Wesley C. (Wesley Clair) Mitchell.

A history of the greenbacks, with special reference to the economic consequences of their issue: 1862-65 online

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recommend the repeal of the bill, and yet he saw no other way

1 Conffremonal Globe^ 88th Coii«., Ist Seas., pp. 2708, 2794.

'Forty-three members did not vote.— /Md., P> 2937. The Senate oononrred In
the House amendments, which did not afleot the substance of the bill, on the i
day.~P. 2990.

313 StabOa at Larffe, p. 182.

* New York Herald^ editorial article, Jane 24, 1864.

6 See account of the meeting in New York papers of Jane 28, IML
A Extract from Chase's diary, Wabdbn, Life of OTUim, p. 007.

7 Letter to J. Cooke, Jane 21, Waxdbn, p. 006.

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to remedy the situation.^ Before this dilemma was settled he
sent his resignation to President Lincoki, June 29, and next
day it was accepted. The vacant position was offered to
Gbvemor David Tod of Ohio. When he declined it, Senator
Fessenden was prevailed upon to assume its duties.'

Meanwhile the gold bill had been repealed. Unanimous
consent to introduce a bill for this purpose was granted to
Senator Reverdy Johnson on the 22d of Juna' July 1,
this bill was called up and passed with no debate except
Johnson^s brief explanation :

The imiversal impression, so &r as I have been able to collect
it, in Congress and out of Congress, now is that .... the gold
bill is doing nothing but mischief ; and I have communications, and
other Senators have received them, from New York especially, bog-
ging that that bill shall be repealed. I do not know any member
of the Senate who formerly was willing to give that bill his sanction
who is not now just as willing to repeal it. It has had its trial and
has &dled to produce anything but mischief.*

Later in the same day the bill for repeal was passed by
the House without any discussion.^ It was signed by Presi-
dent Lincoln July 2;* the 3d was Sunday, and the 4th Inde-
pendence Day, but on the 6th the gold room was reopened
and the business of dealing in gold resumed its wonted

The great fall of the currency, shown by the spectacular
advance of the premium in June and July, was by no
means due solely to the gold-bill blunder. Military news
was unfavorable. After his frightful losses in the Wilder-

iSae his own aoeonnt of what he said to Feesenden in regard to the matter,
Wabdem, p. $19.

s ComjHire Part I, chap, y, sec ii, p. 124, above.

> Conoremcnal Globe, 88th Cong,^ Ist Sees., p. S160. * IMd., p. S44A.

5 Ibid., p. 8468. ThoTotewas: yeas, 87; nays, 29; not voting, 68.

^UStatuiea atLarffe^v.ML

7 At the stock ezohange, however, transactions in gold were never regularly
resomed after June 20. Cf. Commercial amd Financial Chronicle, Vol. I, p. 168.

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Specie Value op the Papeb Cubbenoy 233

ness and at Spottsylvania, Grant had been compelled to
give up his plan of taking Kichmond by assanlts on Lee's
lines. The bloody repulse at Cold Harbbr, June 3, was fol-
lowed by ten days of inaction. When Grant crossed the
James in the middle of the month, Lee merely fell back on
Bichmond and seemed as safe as before. The attempt to
secure the Weldon railway south of Petersburg by swinging
infantry corps to the left was foiled by Swell's fierce attacks,
and though Wilson's cavalry succeeded in cutting the rail-
way, they were afterward defeated and the damage repaired.
On the last day of June the mine was exploded at Peters-
burg, but the assault through the breach failed miserably.
Meantime Hunter, advancing on Lynchburg, was compelled
to retreat into West Virginia by the sudden appearance of
Early on his front with a superior force. This move opened
the way for Early's dash on Washington in the first fort-
night of July, which was almost successful. Though miss-
ing this prize, the Confederates operated in the Shenandoah
for the rest of the month and on the 80th burned Chambers-
burg in Pennsylvania. Grant in the meanwhile was reduced
to acting on the defensive ; for he had been compelled to
send an army corps and two divisions of cavalry to confront
Early. In the South Sherman seemed to be making slow
progress against the wary Johnston in his campaign about
Atlanta, and all attempts to capture Forrest's cavalry in
Mississippi proved futile. It seemed, indeed, in June and
July that almost no progress was being made toward sub-
duing the Confederacy, despite the prodigious expenditure
of money and blood.

