why was debt and runaway inflation such a problem under the articles of confederation?
The Revolutionary War was fought with paper money that had little or no intrinsic value, i.e, it could not be exchanged for coin with monetary value (gold or silver).
See "Continental Dollars and Depression" at http://www.sparknotes.com/history/american/constitution/section1.html
Under the Articles of Confederation, debt and runaway inflation were significant problems primarily due to the financial situation following the Revolutionary War. Here's an explanation of why this occurred:
1. Financing the war: During the Revolutionary War, the Continental Congress issued paper money known as Continental Dollars to fund the war efforts. However, these Continental Dollars were not backed by any tangible assets such as gold or silver. This lack of intrinsic value made it difficult for the government to maintain the value of the currency.
2. Overprinting of Continental Dollars: The government faced a constant need for funds during the war, so they resorted to printing more Continental Dollars without proper backing. This led to an excessive supply of money in circulation and a decrease in its value. The more paper money was printed, the less valuable it became, causing inflation.
3. Lack of taxation authority: Under the Articles of Confederation, the federal government had limited power to impose taxes. This meant that it relied heavily on borrowing money to finance its operations and pay off debts. However, the inability to raise sufficient revenue through taxation made it difficult to manage the national debt effectively.
4. Debts and repayment issues: The war left the United States with significant debts owed to foreign countries, individual states, and individuals who had loaned money to the government. Without a robust central government, there was no effective mechanism to coordinate the repayment of these debts. As a result, many debts remained unpaid, damaging the country's credibility and undermining its economic stability.
5. Interference from individual states: Each state maintained its own economic policies, including the issuance of its own currency, further exacerbating the problem of runaway inflation. The lack of a centralized monetary system led to inconsistencies and difficulties in trade and commerce among the states.
Overall, the lack of a stable currency, excessive printing of money, limited taxation authority, unresolved debts, and state interference all contributed to the problem of debt and runaway inflation under the Articles of Confederation. These financial challenges underscored the need for a stronger and more unified federal government, eventually leading to the drafting and adoption of the U.S. Constitution.