US money in the CSA

[atlantis]

Why did the CSA start printing its own currency so quickly? And how successful was confederate currency in replacing US currency in territory controlled by the CSA?.

 

[kevikens]

The CSA had to quickly issue its own currency for two equally important reasons. First it was a matter of sovereignty, a very public way of announcing its political independence. Secondly it was a matter of necessity. At the start of the war the US Government did not issue its own paper currency, coinage, yes, but a federal or national paper currency, no. In both the North and the South at the start of the war the paper currency was in the form of state chartered bank notes. These notes were, in theory, redeemable for bullion at the issuing bank but with secession these notes could not be redeemed at Northern banks. They became essentially useless and worthless in the South. Southern banknotes would continue in circulation, though now only as a "fiat" currency. As a matter of fact, since the CSA Constitution did not prohibit the individual Southern states from issuing their own state notes (the US Constitution did not permit states the right to either coin or issue notes) that is exactly what they did. The Richmond government decided to issue its own 'national" notes, what would become 'bluebacks' (from the commonly employed blue ink) to try to bring order to the monetary confusion. It did not work. In addition to the Richmond CSA notes, the economy was inundated by a flood of state issued notes and 'shinplaster' notes by banks, railroads, local municipalities and anybody else with access to a printing press. Lacking bullion from the Western Territories the CSA quickly closed the New Orleans, Dahlonega and Charlotte mints and issued no coins bearing the CSA name for general circulation, though they experimented briefly with a few CSA labelled coins.

To answer the second OP question, the money of the US government continued to be used as what the Richmond Government called 'foreign' money, along with coinage from Europe and Latin America. no official exchange rate was enforceable and on the Black Market, and at the crossroads general store, Southerners cast patriotism aside as they attempted to latch onto anybody's specie coinage in preference to their own paper. Once the US Government turned to a national paper currency, first in late 1861 and early 1862 (Greenbacks) and in 1863 with National Bank Notes, Southerners realized that though the Northern notes were also a fiat currency, even if the North lost the war, their notes would retain value with the result that the Northern notes were preferable to their own. As for US coins they were rapidly removed from circulation by BOTH the North and South as their metallic, bullion value was a guarantee that no matter who won or lost the war the intrinsic value of the metals would endure. Apparently even some of the old Spanish coinage, no longer legal tender after 1857, was snapped up since it was coined in good silver. There are innumerable references to Southerners preferring US currency and coinage to CSA issues when they could get them. In short US currency circulated at a premium over CSA notes in the South.

By the way, when Richmond was evacuated in April of 1865 the Confederate treasury shipped out its bullion. As it was used in the last days of the Confederacy all kinds of gold and silver coins were found to be in the treasure chests, US gold eagles, British gold sovereigns, Mexican silver dollars, but not a single CSA coin. As for any CSA notes and bonds in the treasure trove, wall paper.

 

[1950lemans]

The CSA had to quickly issue its own currency for two equally important reasons. First it was a matter of sovereignty, a very public way of announcing its political independence. Secondly it was a matter of necessity. At the start of the war the US Government did not issue its own paper currency, coinage, yes, but a federal or national paper currency, no. In both the North and the South at the start of the war the paper currency was in the form of state chartered bank notes. These notes were, in theory, redeemable for bullion at the issuing bank but with secession these notes could not be redeemed at Northern banks. They became essentially useless and worthless in the South. Southern banknotes would continue in circulation, though now only as a "fiat" currency. As a matter of fact, since the CSA Constitution did not prohibit the individual Southern states from issuing their own state notes (the US Constitution did not permit states the right to either coin or issue notes) that is exactly what they did. The Richmond government decided to issue its own 'national" notes, what would become 'bluebacks' (from the commonly employed blue ink) to try to bring order to the monetary confusion. It did not work. In addition to the Richmond CSA notes, the economy was inundated by a flood of state issued notes and 'shinplaster' notes by banks, railroads, local municipalities and anybody else with access to a printing press. Lacking bullion from the Western Territories the CSA quickly closed the New Orleans, Dahlonega and Charlotte mints and issued no coins bearing the CSA name for general circulation, though they experimented briefly with a few CSA labelled coins.

