How Inflation Nearly Undermined the American Revolution

Inflation isn’t a new problem. In fact, it has plagued this country since its founding. Even though the American Revolution– and its monetary soundness– are worth celebrating, its lesser-known history reveals how war and inflation go hand-in-hand.

The following article was originally published by the Mises Institute. The opinions expressed do not necessarily reflect those of Peter Schiff or SchiffGold.

In a previous article, I detailed how war—even during the American Revolution—contributed to centralization of power and statism, including higher taxes, price controls, and inflation. Doubtless it will be argued that these were necessary sacrifices to achieve independence from the British and that at least some degree of monetary inflation was necessary for American victory. In fact, this article will argue the opposite—monetary inflation threatened the cause of independence. Even though the colonies did achieve independence despite the consequences of inflation, it does not follow that inflation facilitated independence. A policy of inflation hindered, at least as much as it helped, the cause of independence, also contributing to great post-war economic instability.

In a letter to Jean Nicolas DéMeunier—commenting on his article concerning the US in DéMeunier’s Encyclopédie Méthodique—Thomas Jefferson wrote (June 22, 1786),