1865, And 1866, as given in the current reports of the

director of the mint. But, as has been shown, it is probable

that a considerable part of these coins were withdrawn from

circulation at least during the summer, autumn, and winter

of 1864. On the other hand, some of the old copper cents

made before 1857 remained still in circulation in 1862 and

large amounts of cent tokens were privately issued in 1863.

The figures for the postage and fractional currency are

drawn from the public debt statements of the annual reports

of the secretary of the treasury. They are subject to a con-

siderable but indefinite error, particularly in the later years,

on account of the large number of these little notes lost and

destroyed. It must also be remembered that the place in

the currency which they were intended to fill was largely

occupied from July, 1862, to perhaps February or March,

1863, by shinplasters and postage stamps.

The next four items in the table are less uncertain. It

is well ascertained that the old demand notes were not com-

monly used as currency after May, 1862. From that time

on they were seldom paid out except as a substitute for gold

at the customs-houses. The circulation of greenbacks during

the war is subject to small doubt, although different official

1 Chase made the coin of the loyal states November 1, 1861, not less than $210,000,-

000 (Report, 1862, p. 13). The director of the mint made this same sum somewhere

between $255,000,000 and $280,000,000. See note 3, p. 178, above.

2Cy. "Information Respecting United States Bonds, Paper Currency, Coins,

etc." (revised ed., Treasury Department Circular No. 123, July 1, 1896), p. 52, note 1.

THE CIRCULATING MEDIUM 181

documents do not give precisely identical figures, and the

same is true regarding the notes of state and national banks.

In the next two divisions interest-bearing government

obligations which were and which were not a legal tender

the amount outstanding is stated with accuracy by the regis-

ter of the treasury, but no reliable estimate can be made

of the amount that was in actual use as currency at the

different dates.

Statements of the volume of the monetary circulation of

the United States during the Civil War have been published

from time to time in official documents 1 and frequently

accepted uncritically as the basis of argument in currency

discussions. The preceding review of the situation, indefi-

nite and tedious as it is, has at least the negative merit of

showing that such statements are subject to a much wider

margin of error than is commonly the case and few would

be found to claim a high degree of accuracy for statements

of this sort under the most favorable circumstances. To cast

up the totals of the above table would be not only useless,

but positively misleading, because several of the items are

mere guesses, and in the case of others where the amounts

are reasonably certain, not all of the sums set down were in

use at any time as currency. Nor could any estimate be

made on the basis of the totals that would command confi-

dence. But, while the amount of currency in circulation is

not and cannot be known, it is evident from the discussion

that not least among the unhappy consequences of the legal-

tender acts was the disorder into which the circulating

medium was thrown a disorder that caused much incon-

venience to the business public. The more serious effects

produced by the disturbance of the standard of value remain

to be discussed in other chapters.

i See for example the Statistical Abstract for 1878, p. 14, and the circular of the

Treasury Department referred to above.

CHAPTER III

THE SPECIE VALUE OP THE PAPER CURRENCY

I. The Markets for Gold:

First Dealings in Gold The Stock Exchange The Gold Ex-

change The "Open Board" The Evening Exchange Nature

of the Business in Gold Tables of the Premium.

II. Factors which Affected the Gold Price of the Currency:

Various Theories of the Premium The Supply of and Demand

for Gold Effect of Receivability for Taxes, Convertibility into

Bonds and of the Legal-Tender Clause on the Value of Greenbacks

Effect of Additional Issues Of Finance Reports Of "War

News" Of Political Events Of Foreign Affairs The Premium

and the Quantity Theory Speculation.

III. The Course of Depreciation, January, 1862, to December, 1865:

1. January to April, 18622. The Fall from May, 1862, to Febru-

ary, 18633. The Rise from March to August, 18634. The Fall

from September, 1863, to July, 1864 Chase's Campaign against

the Gold Speculators 5. The Rise from August, 1864, to May, 1865

6. The Decline from June to December, 1865.

THE MARKETS FOB GOLD 1

A PBEMIUM appeared upon gold a8 soon as it became known

that the treasury and the New York banks had determined

to suspend specie payments. This premium represented the

difference between the community's valuation of gold coin,

on the one hand, and of the paper currency, on the other.

In January, 1862, the latter consisted of bank and treasury

notes that had been put into circulation as tacit or explicit

promises to pay gold coin. Of course, men did not esteem

such promises as equivalent to gold itself after the promisors

had given public notice that they were unable to redeem

i See K. CORN WALLIS, The Gold Room and the New fork Stock Exchange and

Clearing House ("Atlas Series," No. 8), New York, 1879; JAMES K. MEDBEERY, Men

and 'Mysteriesof WallStreet (Boston, 1870), chapters xii, xiii; HORACE WHITE, Money

and Banking (Boston, 1896), pp. 174-90; and farther references in footnotes below.

182

SPECIE VALUE OP THE PAPER CURRENCY 183

their promises for the present, and when no one knew how long

such redemption would be postponed. Hence, when men who

required gold coin for any purpose sought to procure it in

exchange for paper money, they had to pay more than

$100 of paper for $100 of gold. Whatever excess they paid

was, of course, a premium on gold.

For about a fortnight after suspension there was no

organized market for gold in New York. People desiring

to buy gold naturally went to the dealers in foreign coin

who displayed the precious metals in their shop windows,

and people who had specie to sell took it to the same places.

But very soon the business became too large to be con-

ducted in this fashion. The small offices of the money

brokers were overcrowded, and traders blocked the sidewalks

of narrow Wall street to such an extent that the police were

given special orders to keep the crowds moving. This state

of affairs led to an organization of the traffic and the forma-

tion of gold exchanges.

From the published tables of the premium it appears

that regular dealing in gold began on the New York stock

exchange January 13, 1862. Here it was regarded as the

gentlemanly and patriotic thing to sell gold, and the majority

of members of the exchange who engaged in the traffic at

all were on the "bear" side of the market. A second and

less decorous market was formed in a dingy cellar in William

street, dubbed the "coal hole." A number of men who

were devoting themselves exclusively to dealing in gold took

refuge in this place when their business grew too large to be

conducted in their private offices or in the street. As the

number of brokers increased, the "coal hole" was found too

small and the company moved to more commodious quarters,

first in Gilpin's News Room at the corner of William street

and Exchange place; later in the rooms of the old stock

board at No. 24 Beaver street; and finally in New street,