The American Revolution was very much a case of David versus Goliath. A relatively small group of colonists decided that they wanted to break free of the home government, which in this case just happened to be one of the most powerful nations on the globe. Almost overnight the thirteen separate colonies had to form a central government to unify the people, a military to defend the people and a central economy to pay for it all. It was a daunting task that had to be accomplished while undergoing an invasion by the British army, which would continue to make mincemeat out of whatever forces the Americans could throw at it. The British army, however, had just as many uphill battles to fight. Lack of men and supplies, a chain of command that stretched almost three thousand miles, and a population in the colonies that could range from hostile to very supportive to outright ambivalent. For the British army, meeting the Americans on the field of battle would lead to many victories, but never any that would bring an end to the war. Something besides the force of arms would be needed to bring the colonies to their senses.
To this end a campaign was devised to undermine the nascent American economy in an attempt to achieve a twofer. If the economy was in shambles the Americans would not be able to purchase the men and material needed to continue the war. At the same, by undermining the economy they would also be undermining the American Congress, which was acting as the central government. Perhaps if people lost faith in the Congress, they would realize that war could not be won, and they would all return to the fold. While it is hard to say whether anyone in the British government sat down and actually put together a comprehensive plan, it is obvious that several different measures were undertaken. These included attempts to limit American trade with foreign nations using the all-powerful British Navy to interdict as much overseas commerce as possible as well as searching vessels from “neutral” countries for war materials in route to America. This move in particular was frowned upon by many European nations.
While these activities were effective to a point, the most effective strategy that was tried, and one that very nearly succeeded, was the massive undertaking of counterfeiting Congressional paper currency to the point of making it almost worthless, thus crashing the American economy. No economy, no more war. In looking at this strategy three questions must be asked: How were the fake notes produced and circulated? Was it effective in undermining the economy? Finally, was this a sanctioned strategy by the British, one that they knowingly pursued? Looking at the counterfeiting strategy through these questions presents an intriguing, and often overlooked aspect of the American Revolution.
How was it done?
For the majority of the war the city of New York was under control of the British. It was here that the majority of the counterfeiting was done. For the most part it was not difficult as many of the advanced security measures that are used today to dissuade such actions were not in use. Even though bank notes had individual handwritten serial numbers and signatures, these were no deterrent as they were easily forged. In addition, most of the Continental currency that was printed by legitimate services was done on the cheap, with little eye to quality. This made the process of counterfeiting it much easier. Often the fake currency could be easily spotted because it was of higher quality than the legitimate bills. The paper was usually a higher quality and the engraving was of a much higher quality on the professionally done counterfeits.
One thing that set the legitimate currency apart was the special paper used, common paper infused with blue fibers and flakes of mica that set it apart from normal paper (a similar method is used today, which makes it much harder to simply photocopy a hundred dollar bill and spend it at the local grocery store). While the paper itself was special it was far from rare. In fact at one point British ships were intercepted on their way to New York that were found to be carrying not only the ink for counterfeiting but massive amounts of the paper. The American frigate Deane, on August 9, 1779, captured the Glencairn out of Glasgow. The report of Commodore Samuel Nicholson of the Deane to the Continental Congress, as published in the Virginia Gazette of October 2, 1779, stated:
On board the Glencairn, a person says he had in charge a box, which was to be delivered to some person in New York, but upon our coming up with them and the ship striking, threw it overboard; upon which we went immediately after it, and with difficulty got it before it sunk, when upon examination we found it contained materials for counterfeiting our currency, consisting of types, paper with silk and isinglass in it &c. We have however determined to secure the person, as we believe him to be the sole intender of the villainy: The box we have on board and shall bring it with us to Boston.
As for how the bills were put into circulation, there were several methods. One involved finding men who had deserted the Patriot cause and fled to British lines, lining their pockets with the fake cash, and convincing them to cross back over and spend what they could. Of course they would have to be careful as to not arouse suspicion, but with this method hundreds of fake Continental dollars could be put in circulation at a time. The practice was risky. A soldier named David Gambell of the 8th Pennsylvania Regiment, for example, had deserted and upon being captured was found with counterfeit money in his possession. He was court-martialed and sentenced to death by order of General Washington.
Another method of dissemination was less subtle. Often in the New York newspapers were advertisements looking for people travelling into the colonies who would be willing to “wallpaper” with Continental bills. In the April 14, 1777 edition of the New York Gazette an ad appeared that specifically requested people to take into the other colonies “any number of counterfeit notes.” The advertisement came to the attention of General Washington who on April 18 sent a copy to Congress, writing that the scheme “shows that no artifices are left untried by the enemy to injure us.”
