Money has played a pivotal role in the course of history many times. The United States Government faced a financial and existential crisis in 1861 when the country began to fight a civil war with the Confederacy. In order to continue to finance the war effort, Congress authorized the issuing of Demand Notes and U.S. Notes which came to be known as greenbacks. In this blog we will talk about what they were and why they were important.
The Civil War Crisis
In August of 1861, when it became clear the Civil War might continue for some time, Congress authorized the printing of $50 million in Demand Notes. This was because the government needed to raise funds to pay for the war, but it was difficult to borrow money through traditional means. They could not issue bonds because the government’s creditworthiness was in doubt. There was also a shortage of gold and silver, which made it difficult to back a new currency with these metals.
The war was costly and destructive, and the public began hoarding what coinage was available. Coins became so scarce that it affected commerce because merchants could not make change. Northern mints struck new coins, but these were quickly hoarded as well. Eventually, both the U.S. and the Confederate governments printed paper money that was unbacked by gold or silver reserves.
Forms of the Greenback
Prior to 1861, the only currencies available in America were issued by privately owned banks; there was no official federal paper currency. The new greenbacks came in two forms: Demand Notes and United States Notes.
The United States Demand Note, issued in August of 1861, was not legal tender before March of 1862. Printed on both sides, with the reverse in green ink, it could be redeemed for gold and used to pay customs duties. By December of 1861, the government had to suspend redemption because gold was scarce, and they were taken out of circulation after they were made legal tender.
Congress passed the first Legal Tender Act on February 25, 1862, and on March 10, 1862, Congress issued $150 million in United States Notes which, unlike Demand Notes, were not backed by gold or silver. The reverse of these notes was also printed in green ink, and the public called them greenbacks as well and considered them to be the same as Demand Notes, although the government printed them to pay for labor and goods. U.S. Notes were declared lawful for payment of anything except interest on public debt and import duties.
On the West Coast, in Oregon and California where gold was more available, merchants and banks refused to accept greenbacks for payment or deposit, and the state would not accept them for payment of taxes. As the U.S. Government printed hundreds of millions of greenbacks, their value, measured against gold, went down and fluctuated wildly with news from the front. Eventually, Congress limited their issue to $450 million, and by December of 1878 they became on par with gold again and freely convertible into gold.
While the printing of unbacked currency was controversial and unpopular with many, by issuing it, the U.S. Government was able to finance the war effort without relying solely on borrowing or taxation. This allowed the government to continue fighting the war, maintain the economy, and, ultimately, preserve the Union.
Civil War era money is highly collectible today for historical and numismatic reasons. The value of greenbacks today, like any rare coin, is dependent on rarity, condition, and historical significance. For example, a $5 greenback from 1880 in uncirculated condition can be worth several hundred dollars or more to a collector, while a more common greenback from the same era might only be worth its face value or a few dollars.
If you are interested in collecting Civil War greenbacks, we’d be happy to take the time to make sure you find what you are looking for. Grand Rapids Coins ships to customers nationwide, but locally you can visit our Rockford location. Call us at 616-884-5048 to make an appointment to talk with us in person today.