The Freeman 1972 - The Ludwig von Mises Institute

426 THE FREEMAN Julysecond offense.l 8 In the same year,Rhode Island made both state andContinental notes legal tender. Inaddition to providing penalties fornot accepting this paper, that stateprohibited the buying of speciewith paper or differentiating inprices of goods when offered goldor silver instead of paper.19Sometimes even more drasticmeasures were authorized to makepeople take the paper money.When he was in command offorces at Philadelphia, GeneralPutnam made this announcement:"In future, should any of the inhabitantsbe so lost to public virtueand the welfare of their country,as to presume to refuse thecurrency of the American states inpayment for any commodities theymay have for sale, the goods shallbe forfeited, and the person orpersons so refusing, committed toclose confinement."2o In a similarfashion, George Washington wasauthorized to take goods fromthose who refused the Continentalcurrency and to arrest and confinethem. 21Rising Prices - and ControlsWith such Draconian measuresto support it, the Continentalpaper money did circulate. But themore of it that was issued, themore it depreciated. The most noticeableeffect of this to the publicwas a general rise in prices.(Prices of particular goods andservices rise and fall as demandand supply fluctuate even if theamount of money in circulation remainsstable. And, given blockadesand the kinds of demands incidentto war, some prices would haverisen inevitably during theseyears., However, the price increaseswere not only general butsome of them are rises in Continentalcurrency in relation towhat they could be bought for inspecie, which indicates that it wasthe currency which occasionedsome of the increases.) Some ofthe state governments intervenedin the market further by attempting·to fix prices. As frequentlyhappens, the legislators sought tocontrol the effect - the rise inprices - rather than the causetheincrease in the money supply.Congress recommended that regionalconventions be held to setprices for particular areas. TheNew England and Middle statesheld such contentions, but theSouthern states south of Marylandsteered clear of price controls.After a convention hadagreed upon the general featuresof prices, it was up to the individualstates to enforce the tariffs.The following is a description ofpenalties adopted by Rhode Islandin 1777:The penalty of demanding morethan the tariff price was set at the