It was not just civilians of questionable loyalty that were tasked with spreading the fake currency. British soldiers who became prisoners of war were on occasion charged with using counterfeit Continental money to purchase supplies, most notably after the capture of General Burgoyne’s army in 1777. According to the surrender terms the British were to be allowed to return to Europe. Congress, however, refused to allow their return, claiming several instances of British violations of the surrender terms. Among congressional complaints was the“spending habits” of the British prisoners when purchasing supplies from the locals. When General Howe was informed of the issues he denied the use of counterfeit currency it in a letter to General Washington, calling the accusation that the men were knowingly spreading fake currency “too illiberal to deserve a serious answer.”
Was it effective in undermining the economy?
Without a doubt the massive amount of counterfeiting in all forms had a major effect on the young nation’s economy. As the war progressed the value of the dollar fell dramatically for several reasons. One was the lack of any sort of backing to bolster its value. Paper money is basically a promise that it is worth what it says it is. Without massive gold and silver reserves backing it up the dollar was subject to fluctuation that was based on the strength of the promise, and in this case the strength of the people making the promise, that is, Congress. As such it was very much tied to the fortunes of the army. When the army had success the value of the dollar rose, while failure caused it to plummet; with a few exceptions the army had little success. This lead to the devaluation of the currency which made it hard to purchase supplies and necessities that the army needed to win the victories that could cause the currency to be worth something again. Yes, the circle was a vicious one.
With the specter of fake currency compounding the problem of the already low value, it meant that the large numbers of people in the colonies were simply not be willing to sell supplies to Congress or the army for paper money. This often lead to the army having to “requisition” supplies leaving the people with at best useless stacks of paper money and at worst written receipts that could be turned in for reimbursement, someday. On the hand, the British army could usually go to the same people and offer specie (gold or silver), quickly becoming the preferred people to sell to. Even in a rebellion principles sometimes took a back seat to feeding a family.
How effective was the influx of counterfeit money in undermining Congress? Good enough that even John Adams had to remind his wife Abigail to be very wary of taking any paper money. In a letter home during the war Adams admonished his wife:
How could it happen that you should have 5 counterfeit New Hampshire money? Can’t you recollect who you had it of? Let me entreat you not to take a shilling of any but continental money or Massachusetts, and be very careful of that There is a counterfeit continental bill abroad sent out of New York, but it will deceive none but fools, for it is copper plate, easily detected…
The biggest and most visible sign of how the counterfeiting was affecting the economy and the country at large was Congress passing a law that made counterfeiting a capital crime. Under English Law the act was already considered treason and punishable by death and while most colonies had some sort of law on the books regarding counterfeiting, they mainly dealt with British money specifically. That left Congress having to create laws which sometimes mirrored existing ones, but took the new national status into account. Once that law was passed anyone caught and convicted of making or passing the fake Continental currency would be sentenced to death. A number of high profile cases caught the imagination of the public and were followed by even General Washington himself. To this end in 1780 Congress even took the extraordinary step of offering a bounty on counterfeiters, “two thousand dollars in the present Continental currency to any person or persons who take and prosecute to conviction.” This reward was worth about ten dollars specie at the time. Often the spread of the fake money was compared to the spreading of a plague, and the eradication of the plague was taken very seriously.
Still, even when at one point the amount of counterfeit currency in circulation may have exceed the amount of legitimate currency, the economy hung on by its eye teeth and never fully collapsed. Congress continued to shore up the system by instituting price and wage controls as well as securing loans from European powers. The Treaty of Alliance with France in 1778 went a long way to bolstering the confidence the people had in the Congress and the army, which helped prevent a war-ending panic. Speaking of the army, while far from ever sweeping the British from the field as the war progressed, they began showing a tenacity and competence that also helped to instill the desperately needed confidence.
As the value dropped, Congress had no choice but to print more money, driving the value down even further. By 1781, the exchange rate was $225 paper currency to $1 specie. This was at a time when the average Continental army private made $5 a month in Continental scrip, if he was paid at all.
Joseph Plumb Martin, a soldier from Connecticut, relayed in his memoirs that to earn a little extra (having not been paid in many months) he assisted in a roundup of runaway slaves that had fled to the service of British after the siege at Yorktown in 1781 had ended:
… the fortune I acquired was small, only one dollar; I received what was then called its equivalent, in paper money, if money it might be called, it amounted to twelve hundred (nominal) dollars, all of which I afterwards paid for one single quart of rum; to such a miserable state had all paper stuff, called -money- depreciated.
It was not just the soldiers that felt they were getting short shrift from the poor value of the dollar. In 1781 the people had had enough and in the May 12 edition of the Rivington’s Royal Gazette the following story took over the front page.
