Sunday, December 26, 2010

Explosion of a Currency

Public attentions has been so exclusively directed to the military and navel movements of the Rebel Government that but comparatively little notice has been taken of its monetary progress, whether upward or downward.  Steam rams, turtles, forts, and rifle-pits, have filled the Northern eye, while the foul issue of a still fouler conspiracy have filled the Southern pockets.  We have shelled the turtles, sunk the rams, cleared the rifle-pits and captured the forts, facing the enemy at every point; but, singularly enough, have had no encounter with the Rebel currency.  It is true that we have obtained distant glimpses of the great carnival of rags in which the Southern zanies have been rioting.  Huge deposits of their fetid trash have been taken with their forts and passed from hand to hand among the victors, to be preserved as mute but greasy mementoes of typographical barbarism.  Samples have been sent home by the captors, to be pasted up in shops and bar rooms as curiosities, or preserved in the albums of collectors of Continental currency, that issued for a holy cause for the first time in American history, taking its place by the spawn of an unholy one.  But saving a short, abortive effort at the outbreak of the Rebellion, to peddle the worthless stuff in Northern cities, and the chance reports which reach us from our advancing armies or from fugitive loyalists, we know but little of the social and commercial results of this unexampled issue of an irredeemable currency.  In the hurrying tramp of advancing columns – in the excitement of battle – even after the peaceful occupation of the largest Southern cities – those flying historians of the war, the army correspondents and reporters seem to have given no attention to the currency question.  We may form some general idea of how it stands on learning that tea is selling at $4 a pound, and calico at $1 a yard; but of the wide-spread misery under which the South has suffered we shall learn no definite particulars until the domestic history of the Rebellion shall have been written.

History, however, enables us to conjecture what misery the South is yet to undergo from the collapse of its paper currency.  We know not what amount her treasonable Government has issued, but, from all the information obtainable through her newspapers, we presume it to be at least $300,000,000.  A fraction of the first issue was taken by her citizens in the early furor of the outbreak.  As the people held back, the banks were coerced into subscriptions, then into exchanges of their notes for Rebel bonds.  These resources exhausted, the leaders issued without limit and forced it on the people in payment for supplies, the armies carrying with them millions of unsigned scrip to be used whenever and wherever it might be required.  The true basis for redemption was the success of rebellion.  We have had other rebellions in this country, but this is the only one which attempted to manufacture its own money.  Its artificial basis was the cotton crop and redemption was dependent on success, because without the latter the cotton crop would fail to reach the European market.  But treason has run its bloody course with a rapidity that has astonished the nations.  Every basis, real and artificial, has disappeared.  Conscious of this, the cotton foundation for its bonds is ordered to be destroyed.  This act is the dying confession of the discomfited traitors.  The millions of paper they have issued is left to perish in the hands of the Southern people.  It was in every one’s possession.  As coin disappeared into thousands of private hoards, its place was supplied by paper, which immediately filled the channels of circulation.  It was that or nothing.  Both terror and necessity compelled its adoption.  Those who hesitated to receive it were suspected, while those who refused it were stripped of property and imprisoned.  Real money, in fact, ceased to be known in business transactions and the day of barter returned, the bartering of merchandise for paper.

But even this compulsory currency was insufficient to gorge the community.  Every individual was at liberty to issue whatever he could circulate.  As there was no small change, so each man made it for himself.  Barbers issued tickets good for a shave, groggeries such as were good for drinks, undertakers such as were redeemable in coffins, and even the gamblers and faro bankers issued similar tokens.  The entire fractional currency of all the Southern cities was made of this irredeemable trash.  From them it spread into the country, and as it was there absorbed, the makers issued more.  So pitiable was the southern destitution – so humiliating her dependence on the North, that, shut out from fresh supplies by a blockade which it was thought facetious six months ago to sneer at, these myriads of tickets were printed on brown paper, back of old letters, shop cards and bonnet boards.  The world has never seen a currency to equal it for rottenness.  The Continental currency had value at the beginning – even the French assignats were the representatives of a vast tangible property – but this whole Rebel currency has been the most stupendous swindle from the start that the world has ever beheld.  It falls dead upon the hands of every man who holds it, and $300,000,000 of loss cannot be so distributed in any community as not to impoverish thousands by the explosion.  What other generations suffered from Continental notes and assignats, the South must suffer with far greater severity from this universal collapse.

