Page:Cambridge Modern History Volume 7.djvu/650

618 Paper-money and the banks. [isei- to be planted per hand employed ; and heavy penalties were enacted for exceeding it, though none were ever inflicted. The paper-money policy and its natural concomitant, the arbitrary interference with prices, exaggerated the existing scarcity of provisions. The crops of Indian corn and wheat were abundant during the years of the war. Meats and cereals, though commanding increasing prices in currency, did not rise much above the 1860 level as expressed in gold. This was especially true in the agricultural districts remote from the cities and the seat of war for instance, in North Carolina. The scarcity of food in the cities and in the army was certainly not as much due to deficient harvests or the inroads of the Federal armies as to the difficulty of attracting produce to the markets under the currency and impressment regime. Moreover, the latter policy led to a great accumulation of food material at points where, not being needed, it went to waste, while at other points the armies were suffering from want. Politically, the impressment policy aroused the bitterest opposition to the military authorities and the despotic powers that they exerted. The enormous issues of irredeemable paper-money engendered notions about the currency such as usually characterise a period of inflation. As prices rose with the prodigious issues of treasury-notes and with the general increase of bank-notes, the currency, it was claimed, was not sufficient for the business needs of the South, and demands were made for an increase. It was seldom understood that a further redundancy of notes would create greater relative scarcity by driving prices still higher. A parallel to this movement is found in every period of paper-money inflation in the United States, as well as in the history of the assignats in France. The history of Southern banks during the war illustrates the same demand for an increased currency. At the beginning of the war all banks in the South had suspended specie payments except those at Mobile and New Orleans. The latter held out till September, 1861, when they too fell into line with the others. As the tide of paper-money rose, the banks were authorised and encouraged to enlarge their note issues, and did so. They were also drawn into the prevailing speculation in govern- ment securities and cotton. New banks and similar concerns were founded for the special purpose of speculating in the fluctuating value of commodities, and of meeting the clamour for paper currency. This popular clamour for more currency tends to pass, in all cases of a deranged money system, into the " fiat money " doctrine. The notion that paper-money is the ideal money, and creates wealth without the intervention of the banks, and without reference to a specie commodity, was prevalent in the South. We find there in embryo the philosophy of " greenbackism," which played such an important part in the later political history of the United States. The various notes in circulation in the South became so debased and discredited that in many districts