The Counting House No. 12 — Not Worth a Continental
How the British counterfeited a currency out of existence, and why it took Benjamin Franklin to see the full picture.
There is a phrase that used to be common in American speech and is now nearly gone. Not worth a Continental. My father used it. His father used it. It meant worthless, valueless, so utterly devalued that it could not be traded for anything at all.
The Continental in the phrase is a piece of paper money issued by the Continental Congress between 1775 and 1779 to finance the Revolutionary War. By the war’s end it had lost virtually all of its value. A hundred paper Continentals were worth one silver dollar. A thousand were worth ten. The phrase entered common speech by 1781, was a bitter joke by 1789, and by the middle of the nineteenth century was in every American dictionary.
The reason usually given for this collapse — the reason I was given in high school American history, the reason most standard textbooks still give — is that, just like today’s Treasury, the Continental Congress simply printed too much money. Facing a war it could not afford, and without any power to tax, the Congress issued paper until public confidence in the paper collapsed. Over-issue killed the Continental. This story is true. It is also incomplete.
This is the third piece in a running project I’m publishing on the primary-source financial history of the founding period. The first, in June, told the story of an Aaron Burr check from 1796 that ended up at the Historical Society of Pennsylvania. The second, last week, was about a bill of exchange drawn on Benjamin Franklin in Paris in 1778, made out to a French national named Adrian Renaudel — and about why that bill was paid in French currency instead of Continental dollars. The reason had to do with what was happening to the Continental in 1778. The story I want to tell this week is the next one in the sequence, and it is the one the standard history usually leaves out.
On April 14, 1777, an advertisement appeared in Hugh Gaine’s New-York Gazette and Weekly Mercury, a newspaper printed in British-occupied New York City. The advertisement said, in language that has come down to us verbatim:
Persons going into other Colonies may be supplied with any Number of counterfeited Congress-Notes, for the Price of the Paper per Ream. They are so neatly and exactly executed, that there is no risk in getting them off, it being almost impossible to discover that they are not genuine.
The advertisement was public. It was not hidden. It was placed in a newspaper printed under the direct protection of the British military occupation of New York and it circulated widely on both sides of British lines. Four days after its appearance, George Washington obtained a copy and sent it to the Continental Congress with a brief note. This scheme, he wrote, shows that no artifices are left untried by the enemy to injure us.
A brief note before I go further: I publish these primary-source essays on early-Republic financial history weekly. If the format is your thing, a free subscription gets each one delivered by email as it comes out. It’s the easiest way to follow the project as it develops.
The advertisement is one of a number of similar ones that ran in New York’s Loyalist press between 1776 and 1780. The operation it advertised was massive. Counterfeit Continentals were produced in occupied New York City on presses set up for the purpose — one of them, according to intelligence Robert Townsend delivered to Washington’s spymaster Benjamin Tallmadge in late 1779, using paper that exactly matched what Congress was itself using for its own currency. Estimates of counterfeit share of circulation vary, but at least one careful modern accounting (Stuart Hatfield’s summary in the Journal of the American Revolution) reports that by war’s end the counterfeit may have equalled or exceeded the amount of legitimate paper in circulation. Whatever the precise number, the volume was enough to compound the depreciation from over-issue into something like a total collapse.
Benjamin Franklin, who as commissioner to France watched the counterfeit crisis unfold from the other side of the Atlantic, later gave the strongest surviving account of what it had done. Writing in the memoirs he was preparing at the end of his life, he set the problem down directly:
Paper money was in those times our universal currency. But it being the instrument with which we combated our enemies, they resolved to deprive us of its use by depreciating it; and the most effectual means they could contrive was to counterfeit it. The artists they employed performed so well that immense quantities of these counterfeits, which issued from the British government in New York, were circulated among the inhabitants of all the states before the fraud was detected. This operated considerably in depreciating the whole mass, first by the vast additional quantity, and next by the uncertainty in distinguishing the true from the false; and the depreciation was a loss to all and the ruin of many.
Franklin’s language is not the language of speculation. He calls the counterfeit operation what it was: something that was issued from the British government in New York. It was official. It was organized. And it was — this is the crucial point — often indistinguishable in quality from the notes the Continental Congress was itself producing. Franklin, who understood printing and paper as well as any American of his generation, is telling us that the British had access to better paper and better engraving than the American treasury could arrange under wartime conditions. The Congress printed money faster than it could print money well; the British printed American money slowly and carefully, with the resources of the Bank of England behind them. The counterfeits, in some cases, looked better than the real thing.
