Money and the Civil War

This was an article from The American Numismatic Associacion website, www.money.org

The Civil War was a pivotal period in American history. Politics, society, economics and the military were all changed in drastic ways as the nation was locked in an epic struggle never seen in North America, before or since. The war ended slavery in the United States, but not before countless battles led to the deaths of more than 600,000 men. Amid brilliant and incompetent generals, vast military campaigns and political turmoil, the impact of money on the war often gets overlooked.

The numismatic history of the era is as dramatic as the war itself. The nation moved from a laissez-faire monetary system based on bullion coinage andprivately-issued paper currency to a centrally controlled system based on paper money issued by National Banks and supplemented by Federal paper currency and coinage.

Both South and North were forced to issue huge amounts of paper money to pay for the war – the first mass issues of government-backed currency in the U.S. since the war of 1812. This paper money was not backed by gold or silver – a fragile concept in the 1860s. Union “greenbacks” (Legal Tender notes and Demand notes, printed with green ink on one side) were instead backed by bonds; an investor could purchase bonds with greenbacks, and then redeem the bonds for gold. The emergence of “war bonds” helped create a more solid economy for the Union; similar bonds were used by the U.S. to control inflation again during both world wars.

For the Confederate States, the problem was more acute than it was in the North – none of the States rich in gold or silver had joined the Confederacy, and the banking system in the South was underdeveloped. The South’s economy was almost exclusively based on agriculture, leaving the Confederacy dependent on trade to obtain the goods it needed to fight. As the conflict progressed, inflation ran rampant in the South and made it all but impossible to continue the war effort.

Civil War soldiers were supposed to be paid every two months, but were fortunate if they got their pay at four-month intervals. Payment in the Confederate Army was even slower and less regular. Union privates were paid $13 per month at the start of the war.

The North and South addressed financial difficulties to fight a war that would turn out to be longer and bloodier than anyone could have imagined. New technologies had changed the face of war, not only with deadlier weapons, but with improved communications, supply, and transport.

The North had industry and railroads. The South had great generals. So what decided the Civil War? MONEY.