The unfitness of the postage stamps for currency led the secretary of the treasury to substitute small notes for them. As these notes bore for each denomination a representation of the postage stamp of the same value, they were known as postage currency. In December, 1862, he reported that it had been found impossible to keep pace with the public demand, though the daily issue was $100,000 and was being rapidly increased to twice that amount. Yet at the time of preparing his report the aggregate issue had reached only $3,884,000, and to meet the imperious needs of the trading public the issue was too slow. In March, 1863, fractional notes were authorized to the extent of $50,000,000. They were to take the place of the postage currency, but by June 30, 1863, none had been issued, though the postage notes then amounted to $20,192,456. It would appear that this sum really met the needs of the time, for it was only gradually increased, though as time went on the fractional currency took the place of the postage issues. The combined issues as late as June 30, 1866, amounted to not more than $27,070,876.

If by the close of 1863 the government had succeeded in supplying the need of small currency, the same was not true in the early months of that year, which, despite the prohibitions of the law, showed a remarkable crop of "shinplasters" and copper tokens. The issue of the latter began in the fall of 1862 and reached its height in the early part of 1863. The Coin Collectors' Journal for 1876 mentions about 5,000 varieties.

The coins are in general nearly of the diameter and thickness of the small cents then in use, though a few are larger and approximate the general appearance of the older copper cents. By far the greater number are of copper slightly alloyed, though a small number are of a composition which in its appearance is not unlike that of the nickel cent of 1857. With regard to the inscriptions, we may distinguish broadly between tradesmen's tokens and general tokens, using the former term to designate such coins as bore some evidence of their origin. I find in a small collection ten out of a total of thirty-five which contain a direct promise to redeem the coins, sometimes in bills but more generally without specification of the mode of redemption. On the other hand, twenty-five coins contain only the name of the dealer. While one side bears the name of the dealer, the other generally bears some patriotic emblem or inscription. The most frequent of these is the Indian's head which figured on the legal cent after 1859.

Looking at this side of the coin, one would suppose that he was handling an ordinary cent. Heads of liberty, recalling the former cents, flags, shields, and the like are also seen. Sentiments, such as "Liberty and Union," "Union forever," are not infrequent; while an ingenious miller of Albany, N.Y., seems to mix patriotism and business by the inscription "Union Flour," and the People's Line of Steamers holds strictly to business by placing on the coin the time-table of the line. Doubtless these tokens involved a profit to the issuer and a loss to the public. Yet the fact that the issuers placed their names upon the coins seems to indicate that redemption was at least contemplated.

In the large collection mentioned above are enumerated as many as 848 varieties of the general tokens. Since in the absence of the trader's name two sides of the coin had to be inscribed, a greater scope for the exercise of ingenuity was afforded to the designer. As a rule, the coin has on one side an emblem and on the reverse side an inscription. Perhaps the most frequent specimen was an almost exact imitation of the legal cent, differing from that coin simply by the insertion in very small letters of the word "not" above the words "one cent." The Indian's head, either exactly or nearly reproducing that on the legal coin, is a frequent emblem. We find used also the shield, the flag, the figure of liberty, the heads of Washington and Jackson, groups of cannon and arms, monitors, and many others. The inscriptions are either general or have some reference to the emblem on the coin.

C. The Aftermath of the Greenbacks

105. A CHRONOLOGY OF THE GREENBACKS

1. December 18, 1865: Secretary McCulloch and Congress pledged an early retirement of the greenbacks.

2. April 12, 1866: Congress limited the retirement to a total of $10,000,000 for the next six months, and not to exceed $4,000,000 monthly thereafter.

3. February 4, 1868: Further retirement forbidden; $44,000,000 had been retired in the interim. Total outstanding then $356,000,000.

4. March 3, 1869: In Public Credit act "Congress solemnly pledges its faith to make provision at the earliest practicable period for the redemption of the United States notes in coin."

5. 1871 and 1872: Secretary Boutwell reissued $6,137,000 of retired notes. Strong criticism soon induced their retirement again.

6. March 7, 1873-January 15, 1874: Secretary Richardson reissued $26,000,000 by means of a purchase of bonds.

7. April, 1874: Congress passed a bill authorizing reissues until the total amount outstanding should reach $400,000,000. Grant vetoed the bill April 22.

8. June 20, 1874: A clause in a banking measure fixed the upper limit as $382,000,000, the amount then outstanding.

9. January 14, 1875: Congress provided that after January 1, 1879, United States notes should be redeemed in coin. In the meanwhile for every increase of $100 in bank-note currency, $80 of greenbacks should be retired.

10. May 21, 1878: Forbade any further cancellation of the greenbacks. When redeemed they should be reissued by the Secretary. The amount then outstanding was $346,681,016.

