On June 22, 1775 the Continental Congress Created a New Currency

See Happy Birthday, Money by Jason Furman, who was the chairman of the White House Council of Economic Advisers from 2013 to 2017. Excerpts:

"On this day in 1775, the Continental Congress invented a new currency and authorized the printing of $2 million. 

"In theory, the $2 million of “bills of credit” it ordered up (initially in denominations from $1 to $20) were like bonds, entitling the bearer to be repaid in silver or gold at a future date, albeit without any promised interest or a plausible mechanism to raise the precious metals in question. In practice, the paper looked and functioned like currency today"

The increase in the money supply led to inflation. 

"More notes were issued to deal with higher inflation, which further drove up prices. Treacherous Loyalist New Yorkers compounded the problem by adding forged notes into the mix."

"In 1779, the Continental Congress delayed the promised repayment of the notes, which further eroded their value. By the early 1780s, the currency was nearly worthless — giving rise to the expression “not worth a continental.” [to refer to something cheap or that has no value] The last years of the war were instead financed with foreign aid, loans and a new national bank."

"The Continental currency was good enough to help America get through the first critical years of war but the failure to replace it with a credible national system of finance helped to doom the peace. The newly independent states each went its own unsuccessful way. Rhode Island issued large amounts of paper money, which led to inflation and riots. Massachusetts returned to using silver and gold coins and levying high taxes — and the result was even worse, with Shays’ Rebellion helping to end the Articles of Confederation."

"Fiat money returned, briefly, during the Civil War, when it was once again rendered useless by inflation. Otherwise, U.S. dollars were backed by something shiny and solid more or less all the way through 1971, when President Richard Nixon took the final steps to exit the Bretton Woods system in order to prevent a large outflow of gold to other countries." 

"It was not ignorance that sealed the fate of the Continental currency. Many policymakers of the era understood that printing more money would raise prices, and that paper promises without credible mechanisms for repayment would not be taken seriously." 

Related post:

How Benjamin Franklin Helped Foil Early American Money Counterfeiters: Scientists identified specific pigments, minerals and fibers used in the bills (2025)