384 CARNIVAL OF FIAT MONEY [1863 Northern armies. A weighty recommendation that conscription be given up and volunteering resorted to again to recruit the army, and the fact that there were 100,000 deserters, are not reasons for condemning the Confederate policy of conscription, but they are among the many indications that the Southern cause was lost. The Confederacy was practically supported, in so far as its strictly defined financial operations were concerned, by the issue of paper money and from the proceeds of bonds which were paid for in the paper currency; in this medium the holders of the bonds received their interest. Owing to the stringency of the blockade the revenue derived from the export duty on cotton and from duties on imports was inconsiderable. No large amount of money was raised by internal taxation. An attempt to maintain specie payments would have been futile: $27,000,000 is an outside estimate of the receipts in specie of the Confederate government during its life of four years. Before the end of 1863, $700,000,000 of Treasury notes were in circulation and this amount was increased during the next year to $1,000,000,000, but the issues grew so enormously that apparently no exact amount of them was made public; it is even possible that the Treasury Department itself did not know the amount afloat. But this was not the extent of the inflation of the currency. The different States issued State Treasury notes; the banks expanded their circulation; Richmond, Charleston and other cities put out municipal treasury bills; railroad, turnpike and insurance companies, factories and savings-banks added to the mass of paper money. A large part of this municipal and corporation paper was issued in denominations below one dollar to supply the need for small change caused by the disappearance of frac CH. XII] CARNIVAL OF FIAT MONEY 385 tional silver. In North Carolina ten-penny nails passed current at five cents apiece. At times postage stamps circulated. Tobacconists, grocers, barkeepers and milk dealers put out shinplasters. In 1862 the Confederate government began the issue of one-dollar and two-dollar bills and of fractional amounts under one dollar. It was a carnival of fiat money. Early in 1864, it was conceded that something must be done to contract the currency. The financial history of the American Revolution and the French Revolution repeated itself on February 17 of that year in a measure of virtual repudiation. This was a provision for the compulsory funding of the notes into four per cent bonds; if the bonds were not taken, all notes of the denominations under one hundred dollars might be exchanged for new ones in the ratio of three dollars of old money for two dollars of the new. If neither exchange was made the old notes were to be taxed out of existence. This was really a confession of bankruptcy by the Confederate Congress and the President: the financial situation was hopeless unless independence could be won. The people of the South recognized the superior resources of the North by accepting readily in trade United States greenbacks. They were quoted in Richmond and might be seen in the brokers' offices. Another symptom of the debasement of the Confederate currency was the resort to barter. Manufacturers and merchants advertised in the newspapers, offering their goods in exchange for farm and other products. To obtain supplies for the army, wrote Seddon to Lee on March 29, 1864, we must not "recur to the most expensive and mischievous of all modes - the issue of a redundant currency. I expect to introduce and to rely upon to a considerable extent a system of barter." 386 HIGH PRICES IN THE CONFEDERACY [1863 ! Accompanying the redundant currency were apparent high prices. Contemporary and later writings are full of the subject and indicate the impression made on people's minds by the advance of daily comforts and conveniences. Mrs. Jefferson Davis, drawing from her own domestic experiences and from private diaries, has presented many of the facts in an interesting manner. In July, 1862, when gold was worth $1.50, beef and mutton sold in Richmond for 37 cents a pound, potatoes $6 a bushel, tea $5 a pound and boots $25 per pair. In the early part of 1864, when $1 in gold brought $22 in Confederate money, she reports the price of a turkey as $60, flour $300 per barrel and in July of that year shoes $150 per pair. Gold increased steadily in value and most articles of consumption followed until the extravagant prices were reached which prevailed in the last days of the Confederacy. That money was cheap rather than articles of food dear is signified by the experiences of two Englishmen. LieutenantColonel Fremantle was in Charleston during June, 1863, and wrote that the fare was good at the Charleston Hotel, the charge being $8 a day which was equivalent to but little over $1 in gold. A compatriot sojourning at the best hotel in Richmond in January, 1864, remarked that he had 'never lived so cheaply in any country." It is true that he paid $20 per day, but that was equal to only three shillings of his own money. The great concern of the Confederate government was to feed the army and, when its financial system broke down, it resorted to the tax of one-tenth in kind of agricultural products, and collected this tax by the impressment of food [1863]. The impossibility of supplying the army by purchase alone being now clearly recognized, the act of impressment inaugurated a far-reaching system of taking CH. XII] FINANCIAL PRESSURE 387 "private property for public use" and authorized substantially, within certain limits, any officer of the army to seize any property anywhere in the Confederacy in order to accumulate supplies or "for the good of the service." The outcry against the operation of this law was bitter, widely extended and prolonged; and the evils of impressment were thoroughly appreciated by the War Department. Some attempt, which was probably futile, was made to correct the abuses; its operation was conceded to be harsh, unequal and odious but inexorable necessity had led to the adoption of the policy and would require its continuance. High taxation, loans and the purchase of food at the market price was suggested as a policy in lieu of impressment all had become impracticable. In 1863 the currency in which the taxes were received was redundant and steadily depreciating; in 1864 it was scarce but worth still less than in 1863. All sorts of bond issues were tried and as large an amount of loans was floated as the market would take. That the amount of bonds was smaller in proportion to the amount of Treasury notes than one would expect was not due to financial mismanagement but to the paucity of savings available at the South for such a permanent investment. The surplus capital, as is well known, had been constantly laid out in land and negroes. By January 1, 1863, it became apparent that primitive methods must supplant the modern mechanism of business operations. The South had practically no specie, or, in other words, no basis for a modern fiscal system, consisting of a redeemable currency and bonds. She had no credit. At the outbreak of the war she was in debt to the North and to Europe. With the closing of her ports by the blockade, her chance of getting any credits in the marts of the world was gone. One has only to look over many schedules of 388 IMPRESSMENT IMPERATIVE [1863 goods that went out and came in by the blockade-runners to understand how insignificant was the exchange of commodities through this precarious commerce. The blockaderunning and the trade with the North brought in articles of prime necessity for carrying on the war and all the cotton which went out was absorbed in these indispensable transactions there was not enough of it to establish credits or bring in specie. The resort then to the tithe and to impressment was unavoidable. The tithe was, under the circumstances, an admirable method of taxation and, though it bore hard on the farmers and was the cause of complaint, the bulk of the testimony is to the effect that it worked well. Like much of the other statecraft, both North and South, it was a policy too tardily adopted because of men's imperfect comprehension of the magnitude and duration of the struggle. It is now easy to see that it should have been imposed on the crop of 1862, which would have tended to make the later impressment operations less onerous. In 1863, affairs were at a pitch where impressment became imperative. The law was not at fault, but its administration was defective. A consideration of the grievances it gave rise to will show how a stringent law was rendered odious through negligence, lack of uniformity and undue harshness in execution. The sparsely settled region of the South presented grave obstacles to the efficient operation of the plan. The methods which had served this simple agricultural community in time of peace no longer availed: a system of administration by trained officials was needed to handle the enormous amount of business brought on by the war; and, in the ingenuity requisite to devise such a system, the South was far inferior to the North. Yet though the South had no specie, no credits and no commerce that was not seriously hampered, she had land |