To answer the second OP question, the money of the US government continued to be used as what the Richmond Government called 'foreign' money, along with coinage from Europe and Latin America. no official exchange rate was enforceable and on the Black Market, and at the crossroads general store, Southerners cast patriotism aside as they attempted to latch onto anybody's specie coinage in preference to their own paper. Once the US Government turned to a national paper currency, first in late 1861 and early 1862 (Greenbacks) and in 1863 with National Bank Notes, Southerners realized that though the Northern notes were also a fiat currency, even if the North lost the war, their notes would retain value with the result that the Northern notes were preferable to their own. As for US coins they were rapidly removed from circulation by BOTH the North and South as their metallic, bullion value was a guarantee that no matter who won or lost the war the intrinsic value of the metals would endure. Apparently even some of the old Spanish coinage, no longer legal tender after 1857, was snapped up since it was coined in good silver. There are innumerable references to Southerners preferring US currency and coinage to CSA issues when they could get them. In short US currency circulated at a premium over CSA notes in the South.

By the way, when Richmond was evacuated in April of 1865 the Confederate treasury shipped out its bullion. As it was used in the last days of the Confederacy all kinds of gold and silver coins were found to be in the treasure chests, US gold eagles, British gold sovereigns, Mexican silver dollars, but not a single CSA coin. As for any CSA notes and bonds in the treasure trove, wall paper.

Since the CSA currency had something to the effect that it was redeemable for ? (I forgot this part) two years after a peace treaty with the USA, wouldn't the CSA currency really be considered "mini-bonds"?

 

[WJC]

The CSA had to quickly issue its own currency for two equally important reasons. First it was a matter of sovereignty, a very public way of announcing its political independence. Secondly it was a matter of necessity. At the start of the war the US Government did not issue its own paper currency, coinage, yes, but a federal or national paper currency, no. In both the North and the South at the start of the war the paper currency was in the form of state chartered bank notes. These notes were, in theory, redeemable for bullion at the issuing bank but with secession these notes could not be redeemed at Northern banks. They became essentially useless and worthless in the South. Southern banknotes would continue in circulation, though now only as a "fiat" currency. As a matter of fact, since the CSA Constitution did not prohibit the individual Southern states from issuing their own state notes (the US Constitution did not permit states the right to either coin or issue notes) that is exactly what they did. The Richmond government decided to issue its own 'national" notes, what would become 'bluebacks' (from the commonly employed blue ink) to try to bring order to the monetary confusion. It did not work. In addition to the Richmond CSA notes, the economy was inundated by a flood of state issued notes and 'shinplaster' notes by banks, railroads, local municipalities and anybody else with access to a printing press. Lacking bullion from the Western Territories the CSA quickly closed the New Orleans, Dahlonega and Charlotte mints and issued no coins bearing the CSA name for general circulation, though they experimented briefly with a few CSA labelled coins.

To answer the second OP question, the money of the US government continued to be used as what the Richmond Government called 'foreign' money, along with coinage from Europe and Latin America. no official exchange rate was enforceable and on the Black Market, and at the crossroads general store, Southerners cast patriotism aside as they attempted to latch onto anybody's specie coinage in preference to their own paper. Once the US Government turned to a national paper currency, first in late 1861 and early 1862 (Greenbacks) and in 1863 with National Bank Notes, Southerners realized that though the Northern notes were also a fiat currency, even if the North lost the war, their notes would retain value with the result that the Northern notes were preferable to their own. As for US coins they were rapidly removed from circulation by BOTH the North and South as their metallic, bullion value was a guarantee that no matter who won or lost the war the intrinsic value of the metals would endure. Apparently even some of the old Spanish coinage, no longer legal tender after 1857, was snapped up since it was coined in good silver. There are innumerable references to Southerners preferring US currency and coinage to CSA issues when they could get them. In short US currency circulated at a premium over CSA notes in the South.

