Page:Cambridge Modern History Volume 7.djvu/644

 612 Issues of paper-money. [i86i-3 figure rose to $4*84 ; and during the following months ending August 1, 1863, to $31*36. Issues of notes in increasing amounts followed each other in rapid succession. The first batch, issued in March, 1861, bore a low interest; the smallest denomination was $50; and the amount authorised was only two millions. They were intended as a temporary expedient, and fell due in one year. In the following issues the amounts authorised were increased, till in September, 1862, no limit was set. The date of redemption was also deferred further and further, first to two years, then to six months after a prospective treaty of peace with the United States, and subsequently to two years after such peace. The denominations of the notes were also successively lowered ; and in 1863 fractional dollar notes were issued. On the basis of these laws the amounts of outstanding notes increased prodigiously. About $1,000,000 in treasury notes were in circulation in the summer of 1861 ; by the end of that year the amount had increased to above $30,000,000. It rose to above $100,000,000 by March, 1862 ; to $200,000,000 by August, 1862 ; and reached perhaps $450,000,000 by the end of that year. A year later twice that amount was in circulation ; and before the end of the war a further increase had been made, though after the autumn of 1864 the figures are purely conjectural. During these years the government made constant but futile efforts to reduce the amount of notes in circulation by encouraging or compelling the noteholders to treat the notes as an investment and hold them instead of passing them on in their purchases. With this end in view some of the notes bore interest, for instance the large issue of 7 '30 per cent, notes of 1862. Such interest-bearing notes were, nevertheless, not locked up, but inevitably passed into circulation, and contributed to the inflation of the currency. With the notes falling in value owing to the declining credit of the government, the noteholders naturally felt impelled to pass them on by converting them into some commodity by purchase, in pre- ference to retaining them and bearing the inevitable loss from their shrinking value. In all the early note-issues a provision making the notes exchangeable at par for interest-bearing bonds was introduced, with the hope of thereby correcting the tendency toward redundancy in the currency. It was supposed that if the notes declined in value, that is, were quoted at a discount in gold, the holders would at once exchange them for bonds, thereby reducing the amount of paper-money in circulation. In this hope the government was disappointed ; for the value of the bonds fell with that of the notes, and the noteholders found no advantage in making the exchange, but continued to hold and circulate their notes. The government gradually introduced provisions to compel them to make the exchange. The first Act of the kind was passed in March, 1863, by which the notes issued before the previous December were no longer fundable in bonds after August 1, 1863; notes issued later than