Counterfeit Money and the Yankee Scoundrel

Economic and monetary historians have largely ignored the role of counterfeit money in the Confederate inflation because data are not available on the amount of bogus notes. Nevertheless, contemporaries and scholars of the Civil War have noted that counterfeit money posed a serious problem for the Confederacy (Hughes, 1992). More money chasing the same number of goods created inflation, reducing the central government's take from the inflation tax. The Confederacy was unable to curtail counterfeiting because they lacked the resources and equipment to produce high quality money. Counterfeiting was such a widespread problem that people sometimes joked that fake money was of higher quality than government issued currency.

Weidenmier (1999b) studied the effects of counterfeit money on the Confederate price level by examining the history of the war's most famous counterfeiter, Sam Upham. The Philadelphia lithographer, printed nearly 15 million dollars of bogus Confederate notes during the war. Upham claims that he originally printed bogus "rebel" notes as souvenirs. Although this may have been initially true, Upham certainly became aware of the fact that smugglers were using his notes to buy cotton in the South. The businessman expanded his business to include mail orders and placed advertisements for his bogus notes in leading Northern cities, including Louisville and St, Louis. Upham's venture was so successful that the Confederate Treasury Secretary Memminger made the following comments about the "Yankee scoundrel" in June 1862: 

"Organized plans seem to be in operation for introducing counterfeiting among us by means of prisoners and traitors, and printed advertisements have been found stating that the counterfeit notes, in any quantity, will be forwarded by mail from Chestnut Street

[Sam Upham's address], in Philadelphia to the order of any purchaser." (Secretary of the Treasury Memminger to Confederate Speaker of the House of Representatives, Thomas Bocock, quoted in Todd, 1954, p. 101).

President Jefferson Davis and the Confederate government placed a $10,000 bounty on Upham. The bogus money maker was never caught and some have suggested that the U.S. government protected the businessman with secret service agents.

Weidenmier (1999b) attempted to quantify Upham's effect on the Confederate price level by making different assumptions about the proportion of Upham's notes that ended up in the South. Weidenmier estimates that Upham printed between 1.0-2.5 percent of the Confederate money supply between June 1862 and August 1863. Upham stopped printing bogus notes once Confederate money had depreciated so much that it was no longer accepted as a medium of exchange in cotton smuggling. Given that the Philadelphia businessman was one of many counterfeiters, it is probably safe to assume that bogus money makers had a large impact on the Confederate price level. The actions of bogus money makers fueled the Confederate inflation via a large increase in the money stock.

from "Money and Finance in the Confederate States of America" by Marc Weidenmeir

Pitt T. Maner III comments:

One of my ancestors kept a roll of Confederate notes in a house safe just in case outcomes changed. Evidently he also stored cotton in England during the Civil War and sold it for considerable profit post-Appomattox. With the cash from the cotton he engaged in several successful real estate ventures. Subsequent generations spent the money very quickly, squabbled over land ownerships and inheritances, and left little– other than memories of grander times.

Some of the notes have considerable collectible value today. Perhaps this also is true for the original Confederate counterfeit money.

It also is interesting to note, and Stefan can confirm this, but there were areas in the South, that were fairly pro-Union, such as northern Alabama, that did not have as large a financial interest in maintaining the cotton trade and probably resented having to fight in the Civil War.

Stefan Jovanovich writes:

After watching the Giants and Phillies play last night, I am in anything but an ornery mood; but I have to say that this article is an example of why Shakespeare was wrong - the econometric historians deserve to go before the lawyers. In the initial flurry of lunacy after Fort Sumter and First Manassas the Confederacy collected all the Southern banks' specie in exchange for bonds, which promised to pay interest and be redeemed in gold; but within months people realized that they were living in the equivalent of Zimbabwe. There are lots of "prints" of transactions during the history of the Confederacy from which to draw econometric conclusions like those by Professor Weidenmier, but the data is, as the guys from the Car Show would say, "BO-O-O-GUS". Transactions for supplies for the state militias (remember: other than the fewer than 20,000 soldiers and officers from the Regular Army, everyone who fought in the Civil War/WBTS served as a member of a State military unit; no one was a member of "the Confederate Army") were denominated in Confederate dollars but they were effectively requisitions, not purchases. Upham's "counterfeiting" (sic) was openly advertised precisely because no one - North or South - took the Confederate dollar certificates to be anything but curios. The reason Grant ordered all the Jews expelled from the Army of Tennessee's jurisdiction is that the cotton brokers loyal to the Confederacy were trying to exchange cotton in exchange for Union greenbacks which would, in turn, be used to buy gunpowder and other military supplies. (But why "Jews"? Because cotton brokerage in the ante bellum South was an exclusively Jewish trade; so, for that matter, was finance itself. No one in the Confederacy thought it anything but natural that Judah Benjamin should be the Secretary of War and then Secretary of the Treasury.) There was no Confederate inflation in any real sense because the currency never took hold in the first place. Professor Weidenmier's elaborate calculations are very much like the conclusions reached by Fogel and Engerman on the economics of slavery; the numbers make sense by themselves but the premise is complete folly. People took Confederate money in the same way that Soviet citizens accepted rubles; whenever they had a choice, they said no.

P.S. Since even Professor Weidenmier's later scholarship confirms this we may have to relent slightly and give the econometricians and the attorneys equal billing. 


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