11. January 1, 1879: Greenbacks redeemable in specie on demand. 12. July 12, 1882: Congress provided that when gold reserve fell below $100,000,000 further issues of gold certificates should be suspended, thus indirectly recognizing a definite minimum reserve.

13. 1894-95: The Government sold bonds to replenish specie

reserve.

14. March 14, 1900: A separate reserve fund of $150,000,000 was authorized, and adequate powers granted for maintaining such

reserve.

15. December 23, 1913: Net earnings derived by the United States from federal reserve banks shall, in the discretion of the Secretary of the Treasury, be used to supplement the gold reserve held against outstanding United States notes.

The long experience of the people with paper money in the form of Government notes during the Civil War and the years following when the legal-tender "greenbacks" constituted the chief circulating medium, wrought an important change in the popular conceptions of money.

Money was said to consist of anything which "bore the stamp of the Government," something that depends for its value upon the

Adapted from Money Inflation in the United States, pp. 156-70. (G. P. Putnam's Sons, 1905.)

"faith or credit of the nation." This stamp, this faith, and credit became thus the essential features, whereas before they had been merely incidental features of money. This was true not only of greenbacks, but also of bank notes under the national banking system established during the war. Bank notes now seemed to come indirectly from the Government. Their value no longer seemed to depend upon the integrity of the banker which paid them out, for if redeemed they were redeemed by the Government in greenbacks.

It is difficult to realize, or to overestimate, the importance of the change which had taken place.

The action of the Government in the legal-tender provision had cast a veil over the economic situation and concealed its true character. In this adaptation of the popular mind to the new situation we have a good example of the establishment of an institution by implicit consent, where the people are guided by superficial criteria, and where few have the interest to examine and hold in mind the real principles upon which the new system rests.

In the first annual report of Secretary McCulloch, after the return of peace, he recommended the speedy resumption of specie payments, and he proceeded to withdraw the notes from circulation as the treasury revenues would permit. His proposal was fully approved by Congress, and in an act passed in April of 1866, a steady process of contraction was provided for.

The action of Congress in thus providing for resumption of specie payments gave a new basis for confidence in the credit of the Government and was reflected in a rise in the value of the notes, which was equivalent to a fall in prices of goods and of gold. The people were apparently unable to see that such a fall of prices was the inevitable result of the appreciating credit which the notes represented, a process that must take place whether the actual quantity in existence was large or small. Attention was centered, not on the underlying cause, but on this group of coincident facts, namely, low prices, inability to borrow interpreted as scarcity of money, and contraction of the currency. The shadow had almost completely replaced the substance as the cause of falling prices, and Congress was subjected to a rain of protests against the policy of contraction.

This new money, which cost the Government nothing, seemed to the people as good as gold. It paid the soldier, built the railways, lifted the mortgage from the farm. What more could be asked of any sort of money? It was the money of the common people; it

served all their purposes when they had it, but now it was apparently growing scarce. Bankers said they had none to lend, debtors had none with which to pay. Buyers found money scarce and were unable to pay the old prices for products. Everybody was afraid to buy for fear that when he wished to sell he could not "get his money back." These were the practical facts, superficial though they may have been. Business was dropping; values had all gone to pieces, apparently for want of that which it cost the Government nothing to supply.

The attack upon the policy of contraction reached a successful issue in 1868 in the act prohibiting any further retirement of the greenbacks. With the steadily falling prices, however, the discontent was not abated and it found expression in a movement for the abolition of bank notes and an increase of the greenback currency. This movement did not reach its culmination until 1878, though as early as 1872 it appeared as a national party issue in the platform of the Labor Reform party, which resolved: "That it is the duty of the Government to establish a just standard of distribution of capital and labor by providing a purely national circulating medium, based on the faith and resources of the nation, issued directly to the people without the intervention of any system of banking corporations, which money shall be legal tender in the payment of all debts, public and private.'

The error of theory upon which the agitation for more money was based may be shown in a series of propositions appearing in the debates of Congress.

a) In the first place we have an illustration of the dangerous halftruth. Since the value of a commodity, as gold, was determined by demand for the thing and the supply of the same, so now it was assumed, and urged, that the value of promises to pay was dependent on the same law of demand and supply. The terms "gold" and "promises" were not used, but the ambiguous term "money" was used instead of either, so that the two propositions became identical. The law applicable to the material standard was asserted to apply to the medium which represented the new immaterial standard.

"A currency good in the payment of all debts would fix the price of commodities, and the value of debts would be adjusted to it. The price would be high or low, depending on the volume of the currency."

b) The identification of the token with the thing for which it stood may be shown most clearly in the strange belief that the withdrawal and subsequent destruction of a greenback was an annihilation