affair. new york banks suspended speesy redemption and other banks soon followed. now, we had suspensions before in this country, most notably in 1837, 1839 and 1857, but this time we had a war to worry about and financial chaos was the last thing we needed. not only was there a halt in the speesy outflow from banks but what that meant was there was no market for buying the federal bonds because they had to be purchased with speesy. so something else had to give. we couldn't get tax revenue. we couldn't do conventional borrowing. so we printed money. now, when lincoln took office in march 1861, he inherited a financial crazy quilt of 1600 state chartered banks circulating some 10,000 different types of bank notes. there was an urgent need for funds. lincoln sprang into action and often working behind the scenes he used secretary chase and various members of congress to

conduct a radical overhaul of the nation's financial system. the federal government issued some $450 million in fiat money known for greenbacks known for the zingtsive green ink on the reverse side and designated greenbacks and treasury notes as legal tender. now, fee-at money means currency backed only by the full faith and credit of the government issuing it. so using green backs as legal tender meant that the u.s. had decided to go off the bi-metallic standard. but lincoln never intended a permanent departure from the bi-metallic standard. in fact, greenbacks counted as part of the federal debt and like other borrowing implied a future taxation. by counting greenbacks as a federal debt, we were acknowledging a plan to return to the bi-met al ick standard.

that's history for another day. so government borrowing practices duringed civil war had a far more substantial effect on public finance both at the time and consequently than did tax policy. the revenue effect was large. jay cook's efforts pioneered the efforts of direct sale of treasury bonds and notes to the public rather than using commercial banks as intermediaries. deficit financing became the norm during wartime and we got our first real try at fiat money. as an interesting sidenote, when chase was dithering about whether fiat money was constitutional or not, abraham lincoln reassured him, quote, i have that sacred institution, the u.s. constitution, here at the white house and i'm guarding it with great care, unquote. so chase enthusiastically embraced the issuance of greenbacks but when chase later

ascended to the supreme court, he flip-flopped writing for the justices he decided that congress lacked the power to make paper money legal tender. despite the fact that he himself had authorized the issuance of greenbacks as legal tender. despite salmon's flip-flopping, national bank notes survived and that experiment with fiat money later gave rise to departure from gold standard permanently in this country and the creation of federal currency went hand in hand with the establishment of federally approved rather than state-chartered banks. national banks were capitalized with treasury bonds. they could issue national currency if it was backed by treasury securities. and so the federal government issued debt and then that debt was mono tiezed via the backing of it in the federal banks. late in the war to reinforce the power of the federal currency,

the federal government actually taxed state bank notes out of existence so we don't have those anymore. so the u.s. emerged from the war with a far different financial system than it had when the conflict began. perhaps most important by binding the banks to the federal borrowing via mandatory capitalization it bound the bankers to the fortunes of the union. but it also tied the federal government to the fortunes of the financial sector, which as we know today can have significant economywide effects. this shows the dominance of the national banks by war's end. they became basically the only game in town. now, i want to talk just a little more about the experiment with fiat money. one potential cost of issuing money that's not backed by anything is inflation.

and this slide shows what can happen when you add more pieces of paper to the economy and people use those pieces of paper to bid up prices. and what happened after the war is the mirror image. in getting back to the gold standard at the rate that we had before the war, we experienced substantial deflation. so first inflation, then deflation. and here's another way during the war of showing how much a greenback could buy. this is an annual exchange rate in 1862 it took just over one greenback to buy one dollar's worth of gold. by 1864 it took two. now, the next two slides are the ones which my friend in the audience may find a little scary and others of you as well. but i like them so i'm going to show them to you anyway. what they do is link the fortunes on the battlefield to the trust people placed in the currency, and this shows both greenbacks, which the union had,

and graybacks, which is what confederate currency was sometimes called. incidentally there was a third type of currency called yellowbacks which issued in california which never went off the gold standard, as you might understand why. so we have a couple of slides here i'll show them to you and talk about what we're looking at. what i tried to do here is to identify important points along the way in the civil war battles, and what you can see is that both greenbacks and gr graybacks bought progressively less gold as the war went on, as the graph rises that means that their value is depreciating more and more, especially the grayback, the one on the thoop's in gray. it's interesting to see what happened at gettysburg and then again at cold harbor and petersburg if you look at what the bouncing around does. actually, this -- the one i show you next is one of my favorites because you may be, like,

