Financial costs of the American Revolutionary War

[3] British efforts to weaken the colonies included isolating their economy from the rest of the world by cutting off trade.

[5] Furthermore, Britain's naval strength was great enough to intimidate other nations and scare them away from exporting goods to the colonies, so smuggled and inexpensive imports became costly and rare.

[7] Because the fight was on colonial soil, Washington aimed to take advantage of the lack of trade with Great Britain by cutting them off from necessary resources, hoping that eventually, the British army in North America would grow sick and tired.

Under the Articles of Confederation, however, the Continental Congress did not have the power to impose taxes or regulate commerce in the colonies, and thus could not generate sufficient funds for a war of attrition.

[8] To solve this problem, the Continental Congress sent diplomats including Benjamin Franklin to Europe in search of foreign support for the American cause.

[9] After the British defeat at Saratoga, however, foreign support for the Continental Army increased, and in 1778 the colonies signed a treaty with France, officially bringing them into the war with Great Britain.

[10] By the end of the war, the colonies had received loans from several different European nations, including a significant contribution from France, Spain and the Netherlands.

In addition, the colonies received much private funding, most notably from the Marquis de Lafayette and the Baron of Kalb, both Frenchmen.

[13] The new war in the Caribbean added to Britain's already large financial costs, yet unlike the colonies, the British were not successful in their attempts to garner foreign loans or armaments.

Because it did not possess the power to tax the colonists, the Continental Congress printed money at a rapid rate to fund the army's expenses and pay off its loans from foreign nations.

[20] gobbling up 60% of the budgets in some of the years during the 1760s (relief from this burden is the main reason why Parliament wanted the Americans to pay for 7,500 troops to be permanently stationed in the Colonies from taxes levied on them): this only seemed fair since the British taxpayer was paying an average of 26 shillings a year during the Seven Years War while the Americans were paying one shilling[21] The Treasury estimated the cost at 225,000 pounds but it was actually averaged 384,000 between 1763 and 1775 (about 5 shillings per annum per European settler (2 million) in 1775 in the Colonies and earlier.

[22] The Colonials, Whigs and Tories and neutrals, balked at these revenue-raising measures as an attack on traditional local autonomy.

After the war ended, France had a debt of 3,315.1 million livres,[26] a colossal sum of money at the time which put an enormous strain on the country's total fortune in terms of usable assets and productive capacity.

[30] Spain's revenue loss was similar to Britain's since she lost a lot of income from her American colonies due to the war.

To make up for the shortfall, Spanish governors introduced higher tax rates in the South American colonies, with little success.

[citation needed] Finally, in 1782 the first national bank of Spain – the Banco Nacional de San Carlos – was created to improve and centralize monetary policies.

In addition, counterfeiting of American dollars was carried out by the British Government as an intentional means of sabotaging the war effort.

[36] Late in the war, Congress asked individual colonies to equip their own troops and pay upkeep for their own soldiers in the Continental Army.