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prospect under the new, feels inclined to put every loom in motion and to tax his every ingenuity in pattern and fabric, but halts and hesitates as the din of revolution meets his ears. Thus, in every branch of business the story is the same, and the disposition is to move onward with the flow of the tide, but it is checked and chilled by vague apprehensions, which find no relief as yet. It would be a relief to know what is in store for us, that business men may shape their operations accordingly."

*

Conditions gradually grew worse instead of better, which, in part, was due to the enormous losses sustained by Northern merchants and manufacturers when their Southern custom was cut off by the war and the blockade. On August 5, 1862, the New York Tribune refers to 66 paralyzed industry, obstructed commerce, our overloaded finances, and our mangled railroads." The same paper on September 18 complained of the havoc wrought by the South's practical repudiation of commercial debts due the North:

our

“New York was largely a creditor of the South, and rebellion was held by her debtors throughout the seceded states as a receipt in full for the amount of their obligations. Not that a part of them have not professed and perhaps cherished a vague intent to pay some time or other, but there was no solace in this for the present sufferings of our prostrated merchants. Not less than $200,000,000 of Southern indebtedness to our city was blotted out as in a night. Trade, of course, for a season sank to zero.'

*

Others place this sum as high as $40,000,000. Professor J. C. Schwab (The Confederate States of America: Financial and Industrial History, p. 111) says that the most careful estimate is that of the United States Economist, which placed the total at $40,000,000. See also Emerson D. Fite, Social and Industrial Conditions in the North During the Civil War, p. 108 (copyright, 1910, by The Macmillan Co.). Much of the information in this chapter regarding conditions in the North has been taken from Professor Fite's work.

In his annual message of December 3, 1861, President Lincoln said:

"There are no courts nor officers to whom the citizens of other States may apply for the enforcement of their lawful claims against citizens of the insurgent States, and there is a vast amount of debt constituting such claims. Some have estimated it as high as $200,000,000, due in large part from insurgents in open rebellion to loyal citizens who are even now making great sacrifices in the discharge of their patriotic duty to support the Government."

On May 27, 1862, the Tribune declared that "the fabric of New York's mercantile prosperity lies in ruins, beneath which ten thousand fortunes. are buried. Last fall the merchant was a capitalist; to-day he is a bankrupt." Schuckers says:

*

"Many persons of large wealth, in apprehension of war, had, even before the breaking out of hostilities, transferred their property to foreign countries. The object is obvious enough: it was to escape not only the pressure of the war taxes, but also to preserve their opulence, should the result of the war prove unfavorable to the national cause. The taxable property transferred to Europe aggregated millions. The grim

loyalty of Artemas Ward vented itself in a proposition to send all his wife's relations to the war; and there were plenty of people whose loyalty of a like kind - engaged itself in schemes for taxing the property of their neighbors." † The financial pressure was felt by all. Emerson wrote in 1862:

"The 1st of January has found me in quite as poor a plight as the rest of the Americans. Not a penny from my books since last June, which usually yield five or six hundred a year; no dividends from the banks or from Lidian's Plymouth property. Then almost all income from lectures

*

has quite ceased, so that your letter found me in a study how to pay three or four hundred dollars with fifty. I have been trying to sell a wood lot at or near its appraisal, which would give me something more than three hundred, but the purchaser does not appear. 'Tis frightful to think how many rivals we have in distress and in economy."*

were

Naturally, under the prevailing conditions, numerous economies practised. For instance, as the prices. of coffee and sugar had risen enor

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In spite of the depression over the disastrous failure of McClellan's Peninsula campaign, Pope's defeat at the second Bull Run, Burnside's disaster at Fredericksburg and other reverses, business at the North began to revive late in 1862 and continued active throughout the war. There was a sharp advance in the quotations of railroad stocks; the price of pig

corn or rye, or mixed dandelion root with pure coffee; and some substituted brown for white sugar. Luxuries gradually disappeared from the tables, but under the enthusiasm for the cause were soon forgotten, and the North became a community of simple living, proud rather than ashamed of the frugal repasts. On June 23, 1864, the Providence Journal spoke the sentiment of the majority in the North when it said:

