In 1775, the Continental Congress began issuing the Continental Currency, the new currency of the nascent United States of America. The Continental Currency was pegged to the Spanish Dollar (Peso) or to the amount of silver (or equivalent gold amount). This meant that the bearer of this new currency would be able to redeem its face value in gold or silver.
The main problem with the Continental Currency was that there was no clear rules on how the currency would be exchanged with silver or gold. In addition, there was no silver or gold to back the paper currency.
As a consequence of this, the Continental Currency lost value. According to this article, in November 1776, 1 continental could still buy 1 dollar in goods. However, due to distrust and the requests of merchants to be paid in hard money, by November 1778 1continental would buy 1 dollar in goods. As more continentals were printed, ts value decreased further and by November 1779, the ratio was 40 to 1. By 1781, the value of the continental was so worthless that it ceased to exist.
This post is intended to only raise awareness. In order to make actual financial decisions please contact your financial advisor and/or tax advisor prior to making the decision.
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