Abstract
In 1790, a U.S. paper dollar was widely held in disrepute (something shoddy was not ‘worth a Continental’). By 1879, a U.S. paper dollar had become ‘as good as gold’. These outcomes emerged from how the U.S. federal government financed three wars: the American Revolution, the War of 1812, and the Civil War. In the beginning, the U.S. government discriminated greatly in the returns it paid to different classes of creditors; but that pattern of discrimination diminished over time in ways that eventually rehabilitated the reputation of federal paper money as a store of value.
•Document how U.S. paper money went from nearly worthless to a highly regarded store of value in less than a century.•Discuss the financing of three U.S. wars: the American Revolution, the War of 1812, and the Civil War.•Provide history of evolving views on fiat currency and nominal government debt within the U.S.