The Congress is finally bankrupt! Last Saturday a large body of the inhabitants with paper dollars in their hats by way of cockades, paraded the streets of Philadelphia, carrying colors flying, with a dog tarred, and instead of the usual appendage and ornament of feathers, his back was congress covered with the Congress’ paper dollars. This Bankrupt. example of disaffection, immediately under the eyes of the rulers of the revolted provinces, in solemn session at the State House assembled, was directly followed by the jailer, who refused accepting the bills in purchase of a glass of rum, and afterwards by the traders of the city, who shut up their shops, declining to sell any more goods but for gold or silver. It was declared also by the popular voice that if the opposition to Great Britain was not in future carried on by solid money instead of paper bills, all further resistance to the mother country were vain, and must be given up.
This was a telling account of the effect of the poor value of the scrip and the effect that it had on the people. Though it is true that Rivington’s newspaper was published with a loyalist leaning, there is much to be seen from the perspective of one’s enemy. This sentiment however was felt all across the fledgling nation. Had Congress been able to stop the rampant inflation and build confidence in its own brand, the economy and the war effort would have been stronger. Having the marketplaces filled with illegitimate currency went a long way to effecting dissatisfaction.
Was this a sanctioned strategy by the British?
Almost certainly it was. At least, many of the preeminent men of the revolution believed so. In a 1777 letter home John Adams stated the opinion of most the members of Congress: “Their principal dependence is not upon their arms, I believe, so much as upon the failure of our revenue. To think they have taken such measures, by circulating counterfeit bills, to depreciate the currency, that it cannot hold its credit longer than this campaign. But they are mistaken.” In just the following year Thomas Paine, in a 1778 letter to President of the Congress Henry Laurens, suggested appealing to General Howe in New York to become involved in cases of suspected forgery:
I write this, hoping the information will point out the necessity of the Congress supporting their emissions by claiming every offender in this line, where the present deficiency of the law, or the partial interpretation of it, operates to the injustice and injury of the whole continent. I beg leave to trouble you with another hint. Congress, I learn, has something to propose through the commissioners on the cartel respecting the admission and stability of the continental currency. As forgery is a sin against all men alike, and reprobated by all civil nations, query, would it not be right to require of General Howe the persons of Smithers and others in Philadelphia suspected of this crime? And if he or any other commander continues to conceal or protect them in such practices, that, in such case, the Congress will consider the crime as the act of the commander-in-chief ? Howe affects not to know the Congress; he ought to be made to know them; and the apprehension of personal consequences may have some effect upon his conduct.
Was this a sanctioned strategy by the British? While most of the evidence is circumstantial, certainly the practice was not discouraged by the authorities in New York or London. The question was answered in part later in the war when an American privateer intercepted a British vessel that was carrying a letter written by General Henry Clinton, the Commander-in-Chief of the British forces in America, to Lord George Germaine, British Secretary of State. The letter was dated January 30, 1780; it read:
I should be wanting to my civil commission, in closing this letter, without a few reflections on the present state of the money of America. Every day teaches me the futility of calculations founded on its failure. No experiments suggested by your Lordship; no assistance that could be drawn from the power of gold, or the arts of counterfeiting, have been left unattempted. But the currency like the widow’s cruize of oil, has not failed the Congress … I shall, nevertheless, my Lord, continue while I have the honor to command in America, assiduous in the application of those means entrusted to my care; if they cannot work its destruction, yet they embarrass Government ….
The letter was eventually allowed to be printed in the Pennsylvania Journal on April 8, 1780. The letter was republished in England later that year. More than anything else this letter from Clinton shows that he was not only aware and encouraging the counterfeiting strategy, but also seems to have been a little disappointed that the goal of crashing the American economy had so far failed.
Benjamin Franklin, when he wrote his memoirs, looked back on the time of the flood of fake currency:
Paper money was in those times our universal currency. But it being the instrument with which we combated our enemies they resolved to deprive us of its use by depreciating it; and the most effectual means they could contrive was to counterfeit it. The artists they employed performed so well that immense quantities of these counterfeits which issued from the British government in New York were circulated among the inhabitants of all the states, before the fraud was detected. This operated considerably in depreciating the whole mass, first, by the vast additional quantity, and next by the uncertainty in distinguishing the true from the false; and the depreciation was a loss to all and the ruin of many. It is true our enemies gained a vast deal of our property by the operation but it did not go into the hands of our particular creditors, so their demands still subsisted, and we were still abused for not paying our debts!
While it can be said that the British commanders, both Howe and Clinton, were certainly aware of the massive counterfeiting offensive, it seems that the actual execution of the plan was carried out on a “street” level. Using various methods of disseminating that counterfeit currency, some subtle, some very bold, they were able to put massive amounts of it into circulation. Once in circulation it had the effect of destabilizing what was already an unstable currency, leaving the American economy teetering and the people’s faith in Congress shaken. In most every way the planned economic offensive very nearly achieved its purpose of bringing an end to the rebellion.
