Spare a thought for veterans of the American Revolution

The failure of the government to take care of its soldiers is a main reason that Washington, Alexander Hamilton, and James Madison were all such staunch nationalists after the war was over. They had seen how incapable the government was and knew that if this experiment in self-government was to endure, a stronger central authority had to be established. The first victims of government incompetence were the soldiers.

But this was not the final indignity that the Revolutionary War veterans had to suffer. After the war, the national government did not have the cash to pay the troops, because it lacked the power to tax. It was dependent on requisitions from the states, which were not forthcoming. The soldiers were therefore paid in debt certificates, commonly known as Pierce Notes. The problem was that nobody really believed that the government would ever actually pay back the Pierce Notes in hard currency. Lacking a taxing power, how could it? So veterans, desperately in need of cash, began selling their certificates in 1784. This created a glut of certificates, which drove the value down to less than 20 cents on the dollar, and the certificates tended to migrate into the hands of a relatively small number of eastern speculators.