Colonial America’s Fiat Experiment: Burning Money to Build Trust
Massachusetts invented fiat currency in 1690, but its adoption required theatrical demonstrations of scarcity. Colonial governments burned tax-collected paper bills to prove they could control supply—a stark contrast to modern monetary policy.
Historians trace this deliberate destruction to a foundational challenge: establishing trust in intrinsically worthless paper. Virginia's legislature explicitly linked currency credibility to enforced scarcity, resolving to 'preserve the credit' of their emissions through controlled destruction.
The colonial approach reveals a Core tension in monetary systems. Where modern central banks manage supply through complex instruments, early issuers relied on visceral, public demonstrations of restraint—literally watching money burn.