It was only through the vigilance of Congress and the will of the American people that this outcome did not happen. It nonetheless had a lasting effect on the economy, the devaluation of Continental currency leading to the massive personal debts that plagued many veterans and merchants in post-war years. Eventually this culminated in what became known as Shay’s Rebellion, and the need for a strong central government gave birth to the Constitution. Interestingly, even into the modern era the idea of counterfeiting a nation’s money as a form of economic warfare has survived and has been put into practice numerous times. While Britain may have been the first to use this method, they certainly were not the last.
 John Whiting, Revolutionary Orders of General Washington (New York: Wiley and Putnam, 1844), 118.
 John Fitzpatrick, ed., Writings of George Washington (Washington, DC: U.S. Government Printing Office, 1904-37), 7:433-35.
 The Writings of George Washington, edited by Jared Sparks, Boston, 1834, vol. v, p. 535 (Appendix).
 John Adams to Abigail Adams, May 25-27, 1777. Adams Family Papers: An Electronic Archive. Massachusetts Historical Society, http://www.masshist.org/digitaladams/
 Journals of the Continental Congress, 1774-1789. Edited from the original records in the Library of Congress (Washington, DC: U.S. Government Printing Office, 1904-37), 17:530.
 Joseph Plumb Martin, A Narrative of a Revolutionary War Soldier (New York: Signet, 2001), 208.
 Frank Moore, Diary of the American Revolution. From Newspapers and Original Documents (New York: Scribner & Sons, 1859), 2:425-6.
 Charles Francis Adams, Letters of John Adams, Addressed to His Wife. Edited by His Grandson, Charles Francis Adams (New York: Hurd and Houghton, 1876), 1:263.
 Frank Moore, Materials for History Presented from Original Manuscripts (New York: The Kenger Club, 1861), 108. “Smithers” is most likely James Smither, a well-known engraver in Philadelphia who was commissioned to create the engraving plates for Congress. It was later thought that he was involved in counterfeiting and when charged with high treason in 1778 he fled to New York. After the war he returned to Philadelphia and resumed his trade.
 John Almon, The Remembrancer or Impartial Repository of Public Events (London, 1780), 10:40.
 Benjamin Franklin, Memoirs of the Life and writings of Benjamin Franklin (London: H. Colbrun, 1812), 3:106.
 For example, during WWII Germany tried to flood the world market with counterfeit Bank of England notes; Lawrence Malkin, Krueger’s Men: The Secret Nazi Counterfeit Plot and the Prisoners of Block 19 (Boston: Little, Brown and Co., 2006). Dick K. Nanto (12 June 2009). More recently, North Korea has conducted counterfeiting operations against the US dollar. North Korean Counterfeiting of U.S. Currency, Congressional Research Service, RL33324, accessed September 20, 2015. Both of these operations ultimately failed, but illustrate that once a good weapon for war is found, it generally tends to stick around.
Interesting details on a little known aspect of British covert activities during the war. Robert Townsend, aka Culper Jr., sent a report dated November 29, 1779 to his Case Officer, Benjamin Tallmadge, reporting that the British in New York City had acquired paper stock that matched what Congress was using for its currency. Washington subsequently advised Congress of this report on December 7th, and in March 1780 Congress recalled all of its currency, with the counterfeiting issue being one of the factors.
I also recall reading that a printing press for producing counterfeit American currency was established in a British warship n New York harbor. But, I cannot immediately identify a citation for that information.
I discuss counterfeiting on royal ships in NY harbor in 1776 in “Plotting the Sacricide of George Washington,” – see footnote 19: http://allthingsliberty.com/2014/07/plotting-the-sacricide-of-george-washington/
There are also numerous references to the practice in American Archives.
American concerns about British counterfeiting are illustrated in the experience of Thomas Hughes, a young British officer captured near Fort Ticonderoga in 1777 but not part of the Convention that applied to the forces that surrendered at Saratoga. Hughes had been granted a parole in 1778 and he returned to British-held New York, but in January 1779 he was called back into captivity. Crossed from Staten Island to Elizabeth, New Jersey. There,
“Three men, who call’d themselves Justices, came to our tavern and ordered us to appear before them. On our compliance they made us produce our paper money which did not exceed 150 dollars on inspection they pronounc’d it counterfeit – took it away – and wound not let us have the satisfaction of seeing it destroyed, though we desired it.” (A Journal by Thos. Hughes, Cambridge University Press, 1947, 60).
Was the money really counterfeit, or were the “justices” simply extorting the helpless prisoners? Either way, it shows that counterfeiting was a factor in the conduct of the war.
Congress stopped the price controls when they saw the problems they caused like shortages