The Greenback

When the Kingston Trio came out with their rendition of "Greenback Dollar" with the lyrics saying "I don't give a dam about a greenback dollar I spend it just as fast as I can" today, half of that phrase is actually true. Too many of us continue to spend that greenback ever faster though. But, what we do care about is why that ever disappearing dollar doesn't afford the things it used to. We do give a dam about every last dime that comes into our possession today.

To understand the seriousness of the United States financial status is to trace the history of the dollar or Greenback as it was known during the Civil War. The term greenback refers to legal tender, printed in green on one side and issued by the United States during the American Civil War. Currency at that time was backed up by gold but, when the Civil War broke out the demand for more currency was too much for the gold reserves the United States had. What President Lincoln did by issuance of the Greenback was to put the backing of greenback solely based on the credibility of the U.S. Government. Much like it is today. Those Greenbacks back then was largely what financed the Civil War and subsequently making the first industrial revolution possible.

Today, our floundering US dollar is precariously close to falling off as the world's reserve currency. The main reason is that we still have our currency solely backed up by the credulity of our government. The Federal Reserve continues to print fresh "Greenbacks" and loans the money with interest it to the US government. It is the interest that is making Wall Street and the Federal Reserve wealthier at the expense of the US economy. Think of the Qualitative Easing the Fed did following the financial disaster of 2008. All that did was enrich the power brokers while main street continues to languish in financial distress.

When Lincoln assumed office he already understood that the outcome of the war would be largely determined by the resources of the North. Lincoln also understood the importance of raising enough funds to effectively carry out the war effort. With this in mind Lincoln on the day after his inauguration nominated Salmon P. Chase to be Secretary of the Treasury. Secretary Chase alone was authorized by Lincoln to act on all matters pertaining to the country's finances. Chase, like most everyone else at the time, underestimated the severity of the War in terms of its duration and cost.

Confronted with the expenses of war, the Lincoln Administration sought loans from New York bankers, most of whom were fronts for, or connected to, European bankers. Given the very high interest rates of 24 to 36 percent, President Lincoln refused to accept the terms of the loans and called for other solutions. Colonel Edmund D. Taylor of Illinois made the suggestion that the U.S. government could issue its own money. Taylor is quoted as saying: "Just get Congress to pass a bill authorizing the printing of full legal tender treasury notes and pay your soldiers with them and go ahead and win your war with them also. If you make them full legal tender they will have the full sanction of the government and be just as good as any money." The express right by the Constitution gives Congress under the Treasury Department the right to print legal tender. We have to remember too that this was in a time of war and the Federal Reserve didn't come into existence until 1913.

The idea to print Greenback based on the government's credibility was not Lincoln's idea originally, but with mounting pressure in Congress to accept the plan the President was quick to endorse it. The government could either print its own money or lead the country into to perpetual debt at the hands of European banks. On February 25, 1862, Congress passed the first Legal Tender Act, which authorized the printing of $150 million in Treasury notes. Printed on only one side with green ink. The bills were soon became known as "greenbacks". These United States Notes or "greenbacks" represented receipts for labor and goods delivered to the United States. They could be traded in the community for an equivalent value of goods or services. The union used this money to keep the economy stable and help to pay for the war. There are at least two types of notes that were called greenbacks. They were referred to as: United States Notes and the Demand Note.

What Abraham Lincoln did was prove that the US government could issue it's own currency and not the major banks that were intent on reaping billions of dollars in interest loans to the government in funding the civil War. The Greenback was proof that Lincoln understood the dangers of having currency loaned to the government at high interest rates. He knew that with interest rates with loaned money would be putting the United States deeper in debt.

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