By the way, when Richmond was evacuated in April of 1865 the Confederate treasury shipped out its bullion. As it was used in the last days of the Confederacy all kinds of gold and silver coins were found to be in the treasure chests, US gold eagles, British gold sovereigns, Mexican silver dollars, but not a single CSA coin. As for any CSA notes and bonds in the treasure trove, wall paper.

Very informative! Thanks!
It is telling that when General McCausland threatened to burn Chambersburg, Pennsylvania on July 30, 1864, his ransom demand was $100,000 in gold or $500,000 in U. S. paper money....

 

[kevikens]

Since the CSA currency had something to the effect that it was redeemable for ? (I forgot this part) two years after a peace treaty with the USA, wouldn't the CSA currency really be considered "mini-bonds"?

Some of the notes were interest bearing even before there would be a peace treaty, though they were redeemed in Confederate currency. The regular issue notes could be thought of as something akin to our "bearer bonds" and like the Continental notes of the revolution would have been redeemed in specie, assuming the new Confederacy could find a Southern equivalent of Alexander Hamilton.

 

[Copperhead-mi]

Trans-Mississippi District commander Major General Thomas Hindman, issued orders during June 1862, requiring all citizens and soldiers to accept and use Confederate currency or face immediate arrest and imprisonment.

GENERAL ORDERS,
HDQRS. TRANS-MISSISSIPPI DISTRICT, No. 4. Little Rock, Ark., June 2, 1862.

I. All person within this district are hereby required to take Confederate notes as currency at par in all business transactions.

II. The following tariff of prices is hereby established throughout this district for the articles specified:

Flour.............................per hundred.......$8 00
Bacon............................. Per pound.......... 25
Beef...................................do............ 10
Corn..................................per bushel..... 75
Corn meal..................................do........1 00
Chickens..................................per dozen..4 40
Butter.....................................per pound 20
Eggs......................................per dozen. 15
Potatoes.................................per bushel..1 00
Hay any fodder........................per hundred....1 50
Lard....................................per pound... 20
Pork.........................................do..... 15
Turkeys.....................................each.... 1 00
Salt....................................per sack....15 00
Sole leather............................per pound... 50
Upper leather...............................do...... 80
Harness leather.............................do...... 75
Molasses.................................per gallon. 40
Sugar....................................per pound.. 10
Quinine.................................per ounce...10 00
Calomel.....................................do...... 50
Morphine....................................do......15 00
Castor oil..............................per gallon.. 5 00
Ipecac..................................per pound... 8 00
Opium...................................per ounce... 2 00
Tartar emetic.................................do.... 25
Blistering ointment.....................per pound... 8 00
Epsom salts.................................do...... 60
Soda........................................do..... 50
Rhubarb..................................per ounce.. 50
Cream of tartar...........................per pound.. 2 00
Turpentine..............................per gallon.. 2 50
Dover's powders.........................per ounce... 75

III. Every person violating paragraph I of this order, and every person having for sale any article specified in paragraph II, and demanding or receiving for the same any higher price than that established therefor, or refusing to sell the same for such price, must be arrested and sent to these headquarters, to be dealt with as such inhuman and disloyal conduct may deserve. Proof of the fact, in the form of affidavits, before any State officer authorized by law to administer an oath must be sent with the prisoner.

IV. All Confederate officers and soldiers are hereby instructed, and State officers and loyal citizens are authorized and requested,to execute this order promptly and without respect to persons in every case of its violation.

By order of Major-General Hindman:
R. C. NEWTON,
Assistant Adjutant-General

O.R. Series I, Vol. XV, pg. 782

 

[kevikens]

Very informative! Thanks!
It is telling that when General McCausland threatened to burn Chambersburg, Pennsylvania on July 30, 1864, his ransom demand was $100,000 in gold or $500,000 in U. S. paper money....