The financial outlook was no better. In contrast with
the five-twenty loan which had closed in January, the ten-
forty loan was a dismal failure. Another loan on seventeen-
year bonds advertised June 25 met with so unflattering a
reception that it had to be withdrawn on the 2d of July.

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The ontstanding certificates of indebtedness had monnted to
$162,000,000 and there were unpaid requisitions on the
treasurer of $72,000,000. The expenditures were $2,250,000
a day, while the income from customs was hardly more than
sufficient to pay the coin interest on the debt, and even the
secretary's overestimate made the daily receipts from inter-
nal taxes but $760,000.' Add to this the fact that there was
little chance of quick improvement because Congress had
delayed passing the revenue bills until the last day of June,
and the unhappy state of the finances becomes apparent.'

Under the combination of unfavorable circxmistances it is
not strange that the value of the currency fell rapidly. News
of Mr. Chase's resignation came to New York July 1, and
was declared by the World to mean that the treasury was
practically bankrupt." This seems to have been the construc-
tion generally put on the resignation at first, and it was not
until July 7 that the Tribune denied this story and declared
that Chase withdrew simply because he and the president
could not agree on a successor to Mr. Cisco. Senator Pes-
senden's appointment produced a temporary reaction, but
Early's raid was creating too much consternation to allow of
much improvement Sunday, July 10, he was within ten
miles of Washington, where there was no force that seemed
capable of withstanding his veterana Next day the price of
gold touched 285 — the highest value of the war — that is,
the currency fell to a specie value of $35.09.^ Though the
crisis was passed, the market yielded stubbornly. Fessen-

1 Cf. Report of the Secretary of the Treatury^ December, 1864, pp. 19, 20, and
Part I, chap. ▼, sec. ii, above.

>The tari£f act, the ways and means act, and the internal reyenne act were all
approved Jane 90.-13 8tatute$ at Large, pp. 202, 218, 223.

> See the reply of the Tribune, Jnly 7.

4 After the reffnlar market had closed for the day, transactions in gold at a stiU
higher price are said to have taken place. Mbdbbkkt tells a circumstantial story
of a frightened Missouri banker who bonght $100,000 of gold at SIO, in Men and
Myeterietof WaU Street, p. 25a

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Spboib Value op the Paper Cubbengy 235

den's attempt to relieve the treasury by secnring a loan
from the banks failed on acconnt of the limitations imposed
by the snbtreasury law, and the seven-thirty loan which he
advertised on the 25th of July was not very well received.*
Consequently while the currency reached $40.98 on the 15th,
it fell back again and closed for the month at about $39.

Cbntemporary observers were wont to declare that this
extraordinary rise of the premium after the gold room had
been reopened was due solely to a well-concerted comer
which had been arranged while the gold bill was still in
force.' When one examines the military and financial
situation, however, one finds little ground for surprise that
the credit of the federal treasury was at a low ebb in the
first half of July. No doubt the *' bulls'' in the gold room
were doing their utmost to raise the price, but their signal
triumph over the " bears " would have been impossible had
July, 1864, been like July, 1863, a month of great sub-
scriptions to national loans and decisive victories in the

5. The rise from August, 1864, to May, 1865. — In Au-
gust there was a slow but tolerably steady appreciation in
the value of the currency, due to the improving military
prospect. Sheridan took command in the Shenandoah, and
while he accomplished nothing decisive against Early until
September, all fear of the capture of Washington was
removed. Grant was able at last to resume the offensive
against Lee, and by feinting with his right wing succeeded
in seizing the Weldon railway with his left and holding it
against fierce assaults. In the South Sherman continued
his fianking movements against Atlanta, and Farragut cap-
tured the Confederate vessels in Mobile bay and reduced

> Part I, ehap. y, seo. ii, p. 125, above.

scy. Medbbrbt, op. ctt., p. 250; Gobhwai^us, op. eii., P* 10; Chasers letter of
June 21, to Jay Cooke, Wabobn, op. ciL^ p. 606; editorial articles of New York
Tribune^ July 8 and 15.

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the fort& The rate of advance, however, was checked by
the condition of the finances. At one time the nnpaid
requisitions reached $130,000,000,' and the secretary's
attempts to sell bonds were but moderately successfuL

Early in September news came of the capture of Atlanta,
and later in the month Sheridan defeated Early at Opequan
and Fisher's Hill. The meeting of the Democratic conven-
tion in Chicago at the very end of August had caused a
reaction, but this was overcome by the good news from the
front, and the average value of the currency for the month
was $5.50 above that for the previous month.