The most direct proof that this was British policy rather than freelance villainy came into American hands through the war’s constant interception game. In late 1779, the American frigate Deane captured a British transport out of Glasgow. Aboard was a box that its handler had tried to throw overboard as the Deane closed in; recovered from the water, it turned out to contain types, engraving materials, and a supply of paper interwoven with silk and isinglass — the specific paper Congress used for its own currency. Then, in early 1780, another American privateer intercepted dispatches from Sir Henry Clinton, the British commander-in-chief in America, to Lord George Germaine, the Secretary of State for the Colonies. The Clinton letter was dated January 30, 1780; it was allowed to be printed in the Pennsylvania Journal on April 8, 1780. In it Clinton reported on his conduct of the war to his political master in London, and he included these words:
No experiments suggested by your Lordship; no assistance that could be drawn from the power of gold, or the arts of counterfeiting, have been left unattempted.
The counterfeit operation was, by Clinton’s own acknowledgment to his Secretary of State, among the strategies suggested by London and among the means entrusted to my care. He was reporting that he had used the tools he had been given. The counterfeiting of the Continental was, plainly, one of them.
The British had figured out, correctly, that a paper currency backed by nothing but political confidence could be destroyed by injecting counterfeits into it. Every counterfeit note that entered circulation added to the aggregate paper supply — which drove prices up and confidence down. Every counterfeit note that was suspected made merchants suspicious of all notes — which drove refusal to accept the currency, which further destroyed its value. It was possible, the British recognized, to attack a revolutionary movement by attacking its paper. And they did.
They did not fully succeed — the Revolution survived — but the Continental did not. It was destroyed by the combination of Congress’s over-issue and British counterfeiting acting on the same currency at the same time. By late 1779 the Congress had stopped issuing new Continentals entirely. In March 1780 it formally devalued the outstanding notes at a ratio of forty to one — meaning a hundred-dollar Continental was now officially worth two and a half specie dollars. This was not enough. By 1781, in most parts of the country, the currency was refused entirely.
This is where the Renaudel bill fits into the story, and this is why I wanted to tell these two pieces in sequence.
The Continental Loan Office bills of exchange — the small pieces of paper Francis Hopkinson signed as Treasurer of Loans, drawn on Benjamin Franklin in Paris, payable in French livres tournois — were structurally immune to the counterfeiting attack that was destroying the Continental dollar. They were payable in France, in French currency, at the American diplomatic residence, denominated in a currency the British could not counterfeit into circulation. A French lender who bought a loan certificate through the Pennsylvania office was receiving, in effect, a hard-currency income stream that operated outside the paper economy the British were attacking. The loan-office system was one of the few pieces of Revolutionary War financial infrastructure that continued to function normally after 1778, because the British had no way to reach it. The Continental Congress had, without perhaps fully realizing it, built a small piece of financial architecture that was invulnerable to the specific form of warfare being waged against its main currency.
Adrian Renaudel got his ninety livres tournois. Whether he collected on the Third Bill I hold or one of the two other identical bills issued to him, the payment mechanism worked. Continental dollars in the same year — in the same city, from the same Treasury office, signed by the same Francis Hopkinson — were losing value by the week to a combination of Congressional over-issue and British counterfeit.
There is a way of thinking about the founding of the country in which it appears more heroic and more inevitable than it actually was. The mythology emphasizes the ideas — self-government, natural rights, the sovereignty of the people — and the battles — Trenton, Saratoga, Yorktown — and the eventual constitutional settlement. The mythology is not wrong. But it is missing the character of the counterfeiter, working in an occupied city with a public advertisement in a Loyalist newspaper, methodically injecting fake paper into an economy to help destroy a revolution his king had lost patience with. That character was real. The Revolution was fought against him too. And the Continental Congress, printing paper as fast as its presses could work, was not only losing to inflation; it was losing to a deliberate enemy operation running in parallel to the shooting war.
Not worth a Continental. When my father said it, and his father said it, they meant something roughly equivalent to worthless. They did not mean, and I did not know until later, that the phrase was recording a specific historical fact about a specific piece of economic warfare waged by a specific enemy — and that the currency had been killed on purpose, in part, by an operation most Americans have never heard of.
The paper is on my desk again as I write this. Not the Continental — I don’t own a Continental note, though I have handled one — but the Renaudel bill, the small piece of paper from the parallel system, the one the counterfeiters could not touch. Ninety livres tournois, payable at Passy. It survived because it belonged to a system the British could not reach.
Paper against paper.
— Paul
Next week: something unexpected. I photographed the back of the Renaudel bill for the first time — the piece I wrote about two weeks ago — and everything I said about it is partly wrong. The story continues.
Thank you for reading.