That brings up the matter of the value of Greenbacks in gold. The "official" value of gold for the US Government remained at about $20/ounce but by late 1861 Northern banks had suspended specie payment for their notes. The US then started its issue of its own paper currency to finance the war. They were not redeemable in gold for the present (after Reconstruction they were). Most gold coins disappeared from circulation as the value of the Greenbacks, relative to gold, fell. At the "Gold Room" in NYC a consortium of bankers and investors met daily, bought and sold gold bullion (and silver which also retained its value relative to gold) and thereby established a true market value for gold. This relative value of bullion to paper was published daily and fluctuated according to military successes, or failures, and was expressed as something like "the price of gold today is 135". That was NOT the price of gold per ounce. Many folks, including a significant number of historians writing about the Civil War who ought to know better, get this wrong and write something like "gold was selling at $135 per ounce on a certain date. What that 135 figure meant was that it took $135 in paper Greenbacks to buy 100 gold dollars. When the Gold Room announced that gold was at 200 it meant that $200 was required to buy 1oo gold dollars (an actual one dollar gold coin was minted at the time (1/20 of an ounce). When gold was priced at 200 its actual price (in Greenbacks) it was about $40/ounce. There were two points when Greenbacks fell heavily relative to gold. In early July, 1863 as Lee invaded the North gold was priced at 287 and a year later when Sherman and Grant appeared to be bogged down in sieges (and Butler bottled up). At that point the price of gold briefly increased to about 290 or $47/ounce or to put it another way, the Greenback fell to just under 40 cents in gold. But again, most writers of the Civil War seem to get this botched up and mistake the Gold Room quote as the price of gold per ounce rather than the ratio of paper to gold dollars. At Chambersburg $500,000 in paper Greenbacks, although quicker to obtain, was worth considerably more than$100,000 in gold which the town probably did not have in its banks.

The US Mints continued to mint gold coins throughout the war, mostly at the San Francisco facility. Some did enter circulation (the interest on US bonds was paid in gold) but always at a premium over paper in the marketplace, as paper replaced coins in the North for general use. As the subsidiary silver coinage was hoarded along with gold the US Government issued small change fractional postal notes looking like large postal stamps (at one point early in the war people tried using postal stamps as small change. It did not work at they stuck to everything they touched and each other). About the only actual US coins in circulation were the Indian Head cents.

May I suggest for a quick 15 minute read on the financing of the war and money in the marketplace, Economic History.net which can be accessed at EH.net/encyclopedia/the-economics-of-the-civil-war which article includes a nice segment on the value of slavery just before secession.

 

[atlantis]

That brings up the matter of the value of Greenbacks in gold. The "official" value of gold for the US Government remained at about $20/ounce but by late 1861 Northern banks had suspended specie payment for their notes. The US then started its issue of its own paper currency to finance the war. They were not redeemable in gold for the present (after Reconstruction they were). Most gold coins disappeared from circulation as the value of the Greenbacks, relative to gold, fell. At the "Gold Room" in NYC a consortium of bankers and investors met daily, bought and sold gold bullion (and silver which also retained its value relative to gold) and thereby established a true market value for gold. This relative value of bullion to paper was published daily and fluctuated according to military successes, or failures, and was expressed as something like "the price of gold today is 135". That was NOT the price of gold per ounce. Many folks, including a significant number of historians writing about the Civil War who ought to know better, get this wrong and write something like "gold was selling at $135 per ounce on a certain date. What that 135 figure meant was that it took $135 in paper Greenbacks to buy 100 gold dollars. When the Gold Room announced that gold was at 200 it meant that $200 was required to buy 1oo gold dollars (an actual one dollar gold coin was minted at the time (1/20 of an ounce). When gold was priced at 200 its actual price (in Greenbacks) it was about $40/ounce. There were two points when Greenbacks fell heavily relative to gold. In early July, 1863 as Lee invaded the North gold was priced at 287 and a year later when Sherman and Grant appeared to be bogged down in sieges (and Butler bottled up). At that point the price of gold briefly increased to about 290 or $47/ounce or to put it another way, the Greenback fell to just under 40 cents in gold. But again, most writers of the Civil War seem to get this botched up and mistake the Gold Room quote as the price of gold per ounce rather than the ratio of paper to gold dollars. At Chambersburg $500,000 in paper Greenbacks, although quicker to obtain, was worth considerably more than$100,000 in gold which the town probably did not have in its banks.

