Final answer:
Continental dollars lost their value due to rampant inflation, lack of specie to back the currency, and loss of confidence in the government's financial management during the American Revolutionary War.
Step-by-step explanation:
Continental dollars became basically worthless due to the inflation and lack of confidence in the currency. The American Revolutionary War required significant funding, and the Continental Congress issued large sums of this paper currency to meet financial obligations without sufficient gold or silver reserves to back it. This, coupled with the additional currency printed by individual states and the introduction of counterfeit bills by the British, rapidly devalued the Continental dollar. By 1781, inflation was so severe that it took 146 Continental dollars to equal one dollar in gold. People's lack of faith in the currency and the government's ability to manage the economic situation led to the phrase "Not worth a Continental" to describe something of no value.
The situation worsened as states issued their own currencies, further confusing and destabilizing the economy. With the Articles of Confederation lacking stringent financial regulations, this led to rampant inflation and a nationwide crisis of confidence. The severe financial difficulties faced by the new nation also hindered its capacity to secure necessary funds from other sources such as land sales. Specie scarcity meant that even everyday transactions became challenging, exacerbating the economic woes.