The presence (or, in some cases, the absence) of gold during the Civil War years was as important to both sides as troop strength, battle tactics or public support of the war effort. Gold backed the various Federal currencies that circulated from 1861 through 1862. At the lowest ebb of the war for the North; $2.59 in Federal paper money equaled $1.00 in gold. The Confederacy suffered a dismal exchange rate of $60.00 in Confederate currency to $1.00 in gold.
One needs to realize that before the outbreak of civil war, Federal tax revenues were mostly in the form of excise taxes and tariffs (import taxes). What would become the Confederate States of America provided an astounding 87% of the tax revenue of the Federal treasury in 1860. Northern states used import taxes as a way to protect their own manufacturers against English and other overseas competition. Due to the Southern states heavy exporting of cotton overseas, and the relative lack of Northern tariffs; there was a disproportionate tax burden placed on “King Cotton.” This would lead to severe economic uncertainty on both sides as the war unfolded. The Federal naval blockade of Southern ports (not to mention the early capture of New Orleans) would all but shut down Southern commerce on the high seas.
The Legal Tender Act of 1862 effectively outlawed privately minted gold and silver coins. It authorized the Federal government to issue for the first time, paper currency that was not backed by either gold or silver. These green ink printed notes became known as “greenbacks.” The lack of confidence in these new unbacked banknotes drove most people to hoard all coins in circulation. The Federal government was forced to issue fractional paper currency in denominations of 3, 5, 10, 15, 25 and 50 cents. Postage stamps were also circulated in lieu of small denomination coins. Some were placed into slotted coin-like holders with view windows made of mica to prolong their “shelf life.” The National Banking act of 1863 was a further attempt to shore up the Federal economy. This act provided, among others, the means for state-chartered banks to cease issuing private currency, and provided funds to help pay for the war.
The Confederacy had an even greater challenge. With minimal gold reserves on hand at the beginning of hostilities, the South was forced to issue paper currency that was backed only by good faith in the stability of the Confederate States of America. The Confederate Treasury issued currency in the face amount of over one and one half billion dollars from 1861-1864. This enormous amount was in addition to the various notes issued by state and county governments and banks either already in circulation or produced during the war. The North encouraged the printing of counterfeit Confederate currency as a weapon of economic ruin towards the South. The South more than held its own militarily, but the inevitability of a weak currency led to a steady decline in exchange values. At the end of the war, bales of 1200 Confederate $1.00 notes were sold for $1.00 in Federal currency!
Federal deficit spending ballooned during the Civil War, going from $66 million in 1861 to $1.3 billion in 1864! With widespread speculation in gold rampant throughout the North, President Lincoln tried at first to regulate and then, destroy the gold market by taxing sales of gold having settlements longer than three days. This was an attempt by the Executive branch to discourage speculation in gold. Lincoln was unsuccessful in both attempts.
Gold was seldom used for military financial transactions during the war. Union Paymasters usually paid their troops in paper money about every three or four months. Payments for Confederate troops were even less regular. Some gold was transported with each corps on both sides, and was used primarily for paying spies, or for food when it was available for sale from the local population (it was, of course, more cost effective just to TAKE food from the “locals”). The Federal mint at San Francisco produced gold coins throughout the Civil War. Steamer ships sailing out of the harbor heading east carried an average of $1,000,000 in gold coins and bullion two to three times a month from 1861 to 1865.
The mining and production of gold coins and bullion was not limited for the North to that of California. Mines in Virginia City, Montana contributed greatly to the Union war effort. The uninterrupted mining of gold in the West propped up the Federal “Greenbacks” even though they were not backed with gold by law. Protecting the shipments of gold in its various forms became an urgent necessity. Bank robberies were one way that the Confederacy attempted to acquire gold through immediate means.
One notable attempt was the Confederate Raid at St. Albans, Vermont. St. Albans was a quiet town located about 15 miles from the border with Canada. Vermont had contributed 27 regiments for the war effort, but all the action had been, to date, far away. Approximately 22 young Confederate soldiers wearing civilian clothes robbed three banks in St. Albans on Wednesday, October 19th, 1864. Seeking gold, they found none; but managed to get away with over $200,000 in “Greenbacks.” One townsman was killed and one wounded during the robbery. The Confederates had planned to fire the town on their way out, but their homemade “Greek Fire” failed to ignite. The robbers fled to Canada where they were arrested by Canadian authorities. The Canadian government denied the United States request for extradition, and the Confederates were ultimately freed. About $88,000 in “Greenbacks” were returned to the St. Albans banks by the Canadians. This raid, while not accomplishing the goal of seizing gold, did keep the Northern Border States on edge for the duration of the war.
Gold coins were minted throughout the war at both Federal mints in Philadelphia and San Francisco. Production at Philadelphia was stepped up in 1861 from previous year’s mintage levels. San Francisco, being close to the source of gold and far removed from the theatres of the war, would produce more gold coins than Philadelphia; which would see diminished minting capacity from 1862-18
The Federal Mints located in what was now the Confederate States of America ceased operation in 1861. Some silver half dollars were minted at New Orleans in 1861 under the aegis of the State of Louisiana and the Confederate States of America. These coins are indistinguishable from one another. The mints at Dahlonega, Georgia and Charlotte, North Carolina also closed in 1861, never to reopen.
Various gold coins circulated during the Civil War years. Private mint gold coins made by the Bechtler family of North Carolina from 1830-1852 were endorsed by the Confederate government as a preferable means of exchange. Other private mint and foreign gold coins saw circulation in the South. Even though the Legal Tender Act of 1862 outlawed the MINTING of private mint coins, many of these were in circulation for years after the war.