science' sake. From those enrolled as above, men were chosen to go into the army as needed, by lot. Hence the term "draft."

331. Plans to raise Revenue. (1861.) The debt of the United States in 1860 was only about $65,000,000. The ordinary revenues of the country were wholly inadequate to support the armies and the navy which had been called into existence, and some new way to raise money had to be devised. The two principal means open to a nation for raising funds are (1) Taxation; (2) Borrowing. The latter involves taxation, but it is not so evident. Up to 1861, the United States chiefly made use of the second plan. At the special session of Congress held in July of the same year, the duties on many articles of import were increased, and later internal taxation was resorted to. Congress also made use of the second means to a large extent. This last can be done in two ways: first, by issuing bonds, agreeing to pay interest on the sum named in the bond at a certain rate per annum; secondly, by issuing bills, similar to bank-bills, promising to pay on demand the sum named in the bill. Congress tried both of these plans. But the expenses of the war increasing more and more, the loans and bills authorized did not suffice. On December 30, 1861, the banks of the country suspended specie payment, as they had done several times before, notably in 1837 (sect. 243). The government was forced to follow their example, and soon neither gold nor silver was to be seen in circulation.

People

332. "Greenbacks and Small Notes. (1862.) were driven to all sorts of expedients "to make change,' and, as in 1837, business firms issued "tokens," and notes for small amounts redeemable in sums of one dollar or over;

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but the most popular way was to enclose postage stamps in small envelopes, with the amount enclosed written or printed on the outside. But the government soon issued bills of the denominations of fifty cents, twenty-five cents, etc., which met the demand for change. It was plain that something more had to be done. So, early in 1862, Congress authorized the issue of bills of various denominations, which were called, from the color of the backs of the bills, "greenbacks"; these bills were made a legal tender1 for everything except payment of duties on imports, and of interest on the public debt. It was thought that if the interest on the debt was made payable in coin, the loans would be more readily subscribed to, both at home and abroad, and in order to get the gold coin to do this, duties were required to be paid in gold.

333. "Premium on Gold." (1862-1879.) — Though many think differently, there are some who hold that it was a mistaken policy to have issued so much paper money, if it was not an error to issue any. It is so easy to manufacture paper money and put it into circulation, that the temptation to issue it, great at any time, is almost irresistible in times of emergency. Early in 1862 gold began, as it was said, to demand a premium in "greenbacks." In reality it was the paper money which declined and which should have been quoted at a discount, because gold was the standard with which the bills were compared, but it was thought not only more patriotic, but also a matter of policy, to quote gold at a premium rather than bills at a discount. As the payment of the greenbacks in coin depended upon the success of the government in the war, the "premium on gold" was regarded as a sort of thermometer or bulletin by which to estimate

1 Legal tender is money or currency which the law authorizes a debtor to offer in payment of a debt, and requires the creditor to receive.

the probable result of the conflict. In the early part of 1862 the premium was two per cent; in December it was thirty-three per cent; in December, 1863, notwithstanding the successes of Gettysburg and Vicksburg, it was fifty-one per cent; in June, 1864, the premium was one hundred per cent, making the paper dollar worth but fifty cents in gold. In July, 1864, the premium reached the highest point, one hundred and eighty-five, making the paper dollar worth only about thirty-five cents in gold. From this time the premium gradually declined, until the United States resumed specie payment in 1879, when, of course, the bills were exchangeable for gold at their face value. As it would not do to issue too many bills, large loans were negotiated on as good terms as possible. The large issue of "greenbacks" inflated prices, making the government pay higher rates for everything, thus increasing the debt vastly, besides making the amount of yearly interest to be paid far greater. It is estimated that the debt was increased in this way several hundred millions of dollars. By the end of 1863 the expense of carrying on the war was enormous, the daily cost of the army and navy being nearly $3,000,000, and during the latter part of the next year it was still greater.

334. Finances in the South. (1862-1865.)-In the Confederacy a somewhat similar but worse state of affairs existed. Taxes were laid on almost everything that could be taxed, and notes were issued payable "six months after the ratification of peace with the United States." Bonds were also issued to a large amount. Many of these latter were sold in Europe. As the success of the South became more doubtful these bonds fell in value, until at last they became worthless.1

1 By Amendment XIV. of the Constitution, "debts incurred in aid of insurrection or rebellion against the United States" are "illegal and void."

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The notes also became more and more depreciated, until in some places the curious spectacle was seen of "greenbacks" being accepted by the Confederates in preference to their own currency. Though the advance in prices was great in the North, it was small in comparison with that in the South. Early in May, 1864, the following were some of the prices quoted at Richmond in Confederate money: shoes, $125 per pair; flour, $275 per barrel; bacon, $9 per pound; potatoes, $25 per bushel; butter, $15 per pound. Many of what are considered the necessaries of life were absolutely unobtainable, so close was the blockade of the ports. The suffering in the South for the want of many things was very great, and it fell heavily upon the women and children who had to stay at home. The lack of quinine and other drugs was also severely felt.

335. National Bank Act. (1863.) The United States Congress passed the National Bank Act in 1863. By its provisions banks could be organized under a national law, and on depositing United States bonds with the United States Treasurer at Washington, could issue notes to the amount of ninety per cent of the par value of the bonds so deposited, these bonds to be held as security for the notes. As the redemption of these notes was certain, they were accepted everywhere, regardless of the place of issue, and formed an admirable circulating medium. A market was also provided for United States bonds, and the interest of the people in the stability of the government was greatly strengthened. Later, a law taxing all currency except national bank notes put an end to currency issued by state banks.

336. Union Armies, East and West. (1863.)-It was evident at the close of the year 1863 that success was on the side of

the Union. In spite of the bravery and endurance of the Confederates, they had steadily lost almost everywhere except in Virginia. Even Lee's invasion of Pennsylvania resulted disastrously. At first sight it seems strange that there should

be such a difference in the success of the Federal armies of the East and those of the West, but there were good reasons for it. In the first place, the physical features of the coun