Money ,Muskets, Mischief and the Civil War

 

Money, Muskets, Mischief, and the Civil War 

 

August 20, 1866 – President Andrew Johnson issued a formal proclamation declaring the Civil War over. This was the “on paper” legal end of the war. 

 

As the years slip by, our hurried lives leave little room to dwell on the echoes of long-ago events. The monuments that stand in quiet witness to the past are scarcely noticed, their bronze slowly cloaked in patina. That green veil of time mirrors our own forgetfulness, softening sharp memories until the past itself grows dim, half-hidden beneath the shadows of neglect.

Who remembers that on paper, the American Civil War ended 149 years ago this month?

 

When we do think about the American Civil War, however, we picture battlefields, generals,  emancipation, and cringe at the carnage. Few people  think of money unless you are a retired banker with time on your hands. Behind the guns and uniforms, however, lay financial shenanigans and strange experiments. Even in the chaos of war, many saw an opportunity to turn conflict into cash. Profit for some  outweighed principle while  the Union and the Confederacy had to invent ways to fund  the bloodiest war the nation had ever seen. Some methods ranged from clever to downright bizarre. Here there are a few  you probably never knew.

 

Salmon P. Chase and Greenbacks

Yes – the Chase Bank guy - Salmon? Biblical origin, the ancestor Salmon is  in the Book of Ruth,  but you knew that.

 

The Union desperately needed cash, but its gold and silver reserves were running low. The solution was bold: in 1862, Congress authorized printing paper money not backed by precious metals — the famous “greenbacks.” (See Fiat Money below)

Lincoln’s Treasury Secretary, Salmon P. Chase, who oversaw the design slipped his own portrait onto the new $1 bill. It was the perfect self-advertisement: millions of Americans would see his face daily. Chase hoped it would boost his presidential ambitions in 1864.It didn’t work, but Greenbacks did. By the end of the war, $450 million circulated, keeping the Union economy in the black.

 

 Confederate Cotton Smuggled Through Union Lines

 

The Confederacy’s wealth was in cotton, but the Union blockade cut it off from Europe. So Confederate planters sometimes sold their cotton in the most unlikely place: the North.

Shady deals between Southern traders and opportunistic Union speculators flourished along the Mississippi and in Arkansas. Cotton would slip through Union lines, then it would be  sold in Northern markets, and the profits secretly flowed back to the South. That money bought rifles and gunpowder from abroad, often smuggled in through Mexico or the Caribbean. As the Civil War raged, bullets and bayonets weren’t the only weapons shaping the conflict —so was cotton. Known as “white gold,” the South’s great cash crop found its way into a thriving black market, a hidden lifeline that reached across battle lines and borders.

In Richmond, Confederate leaders like Secretary of State Judah P. Benjamin quietly tolerated smuggling. Officially, the Confederacy tried to hold cotton back, hoping to pressure Britain and France into recognizing Southern independence, but privately, Benjamin and others allowed bales to slip through Union blockades or across the Mexican border. Those smuggled goods returned as rifles, medicines, and hard coin—supplies the without the South could not survive,

 

North of the lines, the cotton lure was just as strong. Ulysses S. Grant, the Union general who would one day become president, found his own family tangled in scandal. His father, Jesse Grant, attempted to use his son’s military authority to secure permits for Jewish traders dealing in Southern cotton. When the scheme became known, Grant reacted harshly, issuing his infamous General Order No. 11, which booted Jewish merchants from his military district. President Lincoln soon rescinded the order, but it revealed how deeply the black-market cotton trade reached—even into the household of one of the Union’s greatest commanders.

Meanwhile “back at the ranch”…

Along the Rio Grande, Confederate governors turned a blind eye as endless wagon trains of cotton rolled into Mexico. There it was swapped for European goods, carried safely through neutral ports, and funneled back into the Confederacy. What could not pass through blockades by ship moved instead across deserts and rivers, greased by bribes and necessity.

