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Money - Then & Now, Parth XI - Financing the CSA

By: Larry LaBorde

-- Posted Monday, 11 October 2004 | Digg This ArticleDigg It!

In the last several years we have seen the old USSR break up as areas with different cultures seceded from the USSR and declared their independence.  The problems with starting a government with no money, no taxing authority and the need for an immediate defense (the most expensive undertaking a nation can embark upon) are overwhelming.  Almost a century and a half ago that same problem faced the CSA as it sought to secede from the United States and set up its own government.


In the 1860’s several Southern states lawfully seceded from the United States after an impasse regarding unfair taxation.  It seems that most of the taxes were collected in the South while most of the tax money was spent on public works programs in the North.   These Southern States seceded and reasserted themselves as individual sovereign nations.  In 1861 they adopted the Confederate States of America constitution.  The basis of their government was much like the original US constitution that only allowed for a weak central government with little or no taxing authority.  Since their original dispute was over excess taxation in the form of tariffs the new CSA government certainly could not pass an excessive tariff to collect revenues in good conscience.  While the South only wanted to go their separate way and be left alone it seems that Lincoln had other ideas.  Lincoln stated that he would never let the South go because they were needed to pay the taxes to support his internal improvements in the North (public works spending on canals, railroads, etc).


Shortly after secession New York merchants began to panic.  The tariff was still around 50% in the US ports but was almost nothing in the Southern ports.  The Northern merchants feared that grass would grow in the once busy ports of New York, Boston and others.  Lincoln assured them he would continue to collect the tariff in the Southern ports.  The newly formed CSA did not agree with Mr. Lincoln’s plan for taxing imports in a foreign port.  After repeated requests to abandon the custom house in Charleston harbor Lincoln sent reinforcements and forced the beginning of the war.  Shortly thereafter Lincoln raised an army of 75,000 men for the purpose of invading the South.  Before the war was over a total of 1,500,000 Federal troops were pitted against only 800,000 Southern defenders.  It was only the South’s better trained officers and excellent general officers that allowed it to hold out against the greater number of better equipped troops.


The newly formed CSA government was faced with the economically devastating task of funding a war to defend their homeland from invasion.  The South was still getting organized when it had to hurry and arm for its defense.  Prior to the fireworks in Charleston Harbor (only one horse was killed as a result of all the bombardment) Davis sent a delegation to see Lincoln to offer to pay for the US installations located in the South as well as pay its share of the national debt.  Lincoln refused to see them.   


In installment III Lincoln’s economic troubles were discussed at length.  In this installment I will talk more about the problems encountered by Mr. Davis. 


When Louisiana seceded in early 1861 the CSA forces took over the US Mint in New Orleans.  The gold for the Mint on deposit at the Citizen’s bank was confiscated.  Total confiscation of gold at the Mint and all US customs houses amounted to about 6 million dollars in gold and silver coins.  In Europe a gold loan of about 3 million dollars was obtained.  Shortly thereafter in 1861 15 million dollars in gold was raised throughout the South by the sale of bonds by the CSA government to its citizens.  The bonds were issued for 10 years and were scheduled to pay 8% interest in gold.  Most of this gold was spent in Europe to buy ships, guns and ammunition.  The arms suppliers in Europe believed in the CSA but they had a strict hard cash on delivery policy.


The young CSA government was forced to print unbacked paper dollars to pay for the cost of the government.  It is estimated that perhaps as much as one billion dollars in paper money was printed.  The records are unclear and several Northern merchants trafficked in counterfeit CSA currency further confusing things.  By the end of the war Lincoln’s unbacked “greenback” dollars were only worth about 50 cents in gold.  Davis’ unbacked CSA dollars, however, were only worth about one cent in gold.


CSA Secretary of the Treasury, Christopher Memminger, believed in hard money and it was especially difficult for him to issue the unbacked notes.  The notes were issued in four offerings.  The first offering was printed by the American Bank Note Company of New York and smuggled South.  The notes stated that they were payable in gold at some time in the future.


