In the Appendix, 1 furnish a basis for studying the remarkable

changes in the gold value of the currency during the Civil

War.

II. Factobs which affected the gold pbice of the

OUBBENCY

So rapid and so violent were the fluctuations in the gold

markets that, despite the absorbing interest of military

events, they attracted much attention from the treasury offi-

cials and the general public. Various attempts were made

to account for the changes. Perhaps the simplest theory

was that a nominal advance of gold had been produced by

Pp. 425-8, below.

188 History op the greenbacks

the nefarious acts of disloyal speculators, who took advan-

tage of the fact that "gold had become a mere commodity"

to monopolize the supply and raise the price. This theory

logically involved the conclusion that the currency had not

depreciated, but that gold had risen in value a conclusion

that was commonly accepted and defended by instancing the

case of various commodities that had not advanced in price. 1

One buoyant adherent of this view went so far as to con-

gratulate the country upon the increase in its wealth pro-

duced by the advance of gold. 2

The plausibility of such views diminished in proportion

as the rise in the price of commodities progressed, and after

the winter of 1862-63 few were found to deny that the

paper money had depreciated. It then became common

to ascribe depreciation to inflation of the currency, which

some charged on the banks, some on the treasury, and some

on both. In view of the dominance of the quantity theory of

the value of money among economists of the time, inflation

was the most natural explanation of the rise of prices. But

the fluctuations in the premium on gold were so much more

rapid and violent than the changes in the volume of the cir-

culating medium that not even academic economists could

regard the quantity theory as an adequate explanation of all

the phenomena. 3 Sometimes they charged the fluctuations

that did not accompany changes in the quantity of money

to mere speculation, sometimes to a variety of other causes.

Indeed, in discussing the question, it was common to begin

by demonstrating that the premium and the volume of the

i Compare the congressional speeches cited above, pp. 113, 114 ; and Report of the

Secretary of the Treasury, December, 1862, pp. 12-15.

28. P. TOWNSEND, The Great Speech of the Late Political Campaign, etc. (New

York: J. A. Houston, 1862), p. 10.

3 PRESIDENT J. T. CHAMPLIN of Colby University, for example, who enunciated a

stiff form of the quantity theory in his little text-book, Lessons on Political Economy,

1868, admitted that the value of a paper dollar depends " partly upon the prospect

of its being ultimately redeemed in real values " (p. 125).

SPECIE VALUE OP THE PAPER CURRENCY 189

currency did not vary concomitantly, as they legitimately

should have done, and then to launch into a tirade against

the unpatriotic gold gamblers. 1

Men who observed the transactions of the gold markets

with care and did not allow their conclusions to be controlled

by preconceived theories, as a rule gave less simple explana-

tions of the changes. The momentary credit of the govern-

ment, the course of military events, the policy of the banks,

the export of specie, the demand for gold from importers,

the probability of fresh issues of legal-tender paper, treasury

sales of gold, speculative manipulation of the markets, the

chance of resumption of specie payments these and similar

matters were declared to affect the premium. Some writers

jumbled such matters together indiscriminately and implied

that the price of gold depended in the same manner on all ;

others attempted to show the logical connection between

one set of factors and another; but perhaps no one who

studied the situation with care failed to see that the oscilla-

tions of the indicator in the gold room generally followed

the news dispatches from Washington and the front. 2

Anyone who undertakes nowadays to investigate the

grounds for these divergent opinions regarding the premium

on gold must make a patient study of the transactions in

the gold market from day to day in order to discover what

considerations influenced those who bought and sold. For

i Cf., e. g., FESSENDEN and McCuLLOCH in the Finance Report of 1864, pp. 22, 23

and 52, 53, respectively. Perhaps as near an approach as any to a strict quantity

theory of the premium is found in Hunt's Merchants' Magazine, Vol. L, p. 299.

2 See as examples A. B. JOHNSON, The Advanced Value of Gold, Suspended Specie

Payments, etc. (Utica, N. Y., 1862) ; ALEXANDER DELMAR, Gold Money and

Paper Money (New York, 1863) ; HENRY C. CAREY, The Way to Outdo England

without Fighting Her, 1865, Letters XII-XVI, and other of Carey's pamphlets on the

currency ; CARL, VON HOCK, Die Finanzen und die Finanzgeschichte der Vcreinigten

Staaten (Stuttgart, 1867), pp. 585-90; H. M. FITZHUGH, Cash and Credit (Baltimore,

1868); CHARLES A. MANN, Paper Money the Root of Evil (New York, 1872), pp.

166-79; CHARLES MOEAN, Money, Currencies and Banking (New York, 1875), p. 21;

R. E. THOMPSON, Social Science and National Economy (Philadelphia, 1875), p. 205;

CARL SCHTJRZ, Honest Money and Labor: An Address (New York, 1879), p. 35"; GEORGE

M. WESTON, Money (New York, 1882), pp. 77-80.

190 HISTORY OP THE GREENBACKS

this purpose it is necessary to have recourse to the financial

columns of the newspapers, in which the fluctuations of the

premium were reported and attempts made to account for

them. Such reading, however, merely supplies a mass of

material of uneven value and contradictory meaning that

requires careful analysis before much can be made of it.

And at best the investigator is forced to admit that his con-

clusions regarding many of the fluctuations are open to

doubt, either because some of the factors affecting the situa-

tion are unknown to him, or because it is difficult to assign

their relative importance to the different factors that were

active at the same time. The difficulties arise mainly in

explaining the quantitative effects of given causes ; one often

feels that for aught one knows a certain event might have

produced equally well half or double the actual effect. But,

as in the case of most economic questions, the qualitative

analysis is less uncertain ; one can see why the known factors

should have produced a certain sort of consequences, though

one would be puzzled to say why these consequences were of

the given magnitude.