In response to Anne Mayhew's points about early America.  The 
depreciation on the New England currencies was prettty substantial 
in the 1600s.  Later, Massachusetts and Connecticut did okay, but 
Rhode Island went whacko, practicing what I jokingly call public 
finance by arbitrage by issuing lots of paper currency and taking 
advantage of the circulation throughout New England and the lag 
until the other colonies readjusted (don't ask me why they didn't 
take all RI currency at a discount to begin with; I haven't spent 
time analyzing this, I'm just going by the price movements and 
the political infighting up there).  
     The supposed indebtedness of the colonies with regard to the 
Continent and Britain is grossly exagerated.  The Chespeake colonists 
were in a lot of debt -- but that was a GOOD thing, not a BAD thing. 
That is, their contacts in Britain were carrying them because it was 
profitable -- if a person takes out a very very big mortage for a 
very very big house, we don't say that they must be in bad shape 
financially -- that could be a sign that their income/wealth position 
is very high.  Right?  And that was true through most of the colonial 
period for the Chesapeake.  There were specific problems with debt 
collection toward the end of the colonial period, but that is a  
separate issue. 
     The middle colonies did fine with their paper money emissions. 
Pennsylvania had less inflation that at any other period in its 
history.  The point that is often missed is that the DOMESTIC 
economy was flourishing in this region during this period.   
     In terms of a learning curve, what I found fascinating then, 
and still find fascinating, is the discussion in pamphlets and 
letters to the newspapers about how you decide how much is enough. 
     So Adam Smith was right about the rise in value of the 
colonial wealth -- but wrong about colonial currency in general. 
Not the only one. 
     (Oh -- the experience with the Continentals was very different -- 
there was about 4 years of hyperinflation followed by three years of 
hyperdeflation, and then it all settled back into the same arrangement 
as before.) 
     -- Mary Schweitzer