Defunct U.S. Currencies and Dollar Defaults
Defunct United States Currencies: Revolutionary War to Present
Revolutionary War Era
Continental Currency (1775-1780)
The Continental Congress issued Continental dollars from 1775-1779, printing approximately $241 million in total, which represented about 82% of federal government income during the first years of the war. The currency rapidly lost value due to inflation, leading to the famous phrase “not worth a Continental”.
Colonial Bills of Credit (Pre-1776)
All 13 colonies issued their own paper money called “bills of credit,” starting with Massachusetts in 1690, which became the first government in the Western world to issue paper currency. Each colony had its own currency system:
- Massachusetts
- Connecticut
- Rhode Island
- New Hampshire
- New York
- New Jersey
- Pennsylvania
- Delaware
- Maryland
- Virginia
- North Carolina
- South Carolina
- Georgia
State Currencies During Revolutionary War (1775-1781)
After the Battle of Lexington and Concord in 1775, all 13 colonies plus Vermont issued their own bills of credit to finance the war effort, competing directly with Continental currency.
19th Century Private Banking Era
State Bank Notes (1782-1866)
From 1782 to 1866, thousands of state-chartered and private banks issued their own banknotes, with over 1,600 banks issuing more than 300,000 varieties of notes across 39 states. Before the Civil War, hundreds of local banks issued thousands of different kinds of currency in bewildering variety, which became the de facto currency of the country.
In 1866, the U.S. Government levied a 10% tax on state and private bank notes, effectively forcing them to retire their currency and ending the “Obsolete Bank Note era”.
Confederate Currency
Confederate States Dollar (1861-1865)
Between 1861 and 1865, the Confederate States of America issued currency on eight separate occasions, pumping millions of dollars into circulation. When the Confederacy ceased to exist at the end of the war, the money lost all value as fiat currency.
Company Scrip
Coal, Lumber, and Mining Company Scrip (1800s-1960s)
Company scrip was issued by thousands of private mining and lumbering enterprises, primarily from the late 1800s through the mid-20th century. An estimated 75% of all scrip used was by coal companies in Kentucky, Virginia, and West Virginia. Payment in scrip became illegal in 1938 as part of the Fair Labor Standards Act, though some claims suggest it continued until the 1960s.
One numismatist’s index lists over 1,100 companies that issued scrip currency in 40 states.
Depression-Era Currencies
Municipal and Emergency Scrip (1932-1935)
During the Great Depression, various entities issued scrip including local governments due to decreased tax revenues, chambers of commerce after bank failures, home-owned stores, barter groups for the unemployed, and charitable organizations.
Summary Count
- 13 colonial currencies (all went defunct when colonies became states)
- Continental dollar (1 federal currency)
- 14 state currencies during Revolutionary War (13 original plus Vermont)
- Confederate dollar (1 currency)
- Thousands of private bank notes (1,600+ banks issuing 300,000+ varieties from 1782-1866)
- Thousands of company scrip issues (1,100+ companies documented)
- Municipal and emergency scrip (hundreds during the Depression)
Conservative estimate: Over 2,700 distinct currency-issuing entities, though the actual number of different currency designs and varieties likely exceeds 300,000 when counting all variations.
U.S. Dollar De Facto Defaults: A Historical Timeline
1. The 1933 Gold Confiscation and Devaluation
What Happened
On April 5, 1933, President Franklin Roosevelt issued Executive Order 6102, forbidding Americans from hoarding gold and requiring citizens to surrender their gold to the Federal Reserve by May 1 for $20.67 per ounce. Shortly after, in 1934, the government increased the gold price to $35 per ounce, effectively devaluing the dollar by 40% and increasing Federal Reserve gold holdings by 69%.
Why This Was a Default
On June 5, 1933, a congressional resolution abrogated gold clauses in all contracts, both government and private, which had guaranteed contracts would be repaid in gold or its monetary equivalent at the 1900 value. The government forced citizens to exchange gold for dollars at $20.67, then immediately revalued gold to $35, representing a massive wealth transfer from citizens to the government.
The Impact
Since Roosevelt banned citizens from owning gold in 1933, the dollar has lost about 93% of its purchasing power.
2. The 1971 Nixon Shock – Closing the Gold Window
What Happened
On August 15, 1971, President Richard Nixon announced the suspension of the dollar’s convertibility into gold, ending the Bretton Woods system where foreign governments could exchange dollars for gold at $35 per ounce. Although Nixon stated this was temporary, all attempts at reform proved unsuccessful, effectively converting the U.S. dollar into a fiat currency.
Why This Was a Default
Under Bretton Woods, established in 1944, the U.S. was committed to backing every U.S. dollar overseas with gold. By the 1960s, a surplus of U.S. dollars caused by foreign aid, military spending, and foreign investment meant the United States did not have enough gold to cover the volume of dollars in worldwide circulation. On August 11, 1971, Britain requested $3 billion in gold be moved from Fort Knox, and Nixon closed the gold window days later.
The Impact
The dollar was overvalued, making imports very cheap and exports very expensive, resulting in the U.S. experiencing its first trade deficit since the 19th century. This was essentially a default on the promise to redeem dollars for gold.
3. The Petrodollar System (1973-1974) – Emergency Dollar Rescue
What Happened
After Nixon ended gold convertibility, the U.S. struck a deal with Saudi Arabia in 1974, ensuring Saudi oil would be priced exclusively in dollars in exchange for U.S. military protection and arms sales. This followed the 1973 OPEC oil embargo, which quadrupled oil prices from about $3 to $12 per barrel.
Why This Mattered
The Nixon Administration understood that the collapse of the gold standard would cause a decline in global demand for the U.S. dollar, so maintaining demand was vital. The “recycling” of petrodollars through the U.S.-Saudi Arabian Joint Commission meant oil exporters put their surplus dollars into U.S. financial markets, helping finance American debt and consumption.
The Result
Today, roughly 80% of global oil transactions are still conducted in USD, illustrating the petrodollar system’s enduring influence.
4. Quantitative Easing (2008-2014) – Massive Monetary Expansion
What Happened
In November 2008, the Federal Reserve started QE1, buying $600 billion in mortgage-backed securities, eventually reaching $2.1 trillion by June 2010. QE2 (November 2010) added $600 billion in Treasury securities, and QE3 (September 2012) involved $85 billion per month in combined purchases.
Total Impact
Between 2007 and 2014, the Fed’s assets increased from $882 billion to $4.473 trillion. By the end of quantitative easing in 2014, the central bank had purchased almost $4.5 trillion in mortgage-backed securities and Treasury bonds.
Why This Was a Stealth Default
QE benefits debtors since interest rates fall, but directly harms creditors who earn less money, and harms importers and consumers as currency devaluation inflates the cost of imported goods. The BRICS countries condemned QE policies, arguing such actions amount to protectionism and competitive devaluation.
Summary: Four Major Dollar Defaults
- 1933: Gold confiscation and 40% devaluation – default on domestic gold obligations
- 1971: Nixon closes gold window – default on international dollar-for-gold promises
- 1973-74: Petrodollar system created – emergency measure to maintain dollar demand after default
- 2008-2014: Quantitative easing – stealth default through currency debasement
Each represents a moment when the U.S. government changed the rules to avoid honoring its previous monetary commitments, effectively defaulting on the dollar’s promised value while maintaining the fiction of continuity.