Counterfeiting

Counterfeit! Exploring a forgery scandal in the Papers of the War Department online collection

Overview

Americans have a long mistrust of the idea of paper money. Even before the drafting of the Constitution, Americans were skeptical of the concept of printed currency being used as a medium of exchange, fearful that it could be manipulated by an irresponsible government or forged by unscrupulous criminals.

In the decades following the American Revolution, the War Department was the country’s largest single consumer of goods. It bought huge amounts of muskets, blankets, shoes, and many other items. The War Department also spent the vast majority of the money spent by the Federal government: nearly seven of every ten dollars the national government spent passed through the War Department. Thus the early War Office was a attractive target for financial fraud and crime.

This lesson plan invites students to do some detective work to track a counterfeiting scandal that plagued the early War Department. This lesson is suitable for:

  • history classes focused on colonial and early American history, 
  • government and civics classes focused on life under the new Constitution, and
  • economics classes dealing with the challenges of paper currency and checks within a large national economy.

Historical Background

What is paper worth? How can the recipient know that a printed piece of paper offered as cash or as a check has actual value? Why accept paper in return for tangible goods?

Americans have had a long, healthy distrust of printed money that dates back before the United States was even a country. During the colonial period, Americans were wise to treat paper money with skepticism, since it was tempting for a talented artist or printer to forge paper money and pass it off as genuine. Without modern technologies to foil forgers, there were few safeguards to protect the paper money supply.

Of even greater concern was the risk that a desperate or unprincipled government might manipulate the supply of paper money. That had happened at numerous points during the colonial period. During the War of Independence, the Continental Congress was faced with the urgent demands of raising, outfitting, and maintaining an army to continue the war against the British. But the Continental Congress lacked the power to levy taxes: it could only request that the individual colonies furnish money to pay a share of the cost of fighting the war.

None of the colonies furnished all of the requested money, and the Continental Congress began issuing paper notes (called “Continentals”) to cover the costs of the war. Because that paper money was not backed by anything tangible, accepting it in exchange for goods was a gamble that the Continental Congress would ultimately pay its debts. As the value of the paper notes fell, the Congress printed more of them. That led to what economists call an “inflationary spiral,” as more and more notes flooded the market and became less and less valuable. By the end of the war anything that was generally useless was said by Americans to “not be worth a Continental.”

Americans were thus rightfully wary of accepting printed paper in exchange for goods and services. And yet the activity of a large national economy demanded some form of exchange. Section I, Article 8 of the 1787 Constitution gave the Congress power to coin money and to regulate its value. It also gave Congress the power “To provide for the Punishment of counterfeiting the Securities and current Coin of the United States.”

That line did not find its way into the Constitution by accident. It was a response to the kind of financial fraud that appeared regularly during the years after the Revolution. This lesson asks students to do the detective work necessary to unravel a series a frauds and forgeries that passed through the War Department in the 1780s.

Lesson Objective

To learn more about the use of paper money and checks in the early United States by acting as historical detectives investigating an ongoing counterfeiting scandal that plagued the War Department in the 1780s.

Lesson Materials

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