6. Inflation in Colonial America

01/14/2010 Mark Thornton

Colonial governments tried to manipulate the Spanish peso when they couldn’t control the commodity monies. They increased the supply of pesos (inflation) and encouraged exports. Prices increased until the process was banned. Fiat paper money created by Massachusetts was an additional inflationary act. A legal tender law forced the use of the paper money.

Debtors like inflation. Creditors, consumers, savers and lenders do not. Inflationary policies cause boom-bust cycles.

Lecture 6 of 9 from Mark Thornton’s The Economic History of the United States.

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