued by their own bank notes. The local banks did not have to use gold and

Due to their recent war with the French, Britain and its colonies were in debt. Britain turned to the colonies as a source of revenue to pay back money, and Parliament passed acts placing taxes and tariffs on the colonies and American trade. Following the revolution, the United States was in debt to France, who helped them fight Britain during the war and supplied money, troops, and supplies. Some Americans demanded paper currency and equal distribution of property (Doc. G). Although the manufacturing industry was growing in America, it was growing very slowly.

Political, economic, military, and social factors were taken into account during the revolution. These aspects of the war all played a significant role in the outcome of the American Revolution. Since Great Britain was in a tremendous amount of debt, it started social and economic issues with the colonies. The French and Indian War (Seven Years War), fought between the British and the French over the Ohio River Valley was a huge contributing factor to said debt.