The Project Gutenberg ebook of History of the United States, Volume 4, by

Maximilian Watching the Departure of the

Last French Troops from the City of Mexico.

170 CIVIL WAR AND RECONSTRUCTION [1864

But these taxes, severe as they were, could furnish only a small part of the necessary income. The Government must borrow. In the first year of the war the banks loaned the United States $150,000,­000 at 7.3 per cent. interest. Many other loans were secured as the war went on--­one for $500,000,000, another for $900,000,000. As security the Government issued bonds, bearing various rates of interest and payable after a certain number of years. Treasury notes were also issued and made legal tender for all debts public and private. As the Government paid its own debts with them, they were in the nature of a forced loan. Of those which bore no interest (commonly known as greenbacks) $433,000,000 were issued from first to last. Also, when property was seized for the use of the army, the owners were given certificates of indebtedness which entitled the holders to payment at the United States Treasury.

The proportion of revenue derived from each of the above sources is illustrated by the report of the treasurer of the United States for the year ending July 1, 1865. Customs yielded $85,000,000, internal rev­enue $209,000,000, loans $1,470,000,000.

1864] FINANCES 171

Finance legislation during the war was more patriotic than wise, due partly to necessary haste, largely to ignorance. The internal taxes bore very unequally upon different classes. The tariff was ill-adjusted to the internal taxes, letting in at low rates some classes of goods whose home produc­tion was heavily taxed, thus discriminating in favor of the foreigner. Millions of debt and half the other economic evil of the war might have been saved by doing more to keep the paper dollar on a par with gold. Thus the banks should not have been com­pelled to pay in gold the loan of 1861. It forced them to suspend specie payment altogether, December 31st of that year--­those of New York City first, followed by others everywhere, and by the United States itself. Gold had been at a nominal premium all through 1861, but the first recorded sale at an advance was on Janu­ary 13, 1862.

172 CIVIL WAR AND RECONSTRUCTION [1864

It would have been better, also, to resort earlier to heavy loans, even at high rates, instead of flooding the coun­try with greenbacks. The national banks, which were created on purpose to help the sale of government bonds, should have been forced to purchase new bonds instead of supplying themselves with bonds already issued, their purchase of which did the Government no good whatever. Neglect in these regards caused the paper dollar to fall in value. In July, 1864, it was worth only thirty-five cents in gold.

The finances of the Confederacy went steadily from bad to worse. The blockade cut off its revenue from import duties. Its poor credit forbade large loans. The gov­ernment had to rely mainly upon paper money. This soon became almost worth­less. In December, 1861, it took $120 in paper money to buy $100 in gold; in 1863 it took $1,900; in 1864, $5,000. Nearly $1,000,000,000 in paper money was issued in all. The Confederate debt at the close of the war was $2,000,000,000. Under the combined influence of depreciated currency and scarcity of goods, prices became ludicrously high.

173

Salmon Portland Chase,