The Massachusetts Bay Colony initiated the use of fiat currency in 1690 by issuing bills of credit, a groundbreaking concept where money held value solely because it was required for paying taxes. This idea, though initially met with skepticism, played a crucial role during the American Revolution when the Continental Congress issued paper currency to support the rebel army, backed by the promise of taxation. Despite its flaws, including overproduction and rapid devaluation, the currency proved effective in sustaining the war efforts. However, after the revolution, many, including Thomas Jefferson, criticized the notion of money having no intrinsic value. It wasn't until 1971 that the U.S. fully embraced tax-backed currency, raising concerns about its long-term sustainability. The article advocates for recognizing both America’s independence and the innovative concept of fiat currency as pivotal achievements in financial history.

Source 🔗