The first greenbacks, thanks to Lincoln

Lincoln’s treasury secretary, Salmon P. Chase, had no financial expertise and was selected only for his radical ideological and political beliefs. A leader in the prewar white supremacy “Free-Soil” party, Chase eventually migrated to the Republicans along with many of his party colleagues. Lincoln’s assignment had him concoct new and unconstitutional schemes of currency and banking, and administer the seizure of property seized from Americans in the South.

Bernhard Thuersam, Chairman
North Carolina War Between the States Sesquicentennial Commission
www.ncwbts150.com
"The Official Website of the North Carolina WBTS Sesquicentennial"
=========
Vague Promises to Pay Hard Money:

“With the treasury nearly empty, financial markets shaken, foreign bankers unsympathetic, taxation inadequate, and loans unmarketable except at a discount, the door of escape by way of paper money seemed most tempting. Without consulting the treasury department, Representative E.G. Spaulding of New York introduced a bill for the issue of treasury notes to be made legal tender in payment of all debts.

What it amounted to was that the United States government was “making money” by means of the printing press. Though not “fiat money” in the bald sense, this paper currency had features which resembled fiat money. Some of its advocates, indeed, regarded such money as sound and proper.

Many questions were raised in debate concerning this measure of financial extremity. Would the people fail the government in the matter of taxes and loans? Was not the issuing of irredeemable paper money as legal tender a breach of contract? Since gold was virtually the prewar money of the country, would it not be bad faith to introduce paper for the payment not only of government obligations but of private debts as well?

What about the rights of creditors who had paid out gold and were to be repaid in paper? Was it not bad ethics to permit a man to pay off his debts at a discount, and in doing so have all the force of the government and its courts at his disposal? Would not such action injure public credit; would it not seriously embarrass sounder schemes…And would not this display of “government bankruptcy” embolden and encourage the enemy? Besides, where was the constitutional power in Congress to make paper money legal tender?

In support of the measure it was argued that there was no choice. The bill was a necessity, said its advocates. The treasury was facing staggering expenditures. The government would be severely hampered in the war if this important power were withheld. The bill was defended as a war measure – a drastic remedy that would not be thought of as part of a sound, permanent policy – yet it was pointed out that the danger of using this medicine as food in normal times was a real menace and should be stoutly resisted.

As passed into law on February 25, 1862, the legal tender act authorized the issue of $150,000,000 of non-interest-bearing “United States notes,” soon dubbed “greenbacks.” Such notes were vague promises to pay hard money; but no provision was made for their actual specific redemption on demand, nor at any indicated time. In a few months [Treasury Secretary Chase] asked Congress for more paper money, and Congress responded with the act of July 11, 1862, authorizing an additional $150,000,000 of greenbacks…A further increase was approved in 1863, so that by the close of the war a total of $450,000,000 of legal tender had been authorized. Actual issues reached $432,000,000.”

(The Civil War and Reconstruction, J.G. Randall, D.C. Heath and Company, 1937, pp. 450-452)
========
The first greenbacks, thanks to Lincoln