During October the appreciation continued, for though
Kautz's cavalry was defeated on the 7th and lost its guns,
Hood in his advance into Tennessee was repulsed at Alla-
toonp Pass and Besaca, Sheridan destroyed Early's army at
Ceda:f Creek, Lieutenant Cushing sank the *' Albemarle"
with a torpedo, and the cruiser " Florida " was captured. In
November there was a curious reaction, due mainly to the
presidential election. Mr. Lincoln's triumph was taken to
mean an indefinite continuation of the war, and so depressed
the value of the government's notes. In a military way the
most important event was that Sherman cut connections
with the North and started from Atlanta on his march to
the sea. Hood meanwhile was still pressing north, while
the imperturbable Thomas continued quiet preparations for
his reception at Nashville. Schofield's withdrawal from the
field after the battle of Franklin was construed as a defeat.

The interrupted rise recommenced in December when
word was received from Sherman that he had reached the
sea in perfect safety and taken Savannah. A little later
Thomas destroyed Hood's army at the battle of Nashville.
The favorable effect of these great successes was partially
neutralized by the disappointment felt over Secretary Fes-

I Report of the Secretary ef tKe Treautvxy^ December, 1864, p. 21.

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Specie Value op the Papeb Cubbbnoy 237

senden^s finance report, by a cnriouB bill introduced into the
House of Bepresentatives by Thaddeus Stevens imposing
penalties upon anyone who should pay more than its face
value for gold coin, or less than its full value for paper
money,* and by Butler's failure to take Fort Fisher.

In January Terry did what Butler had failed to do by
capturing Fort Fisher, and Sherman got ready for his march
north from Savannah. On the 23d an attempt to destroy
Grant's shipping in the James failed. These events, with the
prevalence of peace rumors, sufficed to continue the gradual
advance of the currency. In February Grant's attempt to
turn the Cbnfederate lines at Hatcher's Bun was unsuccess-
ful, but Charleston and Wilmington fell in consequence of
Sherman's advance. The failure of the ^' peace conference^" at
Hampton Boads was depressing. Still, the rise continued
imtil the currency regained the level which it had he}d in
October before the relapse caused by the election.

In March the very slow rate of appreciation suddenly
became very rapid, because of the opening of the spring
campaign. Word came March 14 from Sherman, who had not
been heard from since early in February, that his army had
safely reached Laurel Hill, in North Carolina ; and later
came reports of his victories at Averysboro and Bentonville.
Meantime Sheridan joined Grant before Petersburg. Lee's
position becoming desperate, he made a last assault upon
the encompassing lines, but was driven back. Then Grant
began the advance that was to end the war. In Wash-
ington President Lincoln's second inauguration occurred,
and Senator Fessenden was replaced by Hugh McCuUoch as
secretary of the treasury. All this was favorable, and the
average value of currency for the month was $8.80 higher
than it had been in February.

1 The full text of this bill may be found in the New York Trilmne^ December 10,
1864. For its e£fect npon the gold market see Und,, money articles, December 6 and 7.

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In the first two weeks of April matters calminated with
the victory of Five Forks, the capture of Petersburg and
Richmond, Lee^s retreat and surrender. A little later Sher-
man took Kaleigh, and Johnston's army capitulated. Presi-
dent Lincoln's death was the one untoward event Not-
withstanding it, the currency gained $9.80 over March.

During May there was a further advance of $6.40 above
the average for April. Armed resistance ceased, President
Davis was captured, and the war was over. Moreover, Jay
Cooke was meeting with great success in selling seven-thirty
notes to obtain funds for paying the army. In these last
three months of the war there was an appreciation above
February of $25.

6. Decline from June to December y 1865. — After the
war was over, the gold market became calm, indeed, com-
pared with what it had been. Great fluctuations gave place
to slight variations from day to day. A reaction naturally
followed on the first joy caused by the cessation of hostili-
ties. May 11 marked the high- water point — $77.82. After
that there was a slow decline. Although the seven-thirty
loan was readily subscribed, it led to a great increase of the
debt. Moreover, there was some danger of war with France
because of Napoleon's maintenance of Maximilian in Mexico.
By November the currency had depreciated $5.70 below the
level for May.

