1700s Economic Warfare [Post 34]

When the American Revolutionary War is mentioned, it often evokes thoughts of significant historical events such as The Declaration of Independence, The Boston Tea Party, Paul Revere's Midnight Ride, and the numerous conflicts between the colonists and Britain. While these events may take center stage, there were other dynamics at play during that era. One such element was Britain's counterfeiting campaign to devalue the local currency through inflation.

Inflation is the escalation of prices or the erosion of purchasing power, where the dollar you hold today buys you fewer goods tomorrow.1

To illustrate one historical context for the formation of inflation, we can turn the clock back to the late 1700s.

During the Revolutionary War, Britain sought to undermine the American colonists not only militarily but also economically. They adopted an economic warfare strategy of flooding the American paper currency market of, "continentals," with counterfeit bills. The objective was to diminish purchasing power. This campaign involved Patriot deserters and British loyalists circulating counterfeit bills within local colonist businesses.2

Britain's scheme proved effective, with the value of America's currency plummeting by 13.4% in 1778 alone and in large percentages during surrounding years.3 Noticeably, this wasn’t enough to stop the colonists from revolting as America gained independence in 1776. Though American’s did have to attempt to combat the counterfeiting problem by offering inflation-indexed bonds to soldiers to match rising costs.2

It's worth noting that inflation can function as an economic weapon during times of conflict, yet it's not universally tied to detrimental circumstances. Inflation can also materialize due to positive economic factors like growth, rising wages, and tax reductions. Sometimes, inflation serves as a testament to a thriving, expanding economy. While a large magnitude of inflation can be detrimental, a little inflation can show economic health.1

The commentary of this domain reflects only the personal opinions of the creator(s) and are published independently of services provided by or in connection to KEB Wealth Advisors.

Works Cited

1. Fernando, J. (2023, August 11). Inflation. Investopedia. https://www.investopedia.com/terms/i/inflation.asp

2. Catherwood, J. (2022, March 20). Brief History of Economic Warfare. Investor Amnesia. https://investoramnesia.com/2022/03/20/brief-history-of-economic-warfare/

3. Officer, L. H., & Williamson, S. H. (2023). United States Consumer Price Index (US CPI) Data. MeasuringWorth. https://www.measuringworth.com/datasets/uscpi/