Thomas Paine and Paper Money

Part 1 of 1 in the series Paper Money

The following is the first in a series of articles exploring the history and effects of paper money.

Thomas Paine is well known as one of the Founding Fathers of the United States as well as an author and pamphleteer. In January 1776 Mr. Paine published Common Sense, the pro-independence monograph he anonymously published shortly after his immigration to America in 1774.

In 1786 Thomas Paine wrote about the effects of paper money in comparison to Gold and Silver Coin as Tender in Payment of debts.1 He wrote:

Thomas Paine Man has no share in making gold or silver; all that his labors and ingenuity can accomplish is, to collect it from the mine, refine it for use and give it an impression, or stamp it into coin.

Its being stamped into coin adds considerably to its convenience but nothing to its value. It has then no more value than it had before. Its value is not in the impression but in itself. Take away the impression and still the same value remains. Alter it as you will, or expose it to any misfortune that can happen, still the value is not diminished. It has a capacity to resist the accidents that destroy other things. It has, therefore, all the requisite qualities that money can have, and is a fit material to make money of — and nothing which has not all those properties can be fit for the purpose of money.

Paper, considered as a material whereof to make money, has none of the requisite qualities in it. It is too plentiful, and too easily come at. It can be had anywhere, and for a trifle. . . .

But when an assembly undertakes to issue paper as money, the whole system of safety and certainty is overturned, and property set afloat. Paper notes given and taken between individuals as a promise of payment is one thing, but paper issued by an assembly as money is another thing. It is like putting an apparition in the place of a man; it vanishes with looking at it, and nothing remains but the air. . . .

By what power or authority an assembly undertakes to make paper money, is difficult to say. It derives none from the Constitution, for that is silent on the subject. It is one of those things which the people have not delegated, and which, were they at any time assembled together, they would not delegate. It is, therefore, an assumption of power which an assembly is not warranted in, and which may, one day or other, be the means of bringing some of them to punishment.

I shall enumerate some of the evils of paper money and conclude with offering means for preventing them.

One of the evils of paper money is that it turns the whole country into stock jobbers. The precariousness of its value and the uncertainty of its fate continually operate, night and day, to produce this destructive effect. Having no real value in itself it depends for support upon accident, caprice, and party; and as it is the interest of some to depreciate and of others to raise its value, there is a continual invention going on that destroys the morals of the country.

It was horrid to see, and hurtful to recollect, how loose the principles of justice were left, by means of the paper emissions during the war. The experience then had should be a warning to any assembly how they venture to open such a dangerous door again.

As to the romantic, if not hypocritical, tale that a virtuous people need no gold and silver, and that paper will do as well, it requires no other contradiction than the experience we have seen. Though some well-meaning people may be inclined to view it in this light, it is certain that the sharper always talks this language.

There are a set of men who go about making purchases upon credit, and buying estates they have not wherewithal to pay for; and having done this, their next step is to fill the newspapers with paragraphs of the scarcity of money and the necessity of a paper emission, then to have a legal tender under the pretense of supporting its credit, and when out, to depreciate it as fast as they can, get a deal of it for a little price, and cheat their creditors; and this is the concise history of paper money schemes.2

20 dollar Continental bill of 1778 It is very likely that Thomas Paine’s view of paper money was directly influenced by the Continental Congress’ decision to print The Continental – America’s First Paper Money. In order to finance the war effort, this “assembly” had printed $6 million of the new currency by the end of 1775 – increasing the money supply by 50%. By 1779, $100 worth of gold and silver coins (i.e. “specie”) bought $2,600 worth of Continental currency. And by 1781, the same amount of gold and silver coins fetched $16,800 worth of Continental paper money.

Americans soon learned the hard lessons of paper money. In time, the Continental became largely worthless (inspiring the phrase “not worth a Continental”), many people found themselves in debt, and the resulting inflation caused by printing $200 million of the new currency gave “Americans for generations to come a strong bias against paper money.”3


  1. Paine, Thomas. “Thomas Paine on Paper Money”. 24 Apr 2008. Ludwig von Mises Institute. 21 Nov 2009.
  2. Ibid.
  3. See link referenced immediately above.

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  1. Dan’s avatar


    I am pleasantly surprised you quote Thomas Paine. After all he was a communist:

    It is a position not to be controverted that the earth, in its natural, cultivated state was, and ever would have continued to be, the common property of the human race. In that state every man would have been born to property. He would have been a joint life proprietor with rest in the property of the soil, and in all its natural productions, vegetable and animal….

    [C]reate a national fund, out of which there shall be paid to every person, when arrived at the age of twenty-one years, the sum of fifteen pounds sterling, as a compensation in part, for the loss of his or her natural inheritance, by the introduction of the system of landed property. And also, the sum of ten pounds per annum, during life, to every person now living, of the age of fifty years, and to all others as they shall arrive at that age.

  2. Greg’s avatar

    Dan – So basically what you are saying is that Thomas Paine was a “communist” some 39 years before Karl Marx wrote The Communist Manifesto since Mr. Paine died in 1809 and the Manifesto was published in 1848. That seems like quite a stretch of logic to label someone a communist many years before that phrase came into common usage.

