The best economic approach would have been to threaten to embargo cotton and then sell everything as fast as possible. The fact is that when word spread that the government was going to embargo cotton there was a mini-panic in the world market, and cotton prices actually rose in the first half of 1861. But the price of a commodity like cotton is fleeting, and can change quickly. When the government refused to sell the cotton, second looks were taken at existing stockpiles of cotton and the price began to fall. By the end of 1861 it was too late, and the government was stuck with its cotton.

Not only did the Confederate national economy suffer by this wooden headed approach to economics, but the local economy did also. By placing an embargo on the cotton they didn't own the government collapsed local economies, meaning most of those brokerage houses that I spoke about in the first part of this paper. This had the effect of collapsing many of the local economies. The brokerage houses issued notes based on the assumption that they would be able to turn around and sell the cotton to other markets, such as Northern or European textile manufacturers. If they couldn't get the cotton to the manufacturers, they didn't need any more, so they stopped buying from local farmers. No sales, no money, no exchange of goods and services, economy stops. The Northern blockade took care of the rest. By closing ports, the North stopped trade. No trade could occur, and thus banks and other brokerage houses began to fail. This snowballing caused ever increasing inflation in the Confederacy, and the devaluation of Confederate currency grew greater and greater as the war progressed.

Money has no value in and of itself. The three basic economic needs are food, shelter, and clothing. You can't eat money, you can't wear it, and you can't use it to make shelter. It only has value if it can be exchanged for goods and services. If the person who holds the goods and services thinks that the money is not as good as it used to be (lack of faith and trust), then he will demand more of it for his goods or services (inflation). If he thinks that it is no good anymore, he will refuse to part with his goods and services unless you can give him something of equal value in return. If you don't have anything to offer in return, you cannot buy goods. Think of the Richmond bread riots, 1863.

The Northern Economy and the Rise of a National Currency

In the North, a huge demand was put on the economic system by the war effort. Currency practically dried up, because there just wasn't enough to pay for all of the economic activity going on. The government desperately needed to inject more currency into the present system to continue economic growth. By the way, adding more currency in this manner is also inflation, but the true cause of inflation here was increased demand for war goods and limited supply of those goods,(like the Cabbage Patch dolls) not a lack of faith in the currency.

The government found that it had no real way to increase the availability of money. State banks and brokerage houses did not want to issue more of their notes, because that would deflate the value of their currency. The war economy was beginning to slow down, because there wasn't enough money to pay for it. So in 1862 the government passed a national currency act, which basically gave the United States the right to print money, for the first time in its history. This money was not backed by any particular financial reserves, just by the full faith and credit of the Federal government. Because of the colors used in the printing of the money, the notes were called Greenbacks. For smaller denominations, the government used its existing stocks of postage stamp dies and printed what it called Postage Currency. These were notes that looked like blocks of stamps glued together, and were worth the face value of the combined stamps.

The government also passed an excise tax law, which meant that there was a government charge for conducting normal business. You paid the excise tax by purchasing stamps that were placed on certain documents such as bank checks, express bills, and playing cards, among other things. The amazing thing about this tax is that almost exactly 100 years before, the British did the exact same thing to the then colonies (The Stamp Act) and it caused a tremendous public outcry. The Stamp Act was enacted to help pay for the cost of conducting the war against the French and the Indians, from 1755-1763.

To complete the supply of currency, the government also issued fractional currency, which was miniature versions of the national notes for values less than one dollar. The fractional currency is not the same as the postage currency, but was issued in the same denominations. I believe that the fractional currency was issued to replace the postage currency, as the postage currency was really a temporary fix to the currency shortage anyway. The fractional notes in my collection date from 1864, while the postage currency is dated earlier.

At the conclusion of the war, the Federal government stopped printing money to try to control inflation. There was so much of it in circulation anyway that it continued on its own momentum. The advent of a national medium of exchange, good anywhere in the country, was new and unique. People really liked the idea of being able to use these notes anywhere. Soldiers stationed all over the country (and coming home) could use the currency anywhere they traveled. Remember, it was a new thing in 1865 that the people in Boston and Philadelphia used the same paper currency as the people in St. Louis and Chicago. It made the transacting of business so much easier that a national currency was immensely popular. Bank and Brokerage notes dried up quickly, and passed out of existence shortly after the war. The national currency system was here to stay.

Re-enacting and Money

For the Federal re-enactor, you would have been paid in national notes starting in 1862. I have no sources here now that would tell me what the Federal government used to pay its troops in 1861. I suppose that it would have been hard currency.

The Confederate re-enactor would have been paid in first issue Confederate notes in 1861, and later issues later in the war.

The best Federal notes I have seen are from Arthur Henrick of California who calls himself the Paymaster. I don't have his address here, but he always has a classified ad in the Camp Chase Gazette. He was at Spring Hill last year.

I currently do not carry any Federal money because there is a fine line between good reproductions and counterfeiting. It is a Federal offense to reproduce any United States national medium of exchange that has been minted or printed since 1797, the date of the creation of the United States Mint. You must make certain changes to the note, and most high-quality reproductions fail to comply with the changes necessary. By the way, according to the letter of the law, simply putting the word COPY on the bill is not enough. The Paymaster's stuff is very good, and I don't want to be arrested for counterfeiting because I'm carrying his stuff. Perhaps another letter to the Secret Service is in order from me. I finally got the OK to produce postage stamps in writing, perhaps I should do the same with money.

Mark Brainard in Alabama produces the best Confederate notes I have seen. Mark has painstakingly reproduced original Confederate notes, even numbering his notes by hand and signing them at the clerk's signature line. I sell these in sets for $3. I feel much safer carrying these notes, because there is no corresponding law against counterfeiting other mediums of exchange, including Confederate notes.