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The consequences of this ignorant and wild financial policy were that, by the next meeting of Congress, the volume of currency was at least four times what were the wants of the community for a circulating medium; that prices were inflated more than an equal degree, for want of confidence in the paper of the government had kindled the fever of speculation; that the public credit, abused by culpable ignorance and obstinate empiricism, had fallen to an ebb that alarmed the country more than any reverse in the military fortunes of the war; and that the government was forced to the doubtful and not very honourable expedient of attempting to restore its currency by a system of demonetizing its own issues.
The redundancy of the currency was the chief cause of its depreciation. The amount of money in circulation in the South in time of peace, was $ 80,009,000. In January 1863, it was $800,000,000. In September 1861, Confederate notes were about equal to specie; before December, specie was at ^0 per cent, premium; before April 1862, it w7as at 50 per cent.; before last September, at 100; before December, at 225; before February, at 280, and in the spring of 1863, at the frightful premium of four hundred per cent., while bank bills were worth one hundred and ninety cents on the dollar.
Since the foundation of the Confederate Government, its finances had been grossly mismanaged. The Treasury note was a naked promise to pay: there was no fund pledged for its redemption; and the prospect of the rigid liquidation of the enormous debt that this class of paper represented six months after the-restoration of peace, depended solely on the speculative prospect of a foreign loan to the amount of many hundred millions of dollars. At the commencement of the war the South had the elements for the structure of one of the most successful and elastic schemes of finance that the world had seen. The planters were anxious to effect the sales of their cotton and tobacco to the Confederate States: these would have supplied the government with a basis of credit which would have been extended as the prices of these staples advanced, and therefore kept progress with the war; but this scheme was opposed by the Secretary of the Treasury, Mr. Memminger, and defeated by his influence. He was unfortunately sustained by an Executive grossly incompetent on subjects of finance; which was ignorant of the principle of political economy, that there are no royal ways of making money out of nothing, that governments must raise money in the legitimate way of taxation, loans, &c.; which relied upon the manufacture of a revenue out of naked paper obligations; and which actually went to the foolish extremity of recommending that the creditors of the government should take their payment in currency #rather than in the public stocks. It appears, indeed, that our government was ignorant of the most primitive truths of finance, and that it had not read in history or in reason the lesson of the fatal connection between currency and revenue.
It is true that some appreciation of this lesson was at last shown by Congress in its new tax bill; for the theory of that bill was, by an enormous weight of taxation, to pay, at least measurably, the expenses of the war as *it progressed, and to risk no further connection between the two distinct financial concerns of revenue and currency. But on the other hand its system of forcing the funding of treasury notes by arbitrary reductions of interest, betrayed the ignorance of Congress; left incomplete and embarrassed a system of finance which might have otherwise been carried to a point of extraordinary success; and aimed a direct blow at the integrity of the public credit.
It was easy to see that slight differences in rates of interest would afford but feeble inducements for the conversion of the treasury note into the bond, when money was easily doubled or quadrupled in the active commercial speculations peculiar to the condition of the South in the war, unless the bond could be readily used as a medium of exchanges; and in that event there would only be a change in the form of the paper, the volume of the currency would be undiminished, and its depreciation therefore remain the same. But while the analysis of this system of funding shows it to be a transparent juggle, it was by no means certain that it did not contain the germ of many positive evils. The right of a government to make arbitrary changes in any of the terms of its obligations which affect their value, is questionable, and the commercial honour of such an expedient is more than doubtful. While it introduced the shadow of repudiation only to weak and suspicious minds, it is yet to be regretted that even whispers on that subject were ever heard in the South. But as far as our foreign credit was concerned, there is no doubt that the empirical action of Congress, which involved, even to the smallest extent, the integrity of our obligations, was of serious prejudice. It might indeed have been logically and certainly expected that the general confidence in Europe in the military fortunes of the Confederacy *would have been productive of unlimited credit to us abroad, had the faith of Europe in the management of our finances equalled that in the success of our arms.* On the subject of the financial management of the new Confederacy, one general reflection at least admits of no doubt. The attentive reader will recognize as the most remarkaSle circumstance of this war, that within two years the public finances of the Confederacy should have been brought to the brink of ruin. The sympathy of the people with the revolution was unbounded. The disposition of all classes towards the government was one of extreme generosity. The property of the States of the Confederacy was greater per capita than that of any community on the globe. ' No country in the world had export values comparable in magnitude to those of the South, and the exports of all other countries were produced at a cost in labour four times that of ours. In such circumstances it is highly improbable that the government of the Confederacy could, within two years, have wrecked its credit with its own people, unless by the most ignorant trifling with great questions and the childish management of its treasury.
