In the medium of exchange were not slight, they were less

serious than were the results produced by the change in the

standard of value. For about nine years before suspension

135

136 History op the greenbacks

the money unit of the United States in which all prices

were reckoned and debts discharged, had been, in fact, if

not in legal theory, the gold dollar. 1 The legal- tender

acts substituted the greenback for the gold dollar as this

unit. Now the gold dollar had contained 23.2 grains of

pure metal, but the greenback dollar that took its place was

at no time during the war worth so much as this. A year

after the passage of the first legal-tender act a greenback

dollar would purchase but 14.5 grains of gold. Though

from this point its value advanced until in August, 1863, it

was worth 18.4 grains, the rally was followed by a serious

relapse that culminated in July, 1864, when the paper

dollar was worth but 9.0 grains. Another advance carried

the value to 17.1 grains in May, 1865, and another relapse

reduced it to 15.9 grains at the end of the year. The course

and causes of these fluctuations in the gold value of the

standard money are dealt with in chap. iii.

It was this depreciation of the money unit that gave rise

to the most complicated and interesting economic develop-

ments of the war period. Of course, in exchanging com-

modities for money men were unwilling to give as much for

a dollar worth 9 grains of gold as they had given for the dol-

lar worth 23.2 grains. What is tantamount to giving less

goods for the dollar, they demanded more dollars for the

goods. The decline in the specie value of the greenbacks,

therefore, produced an extraordinary rise of prices, which is

Investigated in chap. IV.

From the very organization of a modern industrial

society, such a rise of prices must produce far-reaching dis-

turbances. The complex process of producing and distribut-

Ing wealth is carried on by a succession of money payments.

Business-men buy materials for money prices, lease land for

money rents, borrow capital expressed in money for the pay-

1 Cf. Lacohlin, History of Bimetallism in the United States (4th ed., 1897), p. 86.

PRELIMINARY SKETCH 137

ment of money interest, hire labor for money wages, sell

their products for money, and in money reckon their profits.

At bottom, of course, this highly developed system of money

payments is only a mechanism for distributing among the

members of society the economic satisfactions which are the

real goal of effort. But under the present regime the eco-

nomic satisfactions which any individual can obtain what

may be called his "real income" depend proximately on

the purchasing power of his money income. The rise of

prices that resulted from depreciation decreased, of course,

the purchasing power of a given money income. As a result

the economic satisfactions received by all those whose money

Incomes did not rise as quickly and in as great degree as

prices, were diminished.

But the matter could not rest there. Men did not long

remain content with the same money return, when the

economic satisfactions it enabled them to command had

declined so considerably. As prices rose, then, all classes

In the community which contributed of their property or

their services to the process of production insistently

demanded a larger sum of money for their co-operation.

The economic situation apparently favored their success.

For depreciation of the currency of itself did not decrease

the amount of commodities produced and services offered

the source from which the real income of all classes in the

community is drawn nor did it affect directly the relative

supply of and demand for the various factors of production;