66

'Many of us are compelled by high prices to deny ourselves certain luxuries to which we have been accustomed. It is not pleasant to dispense with them. Perhaps at times some of us complain and murmur at the burden the war thus lays upon us. But at such moments let us think for an instant how utterly insufficient and worthless are our sacrifices compared with those which the soldiers are making for us day after day and month after month, and let us be shamed into silence that we count our petty trials as anything, while our brothers and friends, living on hardtack, sleeping on the ground, fighting with unsurpassed desperation and vigor, are facing death every hour, and many of them laying down their lives, and all in behalf of us who are grumbling for the lack of some delicacy to tickle the palate, some superfluous luxury which perhaps we are all the better for dispensing with."

* J. E. Cabot, Memoir of R. W. Emerson, vol. ii., p. 612.

Schwab, Confederate States of America, pp. 175-178.

to $59.25 in 1864;* and the prices of commodities in the New York market

greatly increased. An era of moneymaking and accumulation of wealth had set in, which was evidenced not only in wild speculation on the stock exchanges, but in legitimate transactions and in the investment by the people of their savings in the securities of the Government.† On November 14, 1863, John Sherman wrote to his brother remarking upon the increasing prosperity of the country and especially of the laborers, then continuing

"We are only another example of a people growing rich in a great war. And this is not shown simply by inflated prices, but by increased production, new manufacturing establishments, new railroads, houses, etc. Indeed, every branch of business is active and hopeful. This is not a mere temporary inflation caused by paper money, but is a steady progress and almost entirely upon actual capital. The people are prospering and

148

Taxes

show their readiness to push on the war. are paid cheerfully, and the voluntary donations for our soldiers and their families are counted by thousands."*

failures for 1861 in the Northern States as 5,935, with liabilities of $178,000,000, but in this reckoning

"The withdrawal from mechanical and agricultural occupations of hundreds of thousands of our best, strongest and most active workers in obedience to their country's summons to the field,

would, under any system of currency, have in creased the price of labor, and by consequence the price of the products of labor, while the prices of many things would have risen, in fact, from other causes, as, for example, the price of railroad bonds from vast increase of income through payments for military transportation and the price of cotton from deficient supply."

Another index of the prosperous conditions was the paucity of commercial failures. To be sure, in 1860, the liabilities of those who failed amounted to $62,000,000, and then increased in 1861 to $179,000,000; but in 1862 there were only $23,000,000, in 1863 $8,000,000, and in 1864 only $9,000,000.†

During the first year of the war 6,000 Northern commercial houses failed for sums of $5,000 and more, but though there were 2,000 more failures than during the panic of 1857 the liabilities were $90,000,000 less. Counting large and small suspensions, probably 12,000 people failed in 1861.‡ R. G. Dun and Company report the

Sherman's Letters, p. 216; also John Sherman's Recollections, vol. i., p. 332.

These are the figures of Rhodes, United States, vol. v., p. 202.

Emerson D. Fite, Social and Industrial Conditions in the North During the Civil War, pp. 105-106.

souri, and the District of Columbia were not included; these States would raise the total failures to 6,520, with liabilities of $193,000,000. After the spring of 1862 conditions improved and the number of insolvents diminished, the record for 1862, 1863, 1864, and 1865 being 1,652, 495, 520, and 530 respectively.

