classes for their patriotism and zeal for their country's different ans from present peril because they shared their limbed resources in buying federal bonds. but even this wasn't enough. on september 30th the new york herald reported that specie in local banks had dropped from 48 million to 37 million in the span of six weeks where additional gold in the subtreasuries went up by the same $11 million just sitting there. from december 7th to december 28th, new york bank gold reserves shrunk by another one-third. and not only were the banks flailing, so was the military and the administration. as we've already heard there were a couple of things that went on by the end of 1861 things looked pretty bleak. we had lost significant battles at wilson's creek and ball's bluff, not to mention bull run. and abraham lincoln faced political fallout from the trent affair. on december 28th, 1861, new york banks suspended specie 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 specie outflow from banks but what that meant was there was no market for buying the federal bonds because they had to be purchased with specie. 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 as greenbacks, known for the distinctive 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 greenbacks 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 government borrowing implied a future taxation. by counting greenbacks as a federal debt, we were acknowledging a plan to return to the bi-metallic standard. and we did return to gold standard in 1873, which later gave rise to william jennings brian's famous cross of gold speech, but that's history for another day.

so government borrowing practices during the 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 way for 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 instrument, 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 with his face on them, of course, but when chase later ascended to the supreme court, he flip flopped, writing for four of the eight justices, chase 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 monetized 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 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 top that'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, things were pretty bad for their currency after fredericksburg, pretty good after gettysburg and pretty good after petersburg. for the confederate, good after chancellorville, bad after gettysburg. and pretty good after wilderness and cold harbor. 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 appomattox approached. let me leave you with one of the most enduring legacies of change 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, 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 specie 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

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 official 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 a lot of financial stuff is now. the grayback, people had to go back and piece together through news accounts. 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 really 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 things 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 purchases, if any, on 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 article being published? >> it's in the edith wharton 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 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 website 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 at c-spanhistory or like us on facebook at facebo facebook.com/c-spanhistory. you're watching american history tv all weekend, every weekend on c-span3. we had pulled into the refueling that morning around

9:30. we have moored the ship to a pier in the middle of the hash zblert 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 back to my desk and doing routine paperwork when at 11:18 in the morning there was a thunderous explosion. you could feel all fi505 feet o the destroyer thrust up and to the right. it is almost like we seemed to hang for a second in the air as the ship was doing this odd three dimensional twisting and flexing. we came back down in the water, lights went out, ceiling tiles came and popped out, everything on my desk lifted up a foot and slammed back down. i literally grabbed the underside of my desk in a brace position until the ship stopped moving and i could stand up. >> more with the author tonight at 8:00 on c-span's q&a. all weekend long, american history tv is featuring the history of jefferson city,

missouri, the state capital, located on the missouri river. hosted by our mediacom cable partner, c-span's local content vehicles recently visited many sites showcasing the city's rich history. learn more about jefferson city, missouri, all weekend long on american history tv. >> we're at the riverside collections facility which is part of the missouri state museum in jefferson city. this facility has support functions for the public phase in the state capital. the main purpose is to store the many artifacts we have from the collection. last year, 2011, we were lucky enough to get a very large donation of artifacts, approximately 5,000 pieces, all related to the 1904 st. louis world fair. the fair came here as part of a series of international ex

expositions. the crystal palace exposition, there was one in paris which the i' eiffel tower came from, columbia got the fair in 1893 which missouri tried really hard to get. because they tried to get the 1893 fair, they were up and running in their efforts to get the next fair. the u.s. congress decided we need a fair to celebrate this important piece of our history. and st. louis was awarded the fair that the u.s. congress had decided would happen on the anniversary of the louisiana purchase. i want to tell you a little bit about the souvenir aspect of the fairs. and it happened at many of them. at st. louis, essentially anything they could think of put the name st. louis world fair or