The US Mints continued to mint gold coins throughout the war, mostly at the San Francisco facility. Some did enter circulation (the interest on US bonds was paid in gold) but always at a premium over paper in the marketplace, as paper replaced coins in the North for general use. As the subsidiary silver coinage was hoarded along with gold the US Government issued small change fractional postal notes looking like large postal stamps (at one point early in the war people tried using postal stamps as small change. It did not work at they stuck to everything they touched and each other). About the only actual US coins in circulation were the Indian Head cents.

May I suggest for a quick 15 minute read on the financing of the war and money in the marketplace, Economic History.net which can be accessed at EH.net/encyclopedia/the-economics-of-the-civil-war which article includes a nice segment on the value of slavery just before secession.

Thanks for all the info.

 

[kevikens]

Thanks for all the info.

As a retired history teacher it is always my pleasure to share what I have learned from having had some very good professors in my academic days.

 

[atlantis]

As a retired history teacher it is always my pleasure to share what I have learned from having had some very good professors in my academic days.

Did they mention anything about using cotton to back the currency, that seems to me a way to bring some value stability to the confederate dollar.

 

[WJC]

That brings up the matter of the value of Greenbacks in gold. The "official" value of gold for the US Government remained at about $20/ounce but by late 1861 Northern banks had suspended specie payment for their notes. The US then started its issue of its own paper currency to finance the war. They were not redeemable in gold for the present (after Reconstruction they were). Most gold coins disappeared from circulation as the value of the Greenbacks, relative to gold, fell. At the "Gold Room" in NYC a consortium of bankers and investors met daily, bought and sold gold bullion (and silver which also retained its value relative to gold) and thereby established a true market value for gold. This relative value of bullion to paper was published daily and fluctuated according to military successes, or failures, and was expressed as something like "the price of gold today is 135". That was NOT the price of gold per ounce. Many folks, including a significant number of historians writing about the Civil War who ought to know better, get this wrong and write something like "gold was selling at $135 per ounce on a certain date. What that 135 figure meant was that it took $135 in paper Greenbacks to buy 100 gold dollars. When the Gold Room announced that gold was at 200 it meant that $200 was required to buy 1oo gold dollars (an actual one dollar gold coin was minted at the time (1/20 of an ounce). When gold was priced at 200 its actual price (in Greenbacks) it was about $40/ounce. There were two points when Greenbacks fell heavily relative to gold. In early July, 1863 as Lee invaded the North gold was priced at 287 and a year later when Sherman and Grant appeared to be bogged down in sieges (and Butler bottled up). At that point the price of gold briefly increased to about 290 or $47/ounce or to put it another way, the Greenback fell to just under 40 cents in gold. But again, most writers of the Civil War seem to get this botched up and mistake the Gold Room quote as the price of gold per ounce rather than the ratio of paper to gold dollars. At Chambersburg $500,000 in paper Greenbacks, although quicker to obtain, was worth considerably more than$100,000 in gold which the town probably did not have in its banks.

The US Mints continued to mint gold coins throughout the war, mostly at the San Francisco facility. Some did enter circulation (the interest on US bonds was paid in gold) but always at a premium over paper in the marketplace, as paper replaced coins in the North for general use. As the subsidiary silver coinage was hoarded along with gold the US Government issued small change fractional postal notes looking like large postal stamps (at one point early in the war people tried using postal stamps as small change. It did not work at they stuck to everything they touched and each other). About the only actual US coins in circulation were the Indian Head cents.

May I suggest for a quick 15 minute read on the financing of the war and money in the marketplace, Economic History.net which can be accessed at EH.net/encyclopedia/the-economics-of-the-civil-war which article includes a nice segment on the value of slavery just before secession.

Thanks for your response and interesting information.
So the published number was simply an index?
Thanks for the URL: I'll check it out.

 

[Copperhead-mi]

Another interesting tidbit. New York's National Bank Note Company and the American Bank Note Company at one point, produced currency for both the Confederate government and United States government. The National Bank Note Company produced the first issue of Confederate currency during March 1861 while the Confederacy's capital was in Montgomery but once war broke out in mid April 1861, the U.S. Treasury Dept. seized the currency plates from the National Bank Note's facility in New York. The American Bank Note Company produced the earliest notes of the Second Issue after the capital moved to Richmond. These notes were produced in New York but the company's president feared being caught by the Federal government so the company moved the plates and presses for the Confederate currency to their New Orleans branch and renamed that branch the Southern Bank Note Company.