    In contrast, Thomas Paine’s writings are most often referred to in terms of America and the Utopian Dream in the tradition of Sir Thomas More’s Utopia.

  3. Dan’s avatar


    If you research the topic of communism, you’ll find that it really didn’t originate with Marx, that the principles Marx and his buddies put together were borrowed from lots of previous thinkers, including Thomas Paine.

  4. Greg’s avatar

    Dan – True, but the label “communist” wasn’t adopted until after Paine. Like many of his ancient and modern counterparts, Paine was a utopian in the classic sense of the word. A good history of various attempts to set up utopias can be found in Hugh W. Nibley’s article “The Utopians” found in the book Approaching Zion.

  5. frankg’s avatar

    I wonder what Paine would have thought of gulags and berlin walls. Or secret police constantly monitoring lives of citizens, shipping them off to well populated work camps in desolate regions. Did he write a pamphlet for that? Or how perhaps government would force the person to spend those government funds?
    I’m also thinking of his “give me liberty or give me death” statement.

  6. frankg’s avatar

    Whoa! That was Patrick Henry’s quote!

  7. Greg’s avatar

    No problem frankg – we knew of whom you were quoting!

  8. Tony’s avatar

    I find these comments from President Ezra Taft Benson to be especially interesting when considering an eventual demise of paper money in the future:

    The pending economic crisis that now faces America is painfully obvious. If even a fraction of potential foreign claims against our gold supply were presented to the Treasury, we would have to renege on our promise. We would be forced to repudiate our own currency on the world market. Foreign investors, who would be left holding the bag with American dollars, would dump them at tremendous discounts in return for more stable currencies, or for gold itself. The American dollar both abroad and at home would suffer the loss of public confidence. If the government can renege on its international monetary promises, what is to prevent it from doing the same on its domestic promises? How really secure would be government guarantees behind Federal Housing Administration loans, Savings and Loan Insurance, government bonds, or even social security?

    \Even though American citizens would still be forced by law to honor the same pieces of paper as though they were real money, instinctively they would rush and convert their paper currency into tangible material goods which could be used as barter. As in Germany and other nations that have previously traveled this road, the rush to get rid of dollars and acquire tangibles would rapidly accelerate the visible effects of inflation to where it might cost one hundred dollars or more for a single loaf of bread. Hoarded silver coins would begin to reappear as a separate monetary system which, since they have intrinsic value would remain firm, while printed paper money finally would become worth exactly it’s proper value–the paper it is printed on! Everyone’s savings would be wiped out totally. No one could escape.

    \One can only imagine what such conditions would do to the stock market and to industry. Uncertainty over the future would cause the consumer to halt all spending except for the barest necessities. Market for such items as television sets, automobiles, furniture, new homes, and entertainment would dry up almost overnight. With no one buying, firms would have to close down and lay off their employees. Unemployment would further aggravate the buying freeze, and the nation would plunge into a depression that would make the 1930s look like prosperity. At least the dollar was sound in those days. In fact, since it was a firm currency, its value actually went up as related to the amount of goods, which declined through reduced production. Next time around, however, the problems of unemployment and low production will be compounded by a monetary system that will be utterly worthless. All the government controls and so-called guarantees in the world will not be able to prevent it, because every one of them is based on the assumption that the people will continue to honor printing press money. But once the government itself openly refuses to honor it–as it must if foreign demands for gold continue–it is likely that the American people will soon follow suit. This in a nutshell is the so-called ‘gold problem. (The Teachings of Ezra Taft Benson p 639-640.)

  9. Greg’s avatar

    Thanks Tony for the great quote. I’m afraid many are unaware of the nation’s precarious financial situation after operating almost 40 years under a fiat monetary system.

  10. Tony’s avatar

    And I’m afraid all will be made aware the hard way of that precarious situation before too long (<5 years would be my guess). A few years ago I couldn't have imagined things happening so quickly, and yet the house of cards appears to be falling before our very eyes… Not exactly the history I was hoping to witness in my lifetime.

  11. Mace’s avatar

    Actually, if you read the Manifesto you will see that Marx was setting down what he felt was the best strategy for a pre-existing group of Communists to go about. Tom Paine hobnobbed with many of these early self-identified Communists after the French Revolution.

    The term “Communist” was first used to refer to the “Digger” or “True Leveller” movement in England in 1649. Nobles used it as a derogatory term to refer to the fact that the diggers lived on Communes.

  12. Greg’s avatar

    Hi Mace – thanks for the references to this movement during the British civil war.

    Do you happen to have a source for the term “communist” being used in 1649 or during this time period? Almost every reference seems to cite the use of this term in France after the revolution of 1830.

    In France, the term generally referred to a commune (a self-governing village) or to communauté (common-ownership).

  13. tc’s avatar

    After all he was a communist:..


    “It is a position not to be controverted that the earth, in its natural, cultivated state was, and ever would have continued to be, the common property of the human race. In that state every man would have been born to property. He would have been a joint life proprietor with rest in the property of the soil, and in all its natural productions, vegetable and animal….

    This was before the fall…notice the use of the subjunctive…unfortunately, we fell.

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