In December there was a slight reaction, due to McCul-
loch's finance report recommending a speedy resumption of
specie payments and the warm indorsement of this policy by
the House of Bepresentative& ^

1 See Part I, chap, y, see. ill, above.

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I. Falkner*a Table of Relative Prices:

Price Data of the Aldrieh itepor*— Criticisms of Falkner*B Price
Table — Effect of Using Price Quotations for Different Months.
II. A New Table of Relative Prices by Quarters :

Method of Construction — Data Employed — Range of Fluctua-
tions — Arithmetic Mean of Relative I^ces — Discrepancy between
New Figures and Falkner's— Grouping of Closely Related Price
Series — Second Series of Arithmetic Means — Treatment of South-
em Products — Third Series of Arithmetic Means — Median of
Related Prices.

III. RekUive Prices Paid by the Federal Oovemment for Supplies:
Data Employed — Results of Computations — Comparison with
Wholesale Prices.

IV. Relative Prices of Various Necessities at Retail:

Weeks*s Report on Retail Prices — Relative Prices of Twenty-three
Commodities at Wholesale and at Retail — Relative Retail Prices
of Sixty Commodities — Comparison with Wholesale and Govern-
ment Prices.
V. OeneraJ Causes of the Price Fluctuations Other than the Currency :
Grovemment Purchases — Diminished Supply of Southern Staples
— ^War Taxation — Rise of Money Wages — Speculation — Quantity
of Money — International Trade Relations — Decline in Value of
VI. TJie Currency as a Cause of the Price Fluctuations:

Concomitant Variations of Prices and the Premium — Conclusion


Fob the study of prices daring the Civil War the most
copious and trustworthy source of material is the report upon
Wholesale Prices, Wages, and Transportation made by Mr.
Aldrieh from the Senate Committee on Finance in 1893.'
In Part I of this document there is an elaborate table, com-

^ Senate Report No, 189*, 52d Cong., 2d Sees, (fonr i»art8), pp. 668, 1966. For the
sake of breyity this doeoment is hereafter cited simply as the Aldrieh Report,

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240 History of the Gbeenbaoks

piled under the direction of ProfesBor Roland P. Falkner,
the statistician of the committee, showing the relative prices
at wholesale of some 230 commodities each year from 1860
to 1891. As the base from which variations in price are
measured in this table is 1860, a proper starting-point for
investigating the effect of the legal-tender acts upon prices,
it may seem that the present chapter can be confined to an
analysis of Professor Falkner's carefully elaborated results.
Slight examination of the table, however, suffices to show
that it cannot be accepted as a satisfactory index of the
course of prices during the war.

In the first place, Falkner^s table gives but a single index
number for each year, and therefore does not enable one to
investigate in any detail the point of primary interest — the
relation between the fluctuations of prices and the constantly
changing premium on coin. Second, the prices of the single
commodities used in computing the average relative price
for each year do not all refer to the same month. In col-
lecting material. Professor Falkner explains, an attempt was
made to get four quotations each year for every article. In
a few cases, however, this was not possible, and it was neces-
sary to take instead average prices for the year. Where the
prices were obtained by quarters the analysis proceeded on
the basis of the quotations for January. "An exception to
this rule is made, of course,^' he continues, "for articles for
which the January price is not the distinctive price for the
year, as for fresh vegetables and the like. Thus, in the cost
of potatoes, October is taken as the typical month, but the
exceptions to the rule that January is the basis of the com-
parison are very few." *

It is probable that in years of less violent price fluctua-
tions this use of some quotations for July, for example, in
place of quotations for January would make little, if any,

lAldrich Report, Part I, p. 29.

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Pbiobs 241

difference in the general average for all commodities. But
in the years of the Civil War the case is different. The
tables of the last chapter show that the specie value of the
currency in which all prices were reckoned, fell 40 per cent,
between January and July, 1864, and rose 62 per cent, be-
tween January and July, 1865. When one is trying to
ascertain what effect changes in the specie value of the cur-
rency had upon prices, it is clearly inadmissible to include
in the index numbers for years marked by such extraordinary
perturbations relative prices for both January and July.

