Interest-bearing legal tenders and the notes and deposits of

banks was the ultimate fact that regulated the value of the

whole circulating medium.

As for speculation, there seems to be more danger of

exaggerating than of minimizing its importance as an inde-

pendent factor in the gold market. No doubt, as has been

suggested, the formation of highly organized markets, where

engagements were entered into to receive or deliver large

amounts of gold within stipulated times, gave opportunity

for artificial manipulation. No doubt, also, many of the

false rumors so industriously circulated were concocted by

operators with special intent to affect the premium. 2 But it

must be remembered that there were two parties in the mar-

ket, and the arts of " bulls " were set off against the arts of

1 See Part II, chap, II, sec. VI, above.

2 The most notable instance of this character was the fraudulent proclamation

of President Lincoln, taken by unknown persons to the offices of all the New York

papers except the Tribune about 3 : 30 o'clock on the morning of May 18, 1864. It

stated that Grant's campaign was virtually at an end ; that the Red River expedition

was a failure, that 400,000 additional men would be raised by draft if the state quotas

were not filled by June 15, and that May 26 would be observed as a day of fasting and

prayer. Though the World and Journal of Commerce alone were duped into pub-

lishing the document, it caused a rapid rise in the premium before the opening of

the exchanges. As the World at once denounced the forgery on its bulletin board,

the fright subsided quickly and the transactions on the stock exchange were at a

very slight advance over the preceding day. See the newspapers of May 18 and 19.

210 HISTORY or THE GREENBACKS

"bears." Which party carried the day depended in the

long run on matters over which neither had control prima-

rily the condition of the finances and the war news. Viewed

in a broad way, it is therefore a serious mistake to look on

the gold market as a place where a few gamblers were toss-

ing the premium about to suit their selfish schemes ; a much

saner view is that it was the place where the community's

estimate of the government's credit was visibly recorded.

Here, as in other markets, those operators succeeded who

forecast the future correctly, and men who tried to advance

the price of gold when public confidence was increasing, or

to depress it when confidence was on the wane, learned to

their cost that they were not masters of the situation.

III. The course op depreciation, january, 1862, to

DECEMBER, 1865

In order to facilitate study of the progress of depreciation

during the war, the highest, average and lowest gold value

of the currency for each month from 1862 to 1865 is shown

upon the accompanying chart. From this graphic repre-

sentation it is readily seen that there were six strongly

marked periods in the general course of the fluctuations:

(1) January to April, 1862, the depreciation was slight and

almost constant. (2) After April there occurred an almost

unbroken fall until February, 1863, when the average value

of the currency for the month was but $62.30. (3) This fall

was succeeded by an appreciation, which culminated in the

following August, when the average price reached to $79.50.

(4) A second and more serious decline followed, until, in

July, 1864, the lowest value of the war was reached $38.70

for the month. (5) August, 1864, to May, 1865, an upward

movement, interrupted by a reaction in November, carried

the currency to $73.70. (6) After May there was a slow

decline till the end of the year.

SPECIE VALUE OP THE PAPER CURRENCY 211

CHART II

FLUCTUATIONS IN THB GOLD VALUE OF $100 IN AMERICAN PAPEB MONET FROM

JANUARY, 1862, TO DECEMBER, 1865

i!

ft t * I

212 HISTORY OF THE GREENBACKS

1. January to April, 1862. From a gold value of

$99.50 on the 1st of January the currency fell as low as

$95.24 on the 10th, but from this point there was a rally,

so that the average value for the month was $97.60. The

perplexities of the financial situation, particularly the slow-

ness of Congress in framing tax bills, exercised a depressing

influence in the first half of February, that was counteracted

in the latter half by Grant's capture of Fort Donelson and

the provision made for the treasury by the first legal-tender

act. Despite this rally, the average for the month was $1

less than in January. March, however, more than restored

this loss. Curtis defeated the Confederates decisively at

Pea Ridge, the "Monitor" proved itself more than a match

for the "Merrimac," McClellan advanced into Western

Virginia, and Shields defeated Stonewall Jackson at Win-

chester on the 23rd. 1 Confidence in the speedy end of the

war was high, and consequently the value of the currency

was but 1.8 per cent, below par in gold.

During April the depreciation was even less. So confi-

dent was the administration that peace was at hand that

the adjutant-general issued an order stopping recruiting.

While Grant suffered a severe check at Pittsburgh Landing

on the 6th, he more than recovered the lost ground on the