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In
the last several years, we have seen the old U.S.S.R. break up, as areas with
different cultures seceded from the U.S.S.R. and declared their
independence. The problems with starting a government with no money, no
taxing authority, and the need for an immediate defense (the most expensive
undertaking a nation can embark upon) are overwhelming. Almost a
century and a half ago, that same problem faced the Confederate States of
America (CSA) as it sought to secede from the United States and set up its
own government.
In
the 1860's, several Southern states lawfully seceded from the United States
after an impasse regarding unfair taxation. It seems that most of the
taxes were collected in the South, while most of the tax money was spent on
public works programs in the North. These Southern States seceded and
reasserted themselves as individual sovereign nations. In 1861, they adopted
the Confederate States of America constitution. The basis of their
government was much like the original U.S. Constitution that only allowed for
a weak central government with little or no taxing authority. Since
their original dispute was over excess taxation in the form of tariffs, the
new CSA government certainly could not pass an excessive tariff to collect
revenues in good conscience. While the South only wanted to go their
separate way and be left alone, it seems that Lincoln had other ideas.
Lincoln stated that he would never let the South go because they were needed
to pay the taxes to support his internal improvements in the North (public
works spending on canals, railroads, etc).
Shortly after secession, New York merchants began to panic. The tariff
was still around 50% in the U.S. ports, but was almost nothing in the
Southern ports. The Northern merchants feared that grass would grow in
the once busy ports of New York, Boston and others. Lincoln assured
them he would continue to collect the tariff in the Southern ports. The
newly formed CSA did not agree with Mr. Lincoln's plan for taxing imports in
a foreign port. After repeated requests to abandon the U.S. Customs
House in Charleston Harbor, Lincoln sent reinforcements and forced the beginning
of the war. Shortly thereafter, Lincoln raised an army of 75,000 men
for the purpose of invading the South. Before the war was over, a total
of 1,500,000 Federal troops were pitted against only 800,000 Southern
defenders. It was only the South's better trained officers and
excellent general officers that allowed it to hold out against the greater
number of better equipped troops.
The newly formed CSA government was faced with the economically devastating
task of funding a war to defend their homeland from invasion. The South
was still getting organized when it had to hurry and arm for its
defense. Prior to the fireworks in Charleston Harbor (only one horse
was killed as a result of all the bombardment), Davis sent a delegation to see
Lincoln to offer to pay for the U.S. installations located in the South, as
well as pay its share of the national debt. Lincoln refused to see
them.
In Part III, Lincoln's economic troubles were discussed at length. In this
article, I will talk more about the problems encountered by Mr. Davis.
When Louisiana seceded in early 1861, the CSA forces took over the U.S. Mint
in New Orleans. The gold for the Mint on deposit at the Citizen's Bank
was confiscated. Total confiscation of gold at the Mint and all U.S.
Customs Houses amounted to about $6 million dollars in gold and silver
coins. In Europe, a gold loan of about $3 million dollars was
obtained. Shortly thereafter, in 1861, $15 million dollars in gold was
raised throughout the South by the sale of bonds by the CSA government to its
citizens. The bonds were issued for ten years and were scheduled to pay
8% interest in gold. Most of this gold was spent in Europe to buy
ships, guns and ammunition. The arms suppliers in Europe believed in
the CSA but they had a strict hard cash on delivery policy.
The young CSA government was forced to print unbacked paper dollars to pay
for the cost of the government. It is estimated that perhaps as much as
one billion dollars in paper money was printed. The records are unclear
and several Northern merchants trafficked in counterfeit CSA currency further
confusing things. By the end of the Civil War Lincoln's unbacked
"greenback" dollars were only worth about 50 cents in gold.
Davis' unbacked CSA dollars, however, were only worth about one cent in gold.
CSA Secretary of the Treasury, Christopher Memminger, believed in hard money
and it was especially difficult for him to issue the unbacked notes.
The notes were issued in four offerings. The first offering was printed
by the American Bank Note Company of New York and smuggled South. The
notes stated that they were payable in gold at some time in the future.
The real "gold" in the South was cotton. The spinning mills
in England and France depended on cotton from the South. Early in the
invasion of the South, Davis thought he could withhold cotton from the
European spinning mills and force them to help the South. This only
panicked the English into developing an alternate source of cotton in Egypt.