No history of the Continental currency has yet been written, and what we know concerning it must be gathered up from contemporaneous records in which it is incidentally referred to.  Neither has a history of the Colonial paper currency been written; but enough has been preserved to give us some idea of the wide spread ruin which has in every instance swept over the community which may have plunged into great issues of irredeemable paper.  Even cautions, prudent Massachusetts was compelled, in 1751, to redeem £1,792,236 of her paper, at a loss of 90 per cent. to the holders.  In 1712, South Carolina issued £48,000 in bills, which depreciated one third the first year, one half the second, and gradually sunk to almost nothing. – Only six months after the Declaration of Independence, public confidence in the Continental money was seriously impaired.  The Tories sneered at it, and the British counterfeited it.  In October, 1777, it had depreciated to three for one.  The belief was that even if independence were secured by the country would be found too poor to pay its debt; while domestic enemies declared, and the army unfortunately believed, that, if ever able to pay, it did not intend too.  Up to September, 1779, Congress had issued $160,000,000 of paper, and then resolved that the issues should at no time exceed $200,000,000.  But once entered on the career, its issues soon exceeded this limit, and the next year its paper sunk to seventy-five for one.  Coin was impossible to be had, and taxes could not be collected.  In 1781, Congress had issued $359,000,000 of paper, and at that date the earlier notes had sunk to five hundred for one of hard money.  Thenceforward, the depreciation went rapidly toward utter worthlessness.  It is known that millions of this paper were never redeemed, and that depreciation and repudiation combined inflicted untold distress upon the people.  Taxation followed, and this culminated in the Whisky Insurrection in Pennsylvania and in Shay’s Rebellion in Massachusetts, with alarming symptoms of an outbreak in New Hampshire and Connecticut.

All American history is full of warning as to the certain ruin to follow the gorging of a community with a paper currency for whose early redemption no certain provision may have been made.  The South can hope for no exemption from a similar fate.  Her currency began to depreciate from the moment it was issued.  The Continental Congress bore up for eight years under the waning value of its currency, but a single year has been sufficient to wipe out hundreds of millions in the South.  That Congress did repay many millions of its war debt by bonds which have long since been liquidated, but not a dollar of the enormous issues of the Southern Confederacy will be paid.  If a successful rebellion impoverished so many of our fathers, how many will an unsuccessful one convert into paupers!  The stake, moreover, which the South has hazarded in provoking this contest is immeasurably greater than that which all the Colonies possessed.  They had no banks, no railroads, no canals, no telegraphs, no steamers, no furnaces nor mines, nor any of the multiplied appliances of modern civilization into which the South has concentrated millions of capital.  All these have been dangerously crippled, some nearly ruined, others annihilated.  Her banks must be hopelessly insolvent; her State bonds may continue as footballs at the Stock Board, but redemption is almost impossible; while the great bulk of her Corporation stocks is comparatively worthless.  Thousand depended upon incomes thus derived, but now swept away. – Other thousands have meanly fattened upon slave labor; but, under the stunning blows rained down upon it by the stalwart North and West this dependence now reels to its dissolution.  No coupon is paid, no corporation declares a dividend.  Slaves are unsalable, while the title to all real estate is doubtful under the prospect of a wholesale sequestration.  Every prop on which her deluded people has rested has been knocked away.  Agriculture produces no crops, while every cannon fired by our advancing armies drives hundreds of families as fugitives from their homes.  Of all wars, those of invasion are the most frightful, and this the righteously desolated South as fully realized.  The crash must be proportioned to the magnitude of the interests involved.

But the full force of her monetary collapse is yet to come.  When peace lifts the curtain, and lays bare her pecuniary nakedness, we shall behold a perfect carnival of insolvency.  It will be aggravated by the obliteration of vast properties voluntarily destroyed.  The voluntary destruction is of itself an admission that confiscation is inevitable.  Here, then, is an accumulation of causes for a huge monetary explosion such as had no existence in the Revolution.  It is only on the return of peace that such explosions really culminate.  While the war lasts, a pervading pressure serves to brace up all hopes, all interests.  But this pressure relaxes with the return of peace, and the fast artificial system which the war compelled collapses into a desolating chaos.  This generation will soon witness a spectacle in the Rebel States such as history but faintly pictures as having succeeded the American Revolution, the overthrow of Napoleon, or the close of our second war with England.  The North has already gone through its portion of the terrible ordeal, and will now move forward with elastic enterprise, under invigorated energies, to new industrial achievements.  The currency explosion at the South is yet to come. –{Tribune.

– Published in The Burlington Weekly Hawk-Eye, Burlington, Iowa, Saturday, May 24, 1862, p. 1

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