Congress Funds the War with Paper Money
Explain how the Continental Congress funded the Revolution using paper money (Continentals) and why hyperinflation undermined the war effort in Grade 8 history.
Key Concepts
Fighting a war is expensive. The Continental Congress needed money to pay soldiers and buy supplies, but it lacked the power to collect taxes from the states. This created a severe funding crisis for the war effort.
To solve this problem, Congress printed large amounts of paper money . Because this money was not backed by gold or silver, its value dropped as more was printed. This caused rapid inflation , a condition where prices for goods like food and clothing soar. This economic hardship made life difficult for people on the home front.
Common Questions
How did Congress fund the Revolutionary War without taxing?
The Continental Congress printed paper money called Continentals since it lacked the power to tax the states, creating money through currency rather than revenue.
What happened to the value of Continental paper money?
Printing too much money without gold or silver backing caused hyperinflation, making Continentals nearly worthless and undermining the war effort.
Why couldn't Congress raise money through taxes?
Under the Articles of Confederation, Congress had no power to levy taxes directly, leaving it dependent on states that often failed to provide adequate funding.