Nor is this point one of merely theoretical significance.
To determine how frequent is the use of quotations for other
months than January, I have recomputed from the original
data in Part II of the Aldrtch Report all the relative prices
given in Table I for 1865. The result indicates that the
cases of divergence from the general rule of using the Janu-
ary price are much more numerous than Professor Falkner's
language would lead one to infer. Of the 222 relative prices
for that year only 99 are based on quotations for January.
Of the remainder, 74 refer to unstated months or to averages
for the year, 26 to July, 6 to March, 6 to the average of
January and July, 4 to February, and 7 to various other

lAs these gtatements seem in some measnre inconsistent with the impressioq
given by the language of the report, I append a list of the relative prices for 1865
that are not based on January quotations :

1. Time within year not specified: fish, mackerel, No. 1, No. 2, No. 8; lard, pore
leaf; meat, bacon clear and ham; salt, coarse solar, and fine boiled; blankets, cot*
ton warp, aU wool filling; broadcloths, first and second quality ; cassimeres, Nos. 1,
2, and 3; checks; hides; horse blankets; shawls; sole leather; wool, medium and
fine; anvils; bar-iron; door knobe; iron rails; iron rods; lead, pig. No. 2; locks,
mortise and rim; meat cutters; nails; pig iron; pocketknives, Nos. 1 to 25; saws,
Nos. 1 to 4; scythes; carbonate of lead; maple boards; oak boards; shingles, Nos.
3 and 4; calomel; glycerine; glassware, Nos. 1 to 5.

2. July: starch, com. No. 2; calico; print cloths, Nos. 1 and 2; iron wire; brick;
cement; chestnut logs ; hemlock logs; lime; oxide of sine; pine boards, Nos. 1, 8, 6,
and 6; pine logs; putty; shingles, No. 1; spruce boards; tar; turpentine; window
glass, Noe. 1 to 4; starch, ordinary laundry.

8. Average of January and July : doors ; hemlock boards; pine boards, Nos. 2, 4,
and 7 ; pine shingles. No. 2.

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Precisely how great an effect these very frequent devia-
tions from the rale have upon Falkner's index number for
1865 it is impossible to tell. In eleven of the above cases of
deviation the price for the other month is identical with that
for January, but in the majority of instances where a Janu-
ary quotation is available for comparison the difference is
considerable. Perhaps the best way to get a quantitative
expression of this difference is to examine the case of the
twenty-three commodities for which both January and July
prices are given in the exhibits, but where the relative prices
for 1866 are based on the latter quotation. The average
relative price of these articles for January is 268, for July
202— a difference of 66 points.

It is evident that Professor Falkner's average which
includes relative prices based upon these twenty-three July
quotations, to say nothing of the much larger number of
relative prices based upon quotations for other months
besides January, cannot show the true average relative price
of the 222 articles for January, or for any single month, or
for the year as a whole, and therefore cannot with propriety
be compared with the premium on gold for any single month
or for the year.^ Clearly, then, all thought of using the table
of relative prices in the form in which it is published in the
report for investigating the relation between the rise of prices
and the depreciation of the currency in relation to specie
must be given up.'

L March : iilate glass, Nos. 1 to 6.

5. February : fish, ood; meat, beef loins, beef ribs, and matton.

6. April: carpets, Wilton; starch, Ontario.

7. October: coal, anthracite, pea; potatoes, No. 2.

8. May : powder, rifle. No. 2.

9. August : meat, lambw

10. November : potatoes. No. 1.

1 Professor Falkner, overlooking the nature of his average, divides the average
relative price for each year from 1862 to 1878 by the premium on gold in January, and
thus obtains a table which he calls " Relative Prices in Gold."— /6id., p. 99.

s Other objections might be urged against Falkner's table, such as the inclusion
of many different series for slightly different forms of the same article, etc. But
what has been said is sufficient to show the reason for compiling a new table.

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Pbiobs 243

Fortunately, while the table of relative prices published
in Part I of the Aldrich Report is thus unsuitable for the
present purpose, all of the material from which that table
was constructed is published at length in the '* Exhibits^' of
Part II. As this collection of data was made from authen-
tic sources with scrupulous care, the student who finds that
he cannot employ Professor Falkner's averages is able in
many cases to go back to the original material and compile
from it new tables specially adapted to his needs. This is
the task attempted in the next section.


The preceding criticism of Falkner's table of relative
prices indicates what should be the distinctive features of
the new table. First, in order that the comparison between
the fluctuations of prices and of gold may be as full as pos-
sible, it is desirable that several index numbers should be
obtained for each year — the more the better. The attain-
ment of this desideratum in partial measure is made possible

Online LibraryWesley C. (Wesley Clair) MitchellA history of the greenbacks, with special reference to the economic consequences of their issue: 1862-65 → online text (page 21 of 51)