So, beneath the lofty ideals of Union and Confederacy ran a shadow economy. Cotton—meant to be a weapon of diplomacy—became instead a currency of survival. It drew in generals, governors, merchants, and even the families of statesmen, weaving a story of compromise and corruption that history often leaves in the margins.

 

The  “Power Ball” 

Well not exactly but it was a national “lottery” – well really not.

Raising money from taxes and tariffs wasn’t enough so the Union turned to the public with an unusual offer: buy war bonds and maybe win a prize.

 

The “Seven-Thirties” bond issue paid 7.30% interest but also offered a chance to hit a jackpot. Newspapers promoted them like sweepstakes: “Invest your savings and you might get rich while helping save the Union.”

But there was no random drawing to decide winners — everyone who bought Seven-Thirties received the promised 7.30% return. The “jackpot” talk was just baloney. Seven-Thirties promised everyone the same high, fixed return, but were pitched like a sweepstakes.

 

Seven Thirties worked . The mix of patriotism and gambling fever convinced millions of small investors to pour money into the cause. Wall Street bankers helped, but so did farmers, shopkeepers, and the ordinary “joe” hoping his/her” lucky number” would be drawn.

“Invest a few dollars today, earn 7.3% a year, and watch your fortune grow — a sure win for patriots and their pocketbooks!”

But you won nothing.

 

Confederate Wallpaper Money

 

By 1864, the Confederate dollar had collapsed into near worthlessness. Inflation was so extreme that a pair of boots could cost several hundred dollars — payable in crumbling paper money.

Soon, people realized the bills were worth more as wallpaper than as currency. In Richmond and other cities, entire rooms were papered in Confederate notes. Union soldiers marching into the defeated capital reported seeing parlors lined with “thousands of dollars” glued to the walls. This wasn’t just symbolic—it was practical. Wallpaper was scarce and expensive, and Confederate money was plentiful and worthless. What began as a joke turned into a common household solution, making Confederate currency one of the few forms of money in history to end up more useful as decoration than payment.

The “grayback” currency, once printed in patriotic hope, ended its life as home décor.

 

The Union’s financial experiments — greenbacks, lottery bonds, and aggressive taxation — ultimately succeeded, keeping armies fed and factories humming. The Confederacy, by contrast, relied too heavily on printing money and speculative cotton sales, dooming its economy to collapse even before its armies surrendered.

 

The story of Civil War finance is a reminder that wars are not just won on the battlefield. They are also won — or lost — in the ledger books, the presses that print the money.

 

Meme:

 

1950s  S&H Green stamps. Remember them?

Stores (like Wieboldt’s ) handed out stamps you could paste in a booklet and eventually redeem for prizes. Ads promised glamorous rewards (“Fill your book and win a toaster!”).

Most people never collected more than a few kitchen towels, but the promotion built remarkable customer loyalty. Like the Seven-Thirties ads, it blurred the line between steady, everyday value and the lure of something more, using language that didn’t promise wealth outright but suggested it might be just within reach.

 Fiat Money

Governments shifted from commodity-backed money (like the gold standard) to fiat money mainly for flexibility and economic stability. Here’s why:

Under the gold standard, the money supply could only grow as fast as gold was mined. This restricted governments’ ability to respond to population growth, trade expansion, or economic crises.

During recessions, economies often need more money in circulation to stimulate spending. A gold-backed system limits how much governments and central banks can intervene. Fiat money lets central banks adjust interest rates, control inflation, and influence employment. It gives governments powerful tools to manage the economy—tools they wouldn’t have under a rigid gold standard.

In short: Fiat money gave governments freedom to expand, contract, and manage economies—something commodity money couldn’t do.

Wars (especially WWI and WWII) forced governments to spend far more than their gold reserves allowed. Countries abandoned the gold standard to print more money and fund military expenses.

In 1971, U.S. President Richard Nixon ended the convertibility of the U.S. dollar to gold (the “Nixon Shock”). This effectively ended the global gold standard, making fiat currency the norm.

See my future post: WW II. How Did We Pay for It?