 

[kevikens]

Did they mention anything about using cotton to back the currency, that seems to me a way to bring some value stability to the confederate dollar.

I had always wondered about that. CSA currency was not directly related to cotton as far as I can determine, probably because the price of cotton as a commodity fluctuated itself so widely that CSA currency would have fluctuated with it and a widely fluctuating currency is not good for business. Implicitly though, one could assume that with the restoration of peace CSA currency and bonds could then have been used to purchase cotton.

 

[kevikens]

Thanks for your response and interesting information.
So the published number was simply an index?
Thanks for the URL: I'll check it out.

Yes, an index that was a ratio of Greenbacks to gold.

 

[Story]

As for US coins they were rapidly removed from circulation by BOTH the North and South as their metallic, bullion value was a guarantee that no matter who won or lost the war the intrinsic value of the metals would endure. Apparently even some of the old Spanish coinage, no longer legal tender after 1857, was snapped up since it was coined in good silver. There are innumerable references to Southerners preferring US currency and coinage to CSA issues when they could get them. In short US currency circulated at a premium over CSA notes in the South.
.

I'd read recently where the ratio of exchange at CSA PoW Camps was 20:1 for US Greenbacks ($20 purchase power at the PoW camp sutler for each $1 Greenback from a prisoner).

The irony is that the folks in the north had no faith in those very same Greenbacks (and as Kevikens mentioned, coinage being taken out of the market), which led to the rise in tokens (brass/copper) being issued by businesses across the north. There was some 8,000 + variations (including sutler coins).

 

[WJC]

Yes, an index that was a ratio of Greenbacks to gold.

Thanks for your response.
I just finished reading the excellent article you suggested. Its information was not only useful for our immediate discussion, but for questions raised in many other threads in this forum as well.

 

[kevikens]

Another interesting tidbit. New York's National Bank Note Company and the American Bank Note Company at one point, produced currency for both the Confederate government and United States government. The National Bank Note Company produced the first issue of Confederate currency during March 1861 while the Confederacy's capital was in Montgomery but once war broke out in mid April 1861, the U.S. Treasury Dept. seized the currency plates from the National Bank Note's facility in New York. The American Bank Note Company produced the earliest notes of the Second Issue after the capital moved to Richmond. These notes were produced in New York but the company's president feared being caught by the Federal government so the company moved the plates and presses for the Confederate currency to their New Orleans branch and renamed that branch the Southern Bank Note Company.

Interesting that you should mention that. The American Bank Note Co. by 1858 was producing something like 90% of all banknotes using the engraving firm of Rawdon, Wright, Hatch and Edson to do the vignettes and that engraving firm owned about one quarter of the ABNCO. I have a South Carolina banknote in my collection printed and engraved by the company with only the engravers' names printed on the note, no longer with the ABNCO name on it, but still one of their notes. The note was issued in Charleston and is dated, April, 13th, 1861. I wonder if the president and cashier who signed that note could hear the booming of the guns from the harbor. For those with an interest in the currency of the period may I recommend the book I most use in its study, Obsolete Paper Money (Issued by Banks in the US 1782-1866) by Q. David Bowers.

 

[Copperhead-mi]

I had always wondered about that. CSA currency was not directly related to cotton as far as I can determine, probably because the price of cotton as a commodity fluctuated itself so widely that CSA currency would have fluctuated with it and a widely fluctuating currency is not good for business. Implicitly though, one could assume that with the restoration of peace CSA currency and bonds could then have been used to purchase cotton.

Confederate currency was basically backed by "faith of the state" which is essentially what the "second obligation" 1862 United States $1 "greenbacks" and today's (post-1933) Federal Reserve notes are backed by. Mississippi backed some of their 1862 state issued currency with cotton that was stored by the state and Florida backed their state issued notes with public land. All other Civil War State Issued currency was backed by "faith of the state."