* It is true that a small foreign loan lias been negotiated in Europe; but it affords no test of our credit in present circumstances, as it was made on a pledge of cotton. It shows, however, what might have been done, if the cotton had been purchased by the government and mobilized, for the whole crop might have been secured in 1861 at seven cents a pound. But against this scheme the government had set its face as flint, and when it did become distrustful of its former conclusion, it had only the nerve to make a very limited experiment in the application of this staple to support a credit almost hopelessly abused by paper issues.
It was estimated that there remained in the States of the Confederacy at this time 3,500,000 bales of cotton, which could be exported in the event of the ports being opened to trade. This estimate is made after deducting from the crops of 1861 and 1862 the quantity of cotton which had run the blockade, the amount destroyed to prevent capture by the Yankees, and t]\e quantity used for home consumption, which, since the commencement of the war\ had enormously increased, being now fully 500,000 bales per annum.
At an early period of the war it had been our boast that we had spent only fifteen millions, while the Yankees had spent ten or fifteen times that amount. But we find that the debt of the general government of the Confederate States in January last was |556,000,000, with the prospect, at the currenf rate of expenditure, that it would reach nine hundred millions by the close of the fiscal year on the first of July; and it is curious to observe what miscalculations were made of public debt both in the North and in the South. The newspapers of the two nations flourished the estimates of their debt in enumerations only of the obligations of the general government of each, and made complacent comparisons of these sums with the debts of European governments. But according to the estimates of Europe and the calculations of plain reason, the true volume of the debt of each of these nations was represented not only by what was owed by the Richmond and Washington governments, but by the aggregate amount of the indebtedness of the several States composing each confederation. Here could be the only true and just measure of the national debt of either the South or the North in comparison with the debts of other governments, to which the system of the division of powers between a central authority and States was unknown. The debt of each member of the Southern Confederacy, as well as that of a central authority, Avas a burden on the nation, for the problem of its payment was at last to resolve itself into a tax upon the people. It is only by a calculation of these aggregates that just comparisons could be made between our financial condition and that of the North or European nations; and although such comparisons on our side were to the disadvantage of our enemies, yet they exhibited facts which were unpleasant enough to ourselves.
The law of impressment enacted by Congress affords the evidence of the scarcity of supplies in the South. The question of food with that of finance divided the attention ojf the government. The grain-growing and provision-raising country, which stretches from the Potomac at Harper's Ferry to Memphis on the Tennessee, was now exhausted of its provisions. Much of the productive portions of North Carolina and the Gulf States had been also exhausted. The great and true source of meat supply, the State of Kentucky, which Contained more hogs and cattle,* two or three to one, than were left in all the South besides, had fallen into the undivided possession of the Yankees. The general scarcity of all sorts of supplies was attested by the high prices of everything eatable. The advance in prices induced by the scarcity of supplies, was still further enormously enhanced by the greedy commercial speculation which distressed the South, and threw a shadow of dishonour upon the moral aspects of our struggle.
It is a subject of extraordinary remark, that the struggle for our independence should have been attended by the ignoble circumstances of a commercial speculation in the South unparalleled in its heartlessness and selfish greed. War invariably excites avarice and speculation; it is the active promoter of rapid fortunes and corrupt commercial practices. But it is a matter of surprise that more than an ordinary share of this bad, avaricious spirit should have been developed in the South during a war which involved the national existence, which presented so many contrasts of heroic self-sacrifice, and which