really -- yeah, okay. so anyway this is the swings in value. what it is, is essentially the last slide but how things change from period to period. and this one i think shows really how the values went up and down around the time of major battles, and there are even bigger swings for the confederate monetary unit, especially near the end. so everything that's above zero means that the currency's depreciating against gold and everything below zero means that the currency itself is appreciating against gold. so if you look at this -- i know there's a lot to absorb here -- for the union, not too surprising, tinhings were prett bad for their currency after fredericksburg, pretty good after gettysburg and pretty good after petersburg. for the convifederateconfederat chancellorvil chancellorville, bad after gettysburg. so monetary markets i think clearly reflect what was going

on on the battlefield as well. in fact, i'm going back to this one here. what happened with confederate currency looks a lot like what happened with german currency after world war i. hyperinflation in part due to an inability to convince people that either the government or the government finance was stable. the probability that the confederate government could actually redeem its currency shrank more and more as april ahmad ox approached. let me leave you with one of the most enduring changes wrought by the financing of the union army and the civil war. it's actually something that doesn't happen. if you look at any bill in your wallet do you ever see a living person on the bill? why not? well shgt who w well, who was on the greenback? salmon p. chase who wanted to be the president so badly but who

never was. and i'll say nothing about the bottom half of the slide. thank you. >> yes, mike cohen, a tour guide. your words about the speesy as i understand it evolved to the paperback or paper money and the grayback and the greenback and all that, how difficult was it to get all of these things properly aligned so there could be good exchange? >> you mean -- >> i'm sorry. how did these things evolve so

that we could go from one form to another? >> oh, there was actually a gold window in new york, and that was with the main -- but there were exchanges, you know, in every major city where you could actually go in and you could take your money in it. so you couldn't take the greenback in and officially get $1 for $1 greenback, but there was a market for each of these. so the value of this fluctuated against gold, but there was nothing officially about it. it was just what people were willing to give you for what they thought this would buy in real things. same thing for the confederate money. i mean, you could -- i could come up to you and say, look, i've got a greenback, do you have any gold? and you and i could just agree to do that. so there was -- in new york was where the official sort of greenback/gold exchange rate was kept track of, just like are lo of financial stuff is now. there wasn't anything official, it was just what people were

willing to exchange for. great question. thank you. >> was there an actual exchange, like new york stock exchange, where people could buy and sell greenbacks for gold? >> there was what was called the gold room in new york, and that was -- actually, lincoln closed it down a few times because he didn't want people to be speculating against the union. >> yes, what was the impact on the states, on how they financed their operations and what role were they playing? if you're going after a property tax and an income tax, what was left to the states? and, also, what did the states pay for as far as their militias, any? >> yeah, they did. and i'm not an expert on how much was shared, but when you look at the historical statistics, the federal

government paid some, the states paid some. i think they helped pay to equip their militia. it probably varied from state state. and up through the end of the civil war states were still trying to issue their own currency. it wasn't until the end that state banks and state currencies actually pretty much went out of business. but up through the civil war the states were trying to do the same thing as the feds, which was to get people to accept pieces of paper rather than coins to pay for their goods. >> did the system improve purchasing power for corporations like railroads as well? >> well, that's a really interesting question, and i guess what i would say is that there was a lot going on with railroads, both before and during the civil war, in terms

of financing and selling bonds and stocks. i mean, they were with really t the movers and shakers behind wall street and how things sort of started getting a lot more frantic around wall street. so the fact that railroads were debtors probably meant that having inflation wasn't such a bad thing to them. >> i have a question about the taxes. did congress pass legislation authorizing the property tax and the income tax, and how especially with the property tax administered and who about the valuation to see what the property was valued at and how was it assessed and so forth? >> i'm not an expert on that.

they were mainly responsible for the income taxation. property taxation wasn't a big part of it. and whatever system we had before to try to assess value of property -- i mean, the big part in the south of course was assessing value of slaves, but in the north and the south as well equipment and that sort of thing. but that didn't -- that wasn't nearly as big a part of thing as the income tax and of course before that tariffs and import duties as well. >> the supreme court decision under chase as chief justice, what was the date of that decision? and did that instantly lead the federal government to cease collecting taxes?

