📅 This Day in Monetary History — February 3, 1690

The Massachusetts Bay Colony issued the first paper money in the Western world. The colony needed to pay soldiers returning from a failed military expedition against Quebec, and the treasury was empty. The solution: print IOUs and promise they'd be redeemable for hard money later.

It set a template that would repeat for the next 335 years. Governments face a spending obligation they can't cover with real resources, so they create a paper claim on future wealth. The soldiers accepted it because they had no choice. Merchants accepted it because the government mandated it. And within years, the notes traded at a discount to actual silver — the market quietly pricing in what everyone suspected.

The pattern: monetary expansion almost always begins as an emergency measure, then becomes permanent policy. The 'temporary' fix never gets unwound because the political incentive to spend always outlasts the discipline to stop.

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