In 1861, the first year of the American Civil War, the Union government began borrowing money in an effort to fund the war by issuing Demand Notes that were redeemable on demand for gold or silver coins. By the end of the year, however, economic conditions in Union states deteriorated to a point where the government could no longer afford to redeem Demand Notes.
The following year, facing an escalating war and incurring rising expenses, President Abraham Lincoln had to find a way to continue funding the Union’s war efforts. Lincoln’s treasury secretary Salmon P. Chase proposed issuing treasury notes that weren’t redeemable in gold or silver.
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Author: Steven Zheng