Much of the trouble was caused by the facts that the banks were maintaining their reserves below the 25 per cent. limit demanded by conservative interests, and that many of the wild-cat banks in the West collapsed. The sphere of greatest activity of these banks was Illinois, Indiana, Wisconsin, and Missouri; the loose banking laws of these States made it possible to establish such banks without deposits, discount business, or cash reserve, and as stocks of any description were available as security for the circulating medium, much worthless paper was put up as collateral for a currency issue. Some of the banks had a large amount of the stock of Southern States and when these States seceded the stocks fell lower and lower in value and inevitably involved with themselves in their ruin the circulating medium. Almost every day some bank had its notes discarded as worthless and was forced to close its doors; in April of

1861, the opening month of the war, 37 Illinois banks failed, and 89 out of a total of 110 banks in the State were compelled to suspend business. After a year of such trouble only 17 banks in the State remained solvent, and these had the paltry circulation of but $400,000, whereas the circulation had once reached over $12,000,000. In Wisconsin 39 banks were ruined, 27 in Indiana, and a number in Missouri. The downfall of these banks not only lost several million dollars for their depositors, but also ruined many Eastern business men, because collections in the West were almost impossible or, at the best, were extremely difficult.*

Many reforms were attempted. The banking laws of almost every Western State were revised and in several States the bankers' associations took voluntary action. The Wisconsin Bankers' Association resolved not to receive the notes of any bank thereafter established in the State unless the bank were first sanctioned by the association; no bank could increase its circulation unless the association consented; unreliable banks were to be closed; and the members. of the association pledged themselves to aid in putting out of business unsound banks by refusing to receive their notes.t The greatest reform was the establishment of the National

Fite, Social and Industrial Conditions, pp.

110-112.

The resolutions are given in full in Fite, pp. 152-154.

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banking system.* These banks, as were the State banks, were to be managed by a board of directors, but could not circulate notes until a certain amount of United States bonds were deposited in security with the United States Treasury at Washington. Every National bank note was of the same value in every State and, as the notes were printed and furnished by the Government, they were uniform in color and size. There was much opposition to the new banks, particularly in the East, where the bankers could perceive little advantage in the innovation, but in the West it was felt that any change would be a relief from the wrong policies then in vogue, and the large cities soon entered heartily into the new scheme. In order to drive the old notes out of circulation the Western bankers agreed that only greenbacks and National bank notes would be accepted at par after a certain date, and that notes of all State banks, even those of the East, must be sent home for redemption. Finally a law was passed by Congress imposing an annual tax of 10 per cent. on the circulation of State banks; and as few institutions could afford to pay this tax, the old banks were forced indirectly to come under the new banking law.

*Acts of February 25, 1863, and June 3, 1864, United States Statutes-at-Large, 37th Congress, 3d session, chap. lviii., and 38th Congress, 1st session, chap. cvi.

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Besides the State and National bank notes, greenbacks, shinplasters, and postal notes formed a part of the circulating medium. The greenbacks were in some respects similar to the wild-cat notes. The former were promises to pay without interest, and were issued by the Government for circulation as money in every State, but had no security behind them; while the "wild-cats" were issued by individual bankers or banks and were secured by stocks (such as they were). The Government needed money badly, being hard pressed by its creditors, and could not borrow coin on favorable terms; hence it printed and issued its notes without adequate security, though in this way it was able to satisfy creditors with paper promises and to continue their payments indefinitely, so long as the people accepted the notes. It was really a borrowing of money without the payment of interest, but, as no great objection was made, as much as $400,000,000 was kept in circulation. When gold and silver disappeared from circulation, the smaller ten and five cent pieces and even pennies also disappeared; in lieu of small change, therefore, individuals began to issue. their promises to pay without security back of them. Saloons, restaurants, barber shops, hotels, street railways, ferries, and private individuals of all descriptions manufactured this fractional money and their example was

followed by municipalities among others, Albany, Troy, Newark, and Jersey City. Sometimes the plasters took the form of pieces of paper or cardboard, signed or unsigned; sometimes of small coins of various alloy and description; and sometimes of postage stamps and private checks. To afford relief from this situation the Government issued the so-called postal-currency, consisting of small paper notes of the denominations of 1, 3, 5, 10, 12, 24 and 90 cents, each note legal tender to the United States for sums less than $5 but not legal tender between individuals for any amount.*

During the years 1860 to 1865 the deposits of the associated banks of New York, increased from $79,988,633 to $224,112,205, and their liabilities. from $193,897,638 to $352,333,551, while the annual exchanges of the clearing house were as follows: