The ill-fated Quebec expedition, however, cost much more than 7,000-an estimated 50,000 pounds, in fact. Its treasury depleted, the government of the colony decided on December 10 to emit a sum of 7,000 pounds in paper money. Mutiny threatened as the men demanded payment. The troops were to be paid out of the booty that Phips expected to grab once he took Quebec, but by late fall he returned to Massachusetts defeated and empty-handed. In August 1690, under the command of Sir William Phips, 34 ships and 2,000 men departed Boston on a mission to seize Quebec in New France (French Canada). The expedition to which Rothbard referred grew out of King William’s War (1688-1697), which spread from Europe into England’s North American colonies. But even before this, the leading men of the colony were busy proposing paper money schemes. The fateful issue was made in 1690, to pay for a plunder expedition against French Canada that had failed drastically. Massachusetts has the dubious distinction of having promulgated the first governmental paper money in the history of the Western world-indeed, in the history of the entire world outside of China. The late Austrian School economist Murray Rothbard briefly mentioned it in a 1963 article for the Foundation for Economic Education titled, Mercantilism: A Lesson for Our Times.

Nearly a century before, New England provided the setting for an especially interesting case in economic history. The hyperinflation of the continental dollars that Congress printed between 17 was not the first paper money episode in North America.

A few years later, in 1787, Washington declared that the inevitable effects of paper money are “to ruin commerce, oppress the honest, and open the door to every species of fraud and injustice.” When the Congress foisted it on his Continental Army and tried to pay for food with it, his men suffered privation.īy contrast, the nearby British ate well because they paid in gold and silver. George Washington-surveyor, farmer, soldier, and statesman-never thought of himself as an economist but experience taught him a great deal about fiat (unbacked) paper money.

Fiat money