During the Confederation period, the young American nation was in economic and political chaos. The new nation had to rebuild its economy without the benefit of belonging to the British mercantile system. America was desperately short on hard cash. This was due to the sudden renewal of British trade. Hard currency was leaving faster than it was coming into the country.
This, combined with the war debt on the national and state levels, helped to increase public anxiety over the nation's economy. States like Massachusetts attempted to pay off their creditors by raising taxes and implementing import duties on all incoming goods. These taxes would cause contention because Americans hated taxes, particularly direct taxes. In fact, taxation was one of the leading causes of the American Revolution.
The framers of the Articles of Confederation deliberately forbade Congress the power to collect direct taxes on income and property. However, Congress was allowed to collect indirect taxes, import duties, and excise taxes. The states maintained the power of direct taxes. Thus, when states like Massachusetts needed to raise money to pay off their war debts, they levied direct taxes on property and attempted to collect them by methods and practices that were an anathema to their poorer citizens.
This affected the farmers and small landowners the most. In Massachusetts, this problem came to a boiling point in August of 1786, with the outbreak of Shays' Rebellion. This rebellion would last until February 1787 with the capture of Shays and his followers by loyal State militiamen.
Shays's Rebellion, led by Daniel Shays, was a protest over these direct taxes and other economic and political problems faced by farmers of Western Massachusetts. They were unable to pay their debt because the paper currency then in circulation was worthless. Thus, they lost their land to foreclosures and confiscation by the state government.
When the news of the insurrection spread, it caused conservatives everywhere to shudder. They saw this rebellion as one step closer to tyranny and outright anarchy. The rebellion, more than anything, emphasized the weakness of the Articles of Confederation and that the states were too democratic in nature.
This rebellion, combined with the weaknesses of the national government in foreign affairs, helped the nationalists to call for a strong central government, capable of solving the economic and political problems of the nation. The Philadelphia convention would take place in the spring of 1787. The Constitution of the United States is created at this convention.