 Money - Then and Now Part XI
Financing the CSA
Larry LaBorde
October 11, 2004
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 [Confederate States of America] 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.
October 11, 2004
Larry LaBorde
 Silver Trading Company
318-470-7291
website: www.silvertrading.net
email: llabord@aol.com
Larry lives in Shreveport, LA with his wife Puddy, and sells
precious metals at the Silver Trading Company.
Larry can be contacted at llabord@aol.com. You can view his web
site at www.silvertrading.net.
Send questions, comments or corrections to llabord@silvertrading.net.
"Please note that I am by no means a financial advisor and
all investments should only be made after performing your own
due diligence." -Larry
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