Sunday, March 20, 2011

Utah and the Gold Standard: Civil War Currency

As I mentioned in a previous blog post, I have been reading Saints and the Union by E.B. Long. Its a colorful recounting of Utah's history during the Civil War years.

The book tells the story of the displeasure incurred in June of 1864 by Colonel Conner at Fort Douglas when he discovers that merchants in Salt Lake City were encouraging the use of gold as means of commerce instead of "greenbacks" as U.S. paper dollars were called in the day. The Colonel sites a Deseret News article advocating the practice. A search of our state newspaper archives provides us a visual copy of that article. Click to read full scale large version (article highlighted):

I find it interesting that confidence was waning in the "greenback" and that inflation was occurring as a result.  Sound familiar?

The article describes the problem of courts enforcing contracts that were established in gold backed dollars but compelled the receivers to accept payment in "greenbacks" at face value even though they had depreciated below the gold standard that the contract has been established in originally.  The result was that creditors were being robbed by inflation.

Here is an interesting excerpt:

"Mechanics, laborers, producers, and all concerned will understand at a glance that we deem 'greenbacks' the most uncertain in value of all the commodities in their possession, and we trust will govern themselves accordingly, lest, though retiring at night with pockets overflowing with currency, they awake bankrupt."
Fast forward 147 years and today we have HB317 - Currency Amendment sponsored by a bright legislator from western Weber County.  The legislation permits gold and silver coins issued by the federal government to be accepted and tendered as payment.  It also establishes a commission to find out if establishing another form of legal tender is appropriate. 

What would spur such a piece of legislation?  Our nation is at war, our banking system is a wreck, our national treasury can't seem to borrow enough money, and lo and behold people have started to doubt the value of the 'greenback' once again.

The monetary gimmickry occurring at federal level will be revealed for what it is sometime in the future.  In the meantime, we have an obligation to ourselves and our children to learn from history...before we repeat it.

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