louisiana purchase exposition on, they did. we have hundreds of plates. a lot of them with buildings. some with other things. there is a lot of cut glass item . we have a number of things that won gold medals the fair from matches to crayons to dr. pepper, which won a medal at the fair, a gold medal. so we have a number of those historic -- those industrial objects including a corset that we have here that was done especially for the fair. you wouldn't think that that was important, but it was awarded a prize at the st. louis fair. companies tended to use their

awards as advertising after the fact. so on their boxes they would say, gold medal or in here it says highest award st. louis 1904. they would have replicas of the medals so that people could know that this is a wonderful product because it won an award at a fair. and during the late 19, early 20th century, having that award was a key part of promoting items that they were selling. we have a couple things from the jefferson guard. it was essentially a police force that was done, particularly for the state fair, for the st. louis world's fair. we have a badge there. we also have -- it was 1904, so they didn't just have a weapons we would think of today, they did actually have swords. and we're lucky enough to have

the scabbard, the belts and the sword itself, which was numbered. there was a limited number that were created just for the jefferson guard to use only during the exposition. a man who farmed pa formed part guard, they would have been retired military. some of them would have still been civil war veterans, veterans of the spanish american war. i think in some ways it was ceremonial, it was an honor for them, but they did actually have real work to do because sometimes the fair was nice, and sometimes it was a bit rowdy. particularly on the pike, outside of the main fair grounds, there was a different kind of atmosphere that was more like an amusement park atmosphere. so people were afraid, they had problems, ordinary problems, you know, drunken people causing public disturbances, nothing

big. but particularly out on the pike there would have been some rowdiness. and actually there were four major fires during the st. louis world's fair. one of which burned down the missouri building about two weeks before the end of the fair. most of the construction was wooden buildings, so there was a high susceptibility to fire. and actually david r. francis, who ran the st. louis fair, when he was told this, he said only four fires, that's good. that's dedication, you know, it is not just luck. somebody said you're awfully lucky. he said it is not just luck because we have these people behind the scenes that are vigilant and that are trained to help out and make sure there aren't big incidents. it was the only one to have the olympics that went on in conjunction with it. the 1904 olympics, which ironically were slated to be in chicago, they moved to st. louis because they didn't want to compete with the st. louis

world's fair. so the 1904 olympics, which were the third of the modern olympic games, occurred in st. louis as part of it. we have this piece that came out of the 1904 st. louis olympics. actually looked more like a figure from the original ancient olympics in greece rather than somebody who would have been a participant in a 1904 games. this is a replica of one of the medallions for the fair. it hung, we believe in one of the buildings at the fair. but its history after it and how it got to it is kind of interesting. it ended up with a lawyer in st. louis, who took it and used it as a conference table in his law firm office. we think with glass plate in there. he moved to arizona, took this with him, all the way to arizona, and once he was out there, he decided at one point

to get rid of it, to sell it, and melvin getlin who gathered our collection, purchased it from him, took it to new york it was there to many years before coming to us. it is the louisiana purchase exposition and the louisiana purchase was in 1803, the fair was in 1904. and they tried to do it in 1903, but they got approval from congress so late and were having difficulties. so they actually got approval to extend it, have it in 1904 and have a centennial of when lewis and clark set off. the story of the world's fair is a big story. and the fair itself was big. and it is hard to pin down. we have one artifact that tries to do that. it was from a time of the world's fair and they had to have maps to find them around. they did. the st. louis exposition all in a nut shell and they have a

reproduction walnut shell and a map inside of it that you can accordion out. that was a unique promotional item. it had pictures inside of buildings. and information on the buildings. so that you would know everything you needed to know about the fair and be able to take it home. but as i said, everything you could sell, that you could put the world's fair on, they did it. for the state museum, our tagline is, it's your history. we're really trying to get more of the history out to the people. it will be on exhibit in 2014. and in this case, part of the process will be going through all of this, trying to do more research to get some of the stories behind it to include in the exhibit. it usually takes for a smaller exhibit up to a year before the exhibit actually opens. when you're