>> well, are you referring to the one that made paper money, whether it was unconstitutional to make -- >> was that the decision rather than the income tax? >> yeah. the decision hepburn v griswold where chase went back on what he did as treasury secretary was in 1870. there was actually concurrence by a fifth judge so, therefore, yes, they did say this isn't legal tender so congress had to do something right away to bring that back. but they were already moving off of the fiat money by 1873, had gone back to a gold standard anyway. so it was a bit of a moot point. >> jenny, that decision was then reversed the following year. >> that's right. >> so that -- and they're known as the legal tender cases. >> right. >> the first and second legal tender cases.

>> my question is about trade flows. obviously the southern part ports were shut down so there was probably not much happening there. but what, if anything, was the impact on u.s. currency of u.s. purchases abroad, federal government praurchases, if any,n the monetary flow and the expansion of those greenbacks? >> i don't know the answer to that. it's a good question. i don't know that there was a lot of federal purchasing of goods abroad. that tended to be more in the private sector because the federal government just wasn't a big player at all. but you're right in raising the question about were there international repercussions. yeah. >> my understanding is the treaty with the rest of the world was maybe between 5% and 10%. >> it was pretty small then. >> i thought you maybe could add

another dimension. thank you. >> thank you. >> thank you all very much. [ applause ] before jenny goes, she will not be able to be here for the roundtable so if anybody is holding back a question -- ah, see, there's one more. come back. >> where is your edith wharton -- >> it's in the edith wharton revi review! thank you. >> we're back to the house of mirth, which i guess is the place to end with tax policy. we have on the program a break until 10:45. we are actually starting our

break a couple minutes early so we will convene back here at precisely 10:45 and move forward. thank you very much. we'll see you in a few minutes. the civil war airs here every of saturday at 6:00 and 10:00 p.m. and sundays at 11:00 a.m. eastern time. to watch more of our civil war programming anytime, visit our web site c-span.org/history. and to see what we're up to during the week or to send us questions and comments, join us online. follow us on twitter or like us on facebook. you're watching american history tv all weekend, every weekend on

c-spa c-span3. paul weeken, a city named for thomas jefferson and incorporated in 1839. hosted by our media com cable partner, c-span's local content vehicles recently visited many sites show casing the city's rich history. learn more about jefferson city, missouri, all weekend long on american history tv. well, the thing that excited me about being here today is the fact that it's june the 4th and the lewis and clark core of discovery passed through here just beyond those trees that you see over there on june the 4th in 1804. that's 208 years ago. they were wion their way to the pacific ocean, and, as i say, they passed here and continuing

on up the missouri river. they followed the river up to the eastern slope of the rocky mountains. it was pre-louisiana purchase. thomas jefferson had wanted to send an expedition of 12 men out into what was then, they thought, spanish territory. and congress said yes, all right, they would fund them to the extent of $2,500. lewis had been jeffersojefferso secretary. jefferson had known him for years. they were relatively close neighbors in virginia. so he knew lewis, he knew his capabilities, and he knew he was the man who could pull this off, getting to the pacific ocean. clark had been lewis' immediate superior when they were in the army together on the frontier in ohio and illinois.

he and clark formed a great friendship in the service so when lewis knew that this was coming and whe had been selecte to lead it, he said there's only one fellow i want to go with me as a co-captain, would be william clark. meriweather lewis was a smart guy. unfortunately he was a shy man and he didn't interact well with people. he was an outdoorsman. he spent his early years on the frontier which was in now western virginia and he was looking for things that were unfamiliar to him. he was looking for the indians. he was looking for plants, animals, birds, fish, whatever. and he carried that over with him on to the expedition. on the other hand, clark was aa

people person. he related well to the men and they to him. so, really, between the two of them they had the mental horses to keep this expedition under control and on the way. they knew what to expect for much of their trip. once they got as far as st. louis, once they got past st. louis and st. charles, things changed because there were no places that they could look forward to for a warm meal around the fireplace and bed to sleep in. they were out in unexplored territory as far as the western europeans were concerned. in the afternoon of june 4, the keel boat which was the larger of the three craft that he were using on the expedition, sailed too close to the bank and the mast hit a limb of a sycamore tree and broke.

