Background on the Money Question, Part Two
Following the Revolution, American monetary politics continued to pit those who favored "loose" money--and paper notes--aginst those who favored "tight" or hard money, meaning money based on metals. See this reference for a concise history. Officially, the nation's money was based on gold and silver before the Civil War, but in practice, paper money entrepreneurship fueled economic expansion. In the antebellum period local and State banks could print their own money, and in the twenty years before the Civil War more than 4000 different kinds of paper money circulated. Even more striking, according to the Treasury Department, more than forty percent of the money in circulation was counterfeit. For a brief look at the Jacksonian economy, in which the desire for stability battled against the desire for expansion and easy credit, click below.
The Civil War put an end to this monetary complexity. The National Banking Act of 1862 imposed a tax on State and local paper money issues that effectively eliminated them. It also saw the introduction of a single standard money form, the "greenbacks," controled by the federal government.
The War itself was never entirely popular, even in the North, and Lincoln's administration was hard pressed to raise money. Rather than impose more and higher taxes, the Lincoln administration resorted to legal tender paper money. "Legal tender" meant that you had to accept the paper notes. The North printed more than 450 million dollars in paper notes, popularly termed "Greenbacks." It used them to pay soldiers and suppliers, and from there they entered the economy. Greenbacks let Lincoln finance the unpopular war.
One of the first "greenbacks," a "demand note" of 1861, used to pay federal workers. For more information see this online exhibit.
They also produced an economic boom for the North. According to Lincoln's allies, greenbacks loosed the spirit of enterprise. Republican editor Horace Greeley wrote:
But greenbacks never enjoyed full acceptance. Editorials in the New York Herald compared those who argued for paper money to real estate brokers who, "with a few strokes of the pen convert a rickety old farm house... into an elegant villa surrounded by a spacious lawn," or theatrical managers, whose "genius renders a beggarly account of empty boxes into a crowded and fashionable house." In popular culture, minstrel show songs described Greenback in critical terms, as in the exmple below.
How are you Green-backs! 1863. From American Memory
This song, sung by a white man in blackface, included lyrics that connected greenbacks to shoddy merchandise and profiteering:
The song also compared, in its last verses, greenbacks to African American soldiers, seeing both as "counterfeits" or as inflated values. Click below to see the full text.
Following the war, two issues dominated American politics: what to do about the South and its former slaves, and what to do about the greenbacks. There were three basic positions on the money question.
The gold standard position benefited from increased opposition to Reconstruction, and the enterprise of racial equality that Reconstruction began. "No legislation of Congress can elevate or improve the physical, moral or intellectual condition of the negro," insisted Senator George Vickers of Maryland in 1869: "we cannot legislate into them any fitness or qualifications which they do not now possess." Gold bug arguments increasingly took on the racially charged language of the times. As Historian Walter Nugent has noted, arguments for gold frequently referred to gold as the "natural" metal of the "anglo saxon race." This tendency would only worsen by the end of the century.
In the Coinage Act of 1873, the US officially adopted gold alone as the basis for its currency; the Resumption Act of 1875 further provided for the elimination of greenbacks from circulation.
"Contracting" the greenbacks caused a depression in the mid 1870s. Greenbacks still had many supporters, enough to form, in 1878, the Greenback Labor Party. The Greenback Party campaigned for an increase in paper note circulation; it returned 14 members to Congress in 1878. Below is an example of pro-greenback sentiment.
W. A. Croffut, “Bourbon Ballads (Songs for the Stump) An extra edition, no. 52,” New York Tribune (September 1879)
Greenbackers saw "the people's money" as a way to keep wealth from concentrating in the hands of the rich. They argued that wealth came from labor, not from "intrinsic value," and that the people should manipulate the money supply according to society's needs. Though they faded quickly after 1878, defeated partly by an increase in the stock of precious metals and partly by the racially charged tactics of their opponents, they reemerged powerfully in the 1880s as the People's Party, more commonly known as the Populists.
Silverites followed a middle course. They argued that adopting both gold and silver as the basis for the nation's money--a "bimettalic" standard--would result in some mild inflation while retaining the alleged "natural" value of precious metal. Silver had its strongest constituency in western states with silver mining interests, but it won a great deal of popular support by circulating fantastic theories of an international conspiracy to "demonetize" silver. Silverites raved about the "crime of 73," and claimed that international bankers had bribed and corrupted congress into adopting the gold standard. Silverites waxed nostalgic about silver, which they called "the dollar of our daddies," and they adopted strongly anti-Semitic tactics which the Populist Party would later pick up in the election of 1896, as we will see.
The money question had the power to evoke strong emotions, and to symbolize larger cultural concerns. It seems especially striking that Americans paid so much attention to gold and silver at a time when, increasingly, they did business with checks. Rapid economic growthm th increased pace of exchange, and the constant elaboration of new forms of credit also made the gold sandard increasingly anachronistic. In fact, the more "modern" and diverse the economy became, the more rapid the pace of change, the more strident and irrational the debate over money became.
The money question reached its peak in 1896, spurred by economic forces but also by more general cultural anxieties, including what some historians call a "crisis in representation."