The Confederate States of America (CSA), the federal government of the rebellious Southern states, had a very difficult time financing its war effort. The Union blockade prevented the export of most of the South’s cotton and other staple crops and stymied attempts to import specie (gold and silver coins) or other goods from abroad. Specie was therefore in short supply and tariff revenues were almost nil and the CSA, ostensibly founded on states’ rights principals, found it politically inexpedient to invoke, let alone collect, direct taxes. Tax revenues therefore accounted for less than 10% of the CSA’s total receipts.
Given the blockade, the region’s anemic supply of specie, the uncertain outcome of the war, and its weak tax revenues, the CSA found it difficult to borrow domestically or abroad. Loans therefore accounted for only about a third of its wartime expenditures and much of its borrowing occurred early in the war, when a quick (read cheap) victory appeared possible.
Thus constrained, the CSA turned to the printing press to supply most of its financial resources. Much like during the American Revolution, state governments issued bills of credit like those pictured while the CSA issued so-called graybacks analogous to Continentals. Although similar in form and function to the North’s greenbacks, Confederate currency was issued in sums far greater in proportion to the Southern economy than the Union’s fiat currency was. The South also suffered much more at the hands of counterfeiters. The result of the rapidly expanding money supply was runaway inflation, second in American history only to the hyperinflation of the Revolution. By 1863, it took 10 CSA dollars to purchase a gold dollar. The following year, it took 30. By early 1865 the price of a gold dollar was 50 or more CSA dollars. By contrast, it never took more than three greenbacks to buy a gold dollar.
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