Later in the War, the Northern blockade prevented the South from delivering
the cotton to Europe. In the later years of the war, blockade runners
could buy cotton in the South for 6 cents a pound and sell it for 60 cents a
pound in England. The average steamer could carry 800 bales. It
is estimated that Davis could have sold over 100,000 bales of cotton in the
early years of the war and obtained a great deal of hard cash if only he had
not tried to force Europe into politically supporting the CSA by withholding the
cotton.
When Admiral Farragut took New Orleans early in the war, in 1862, thousands
of bales of cotton had piled up on the wharves. In order to keep this
cotton out of Northern hands and to try to stop Farragut, they were all
floated down the river and burned. Millions of desperately needed
dollars went up in smoke and were lost to the CSA forever. Before the
war, New Orleans was the center of cotton and sugar exports and the largest
city in the South.
In the year before the war, 2,000 ocean going steamers and 3,500 river
steamers entered the port of New Orleans with goods. After Admiral
Farragut took New Orleans and General Butler occupied the City, trade ground
to a halt. This forced all exports to smaller ports where commodities
were gathered and loaded onto blockade runners. The ports of Charleston
and Wilmington in the Carolinas became the CSA's principal ports after New
Orleans was taken. The blockade runners usually only had to run as far
as Bermuda or Nassau, where they could sell their cotton and then purchase
goods such as guns, ammunition, food and luxury items for the CSA and its
citizens. When an English blockade runner sold his goods in CSA ports,
they were usually paid in CSA currency. They then purchased cotton with
the CSA notes and had to sell the remaining CSA currency at a deep discount
to obtain gold.
There was so much money to be made in running the blockade that shipyards in
Scotland and England were busy building fast steamers to run the
blockade. Many of the Captains were from foreign countries. The
most famous blockade runner, however, was Captain Maffitt of the CSA
Navy. Captain Maffitt managed to take 72 prizes in the form of captured
Federal ships on the high seas. In addition, Captain Maffitt also ran
the blockade and carried cotton east and vital war supplies back to the
CSA.
Bermuda along with most of Europe was very sympathetic to the South. (Charles
Dickens wrote several articles in favor of the South and pressed for English
intervention.) It was such a busy port that almost everything the CSA
imported flowed through its warehouses. Hog buyers from Bermuda would
travel to New York and nearby states and purchase hogs. The hams and
bacon were salted and shipped to Bermuda from New York. After they
arrived in Bermuda, they were sold to blockade runners for their 500 mile dash to the Southern ports.
After Vicksburg fell and the eastâ€"west
rail line to the Trans-Mississippi district was severed, vital food supplies
were cut off. The Eastern regions of the CSA had to import even more
food via the blockade runners. After Sherman (A.K.A., "Kerosene
Billy") cut the remaining CSA in half, the logistics in supplying the
army became even more difficult. Blockade running to smaller ports on
the Gulf became more important than ever. Late in the war, blockade
runners not only had to face the Federal Fleet, but also had to contend with
the smaller and smaller quantities of gold available for trade.
On May 5th of 1865, President Davis and the CSA Government met for the last
time while fleeing pursuing Yankee troops. General Longstreet's
Commissary Officer, Major Moses was given possession of the last of the CSA's
supply of gold and silver. In the book, "Last Order of the Lost
Cause," the story is told that Major Moses gathered some brave
soldiers to help protect the bullion from mobs and carried out the last
orders. These last orders of the CSA government were for Moses to take
the remaining bullion and help the thousands of defeated, sick hungry and
exhausted CSA soldiers straggling home. Major Moses carried out his
orders with the last of the bullion and even obtained receipts for
everything. Many legends exist about the "lost confederate gold."
The legends are varied and range from Albert Pike's Knights of the Golden
Circle hiding the gold in Canada to Mr. Sylvester Mumford's mysterious
regaining of his family fortune immediately after the war. Mr. Mumford
traveled to England after the war and sent back aid to orphans of the war,
built orphanages and purchased seed corn in South America and sent it back to
Georgia. His daughter set up an educational fund for the descendants of
Confederate soldiers.
The South's heroic struggle for freedom was doomed as soon as the Federal
blockade finally moved into place. From an economic standpoint, they
had to trade with Europe in order to survive. From a logistic
standpoint, the only place to obtain rifles, ammunition and other military
hardware was Europe. Without the much needed gold to purchase those
goods, there was no way to defend themselves any longer.
Always remember, that the victors write the history books!
Larry Laborde
Silver Trading
Company
www.silvertrading.net
Larry lives in the occupied South with his wife Puddy and sells
precious metals at the Silver Trading Company. Larry can be contacted
at llabord@aol.com. You can view
his web site at www.silvertrading.net.
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