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Confederate Money

The new government passed almost immediately to a paper currency, which from time to time was emitted freely, until before the close of the war it was practically valueless. The provisions of the new constitution regarding the issue of legal tender paper money remained the same as of old. In the North such legal tender paper began to be issued in the spring of 1862, and later opened the question of the constitutionality of such a practice. No Confederate legal tender act was ever passed, though the agitation in that direction was often strong. The objections which prevented the passage of such an act were the same as those offered by the minority in later years against the constitutionality of the Federal legal tender act. The Southerners were too true to their strict constructionist views of the constitution to admit the constitutionality of a legal tender act.

The specie holdings of the Southern banks largely found their way into the Confederate treasury in payment for the $15,000,000 loan effected early in 1861. In addition, the government secured the specie in the various Federal offices which fell into its power. These sums were soon sent to Europe in payment of foreign war supplies. The gold and silver in general circulation also soon left the country almost entirely, driven out by the rising flood of paper money. Aside from the payment of the above loan the government never secured any specie revenue, and was driven headlong into the wholesale issue of paper money. The first notes were issued in March 1861, and bore interest. They were soon followed by others, bearing no interest and payable in two years, others payable six months after peace. New issues were continually provided, so that from an initial $1,000,000 in circulation in July 1861, the amount rose to 3O millions before December 1861; to 100 millions by March 1862; to 200 millions by August 1862; to perhaps 450 millions by December 1862; to 700 millions by the autumn of 1863; and to a much larger figure before the end of the war.

This policy of issuing irredeemable paper money was copied by the individual states and other political bodies. Alabama began by issuing $1,000,000 in notes in February 1861, and added to this amount during each subsequent session of the state legislature. The other states followed suit. Cities also sought to replenish their treasuries in the same way. Corporations and other business concerns tried to meet the rising tide of prices with the issue of their individual promissory notes intended to circulate from hand to hand. As a result of this redundancy of the currency the price of gold rose to great heights. It was quoted at a premium in Confederate notes in April 1861. By the end of that year a paper dollar was quoted at oo cents in gold; during 1862 that figure fell to 40 cents; during 1863, to 6 cents; and still lower during the last two years of the war. The downward course of this figure, with occasional recoveries, reflects the popular estimate of the Confederacy's chance of maintaining itself against the Northern invasion. The fluctuations of the gold premium in the North during the same years arc a complementary movement, and correspondingly reflect the periods of popular elation and depression as to the final outcome of the war.