The real “gold” in the South was cotton.  The spinning mills in England and France depended on cotton from the South.  Early in the invasion of the South, Davis thought he could withhold cotton from the European spinning mills and force them to help the South.  This only panicked the English into developing an alternate source of cotton in Egypt.  Later in the War the Northern blockade prevented the South from delivering the cotton to Europe.  In the later years of the war blockade runners could buy cotton in the South for 6 cents a pound and sell it for 60 cents a pound in England.  The average steamer could carry 800 bales.  It is estimated that Davis could have sold over 100,000 bales of cotton in the early years of the war and obtained a great deal of hard cash if only he had not tried to force Europe into politically supporting the CSA by withholding the cotton.  When Admiral Farragut took New Orleans early in the war in 1862 thousands of bales of cotton had piled up on the wharves.  In order to keep this cotton out of Northern hands and to try to stop Farragut they were all floated down the river and burned.  Millions of desperately needed dollars went up in smoke and were lost to the CSA forever.  Before the war New Orleans was the center of cotton and sugar exports and the largest city in the South.  In the year before the war 2,000 ocean going steamers and 3,500 river steamers entered the port of New Orleans with goods.  After Admiral Farragut took New Orleans and General Butler occupied the City, trade ground to a halt.  This forced all exports to smaller ports where commodities were gathered and loaded onto blockade runners.  The ports of Charleston and Wilmington in the Carolinas became the CSA’s principal ports after New Orleans was taken.  The blockade runners usually only had to run as far as Bermuda or Nassau where they could sell their cotton and then purchase goods such as guns, ammunition, food and luxury items for the CSA and its citizens.  When an English blockade runner sold his goods in CSA ports they were usually paid in CSA currency.  They then purchased cotton with the CSA notes and had to sell the remaining CSA currency at a deep discount to obtain gold. 


There was so much money to be made in running the blockade that shipyards in Scotland and England were busy building fast steamers to run the blockade.  Many of the Captains were from foreign countries.  The most famous blockade runner, however, was Captain Maffitt of the CSA navy.  Captain Maffitt managed to take 72 prizes in the form of captured Federal ships on the high seas.  In addition Captain Maffitt also ran the blockade and carried cotton east and vital war supplies back to the CSA. 


Bermuda along with most of Europe was very sympathetic to the South.  (Charles Dickens wrote several articles in favor of the South and pressed for English intervention.)  It was such a busy port that almost everything the CSA imported flowed through its warehouses.  Hog buyers from Bermuda would travel to New York and nearby states and purchase hogs.  The hams and bacon were salted and shipped to Bermuda from New York.  After they arrived in Bermuda they were sold to blockade runners for their 500 mile dash to the Southern ports. 


After Vicksburg fell and the east–west rail line to the Trans-Mississippi district was severed, vital food supplies were cut off.  The Eastern regions of the CSA had to import even more food via the blockade runners.  After Sherman (aka kerosene Billy) cut the remaining CSA in half the logistics in supplying the army became even more difficult.  Blockade running to smaller ports on the Gulf became more important than ever.  Late in the war blockade runners not only had to face the Federal fleet but also had to contend with the smaller and smaller quantities of gold available for trade.


On May 5th of 1865 President Davis and the CSA government met for the last time while fleeing pursuing Yankee troops.  General Longstreet’s commissary officer, Major Moses was given possession of the last of the CSA’s supply of gold and silver.  In the book, “Last Order of the Lost Cause” the story is told that Major Moses gathered some brave soldiers to help protect the bullion from mobs and carried out the last orders.  These last orders of the CSA government was for Moses to take the remaining bullion and help the thousands of defeated, sick hungry and exhausted CSA soldiers straggling home.  Major Moses carried out his orders with the last of the bullion and even obtained receipts for everything.  Many legends exist about the “lost confederate gold”.  The legends are varied and range from Albert Pike’s Knights of the Golden Circle hiding the gold in Canada to Mr. Sylvester Mumford’s mysterious regaining of his family fortune immediately after the war.  Mr. Mumford traveled to England after the war and sent back aid to orphans of the war, built orphanages and purchased seed corn in South America and sent it back to Georgia.  His daughter set up an educational fund for the descendants of Confederate soldiers. 


The South’s heroic struggle for freedom was doomed as soon as the Federal blockade finally moved into place.  From an economic standpoint they had to trade with Europe in order to survive.  From a logistic standpoint the only place to obtain rifles, ammunition and other military hardware was Europe.  Without the much needed gold to purchase those goods there was no way to defend themselves any longer.


Always remember, that the victors write the history books.



Larry LaBorde

Larry and Puddy (his wife of 27 years) live in the South along with their two semi-grown children and Haley the wonder dog.  Larry manages the family drilling business and also sells precious metals at Silver Trading Company.


Send questions, comments or threats to: LLABORD@SILVERTRADING.NET

-- Posted Monday, 11 October 2004 | Digg This Article

Contact Larry LaBorde

Owner of Silver Trading Company:
Silver Trading Company is committed to providing silver and gold at the most reasonable price directly to our customers. We strive to do this by keeping our overhead low and our volume high.


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