so that meant they couldn't sail any longer. they now had to row and pull the boat up to where they spent the night, which was about eight or nine miles north of where we are right now. and they named it mast creek, now called grays creek. we focus on the personalities, the achievements accomplishments and some little-known fact s about the expedition, primarily for those five people in the monument. let's talk about york. he he's on the extreme left of the monument. he's seated. he's a black man, and the indians had never seen a black man. and in one location they spat on the back of york's hand and tried to rub it off because black was the color that the indians dobbed on their body to indicate proficiency in hunti g, warfare or tribal affairs.

so when they couldn't rub the black off him and then found out he was black all over, they said, this is a very important man to this group of men, and they called him big medicine. on the extreme right is george drewyar. he was a half-breed. his father was a french canadian his mother show showny. he lived in the area of cape girardeau, maybe 75 miles south of st. louis. he lived there. he was hired to be an interpreter. he spoke four or five indian languages, including sign language, which was critical when they got out beyond north dakota because he knew none of those languages. the dog is a newfoundland. that's where he came from, but lewis bought him in pittsburgh. he paid $20 for him, which in

1804 was a lot of money. lewis had a very difficult time in st. louis after the expedition. he was, as i said, a shy man. he liked to be out exploring on his own. paperwork and governmental affairs were an anathma to that poor man. he couldn't handle it. there was a book recently written, about three years ago, and tom denici thinks that he had malaria. now, there's five types of malaria, which i never knew, but his -- he was subject to two of them, one in the brain and one in his abdomen. and he was in excruciating pain whenever they would kick up, particularly the ones in the abdomen.

and he was using opium and alcohol to temper his feelings. he had been called back to washington by thomas jefferson because he had not written the journals as he had promised to do, translating them into a written form and printing them. he ended up on the natchez trace, which is the path that runs between natchez and nashville, and that night he showed very peculiar symptoms and behavior. two shots were fired. they think he committed suicide. there's also another story that people tell and with justification and some support, that he was murdered. we don't know. but he died in 1810 on the natchez trace. clark, as i said, was the head

of the indian department. he was eventually appointed governor of missouri, and he also worked with the indians there. they loved -- the indians loved him. they called him red hair because he was really -- he was really their friend. he listened to them. he helped them all that he possibly could. and he never really campaigned for the office of governor again, although he ran. his name was entered, he did not win and he returned again to his position as the head of the indian affairs, which he kept on until he died. and he is now buried in the bell fountain cemetery in st. louis. and we were an integral part, the missouri river and the rest of the state of missouri, was an integral part of that expedition. the entire expedition was about 7,000 miles and it took them 2 1/2 years to do it.

unbelievable what they went through. the more you read about it, it's awesome, absolutely awesome. all weekend, american history tv is featuring jefr jefferson city, missouri. our local content vehicles traveled there to learn about its rich city. learn more about jefr ferson ci at c-span.org/local content. next month we'll feature louisville, kentucky. you're watching american history tv all weekend, every weekend, on c-span3. the life of a sailor included scrubbing the deck in the morning, working on the sails, climbing aloft, whatever the duties assigned, gun drill practice. but by the end ever the day you're ready for some rest, but you don't get a full eight hours ship. aboard the ship like constitution, it's four hours on, four hours off. >> this weekend on american history tv, the life of an enlisted man aboard the uss

constitution during the war of 1812. >> the sailor lived in fear of the possibility of being whipped by a cat of 9 tailz. it was always carried by a petty officer. the thing a sailor didn't want to see is a petty officer ready for a flogging. it's a phrase we still let, don't let the cat out of the bag. you don't want to see the cat of 9 tails coming out of the bag for a flogging. >> also this weekend, more from "the contenders," our series on key political figures who ran for president and lost but changed political history. sunday, 1928 democratic presidential candidate, former new york governor, al smith. >> we had pulled in for the refuelling that morning around 9:30. we had moored the ship to a pier. >> the former commanding officer of the uss cole on the events surrounding al qaeda's october 2000 attack that left 17 dead and 37 injured. >> i was turned backo