The Bubble: Greenbacks, Corruption, and the Politics of Looking Backwards

The Bubble: Greenbacks, Corruption, and the Politics of Looking Backwards

Throughout this long presidential campaign season, the specter of the Great Recession is well and alive. Over seven years since the end of the recession, many American workers are dealing with painfully slow wage growth and lingering anger and anxiety about the economy. Reacting to these concerns, the candidates offer voters clashing visions of a path forward. Hillary Clinton promises that she will strengthen financial regulations passed during the recession, reform taxes, and increase infrastructure spending. Donald Trump plans to rewrite or terminate many of these policies, especially international trade agreements such as NAFTA.[1] Critically, he has gone one step farther by stressing corruption in Washington and secret conspiracies of politicians and financial elites as part of the problem. At the first Presidential debate, Trump warned millions of Americans that the Federal Reserve’s low interest rates were actually feeding a “big, fat, ugly bubble” that would favor Clinton.[2] Recently at a rally in West Palm Beach, Florida, Trump went so far as to suggest a secret “global power structure” that works against himself and the interests of the American working class.[3]

The Federal Reserve Building, Washington, D.C., Courtesy of the Federal Reserve.

 Conspiracy theories and dramatic promises in the face of a stagnant or depressed economy are nothing new in American history. But when trying to provide a historical context for politics and policy in the shadow of the Great Recession, historians typically explain our current situation by pointing to the history of late twentieth-century conservatism, the decline of labor unions, and financial restructuring. But history does not just provide origins, its also provides perspective. It is in this second mode that the Civil War might speak to our current concerns.

The young Republican Party that took power in 1861 never thought they would argue about banks and money in the midst of a war. Facing what we would call today a liquidity crisis, House Republicans drafted a bill to issue 150 million dollars in paper money in early 1862, with the crucial addition that these notes would be legal tender for all debts public and private. Since the ratification of the Constitution, gold and silver money, called “specie,” had been the only legally recognized “dollar” in the country. True, Congress created two national banks that issued a paper currency, and for decades most Americans used banknotes issued by hundreds of state-chartered banks. But American paper money had always been tied to the promise of gold. To make sure that banks and contractors would take federal paper money, Congress substituted the government’s command, or fiat, for the glitter of gold.[4]

These notes, which were eventually dubbed greenbacks due to their color, thrust the government into every cash transaction in the country. The initial 150 million in greenbacks eventually grew to almost 450 million, plus a morass of postage and fractional currency notes that served as the small change of the country.[5] Armed with the power to create money, the Republican Congress now possessed the ability to affect the price of everything in the Union economy—from a bushel of wheat to the price of securities on Wall Street. In addition to the greenbacks, in 1863 and 1864 Republicans authorized a system of national banks that would push out many of the old state banks after the war.

Currier & Ives, “Running the Machine,” c.1864,  Courtesy of the Library of Congress Prints and Photographs Division.

That financial power frightened and outraged critics in every political faction, but especially the Democratic Party. In 1863 and 1864, as inflation pushed up prices, Democrats attacked greenbacks as a vector for moral corruption and political cronyism.[6] One campaign document included tables of basic goods with one column marked “Democratic Prices” (or prewar prices) and the other dubbed “Abolition Prices.”[7] Within the Democratic rhetoric of the era, “greenback” became a synonym for extravagance and corruption. The Old Guard accused Abraham Lincoln of using greenbacks to “buy the hide and tallow of thousands of fishy politicians.”[8] Democrats, on different occasions, dubbed compensated emancipation “greenback abolitionism,” and called greenbacks “abolition rags.”[9] They also attacked the National Banking Acts as a means to enrich Republicans and yoke Main Street to Washington and Wall Street. In a pamphlet published in 1864, Alexander Del Mar warned his readers that “fanned by unscrupulous politicians” they were inside a “great paper bubble” that would “inflict upon the country all the long agonies of financial distress.”[10] Delmar was not alone. Among Republican critics there was a quiet hope that victory over the Confederacy would bring about a quick return to the gold standard and the financial status quo antebellum.

“Delmar’s Financial Indicating Bubble,” from Alexander Delmar, The Great Paper Bubble; Or, the Coming Financial Explosion…A Campaign Document for 1864 (New York: Office of the Metropolitan Record, 1864).

That, however, was simpler said than done. Pennsylvania iron manufacturers, Midwest farmers, and voters from every party and region registered support for the greenbacks and thwarted attempts to retire them after the war.[11] This issue was a headache for Democrats and Republicans who both counted goldbugs and greenbackers in their ranks. Eventually the United States did resume specie payments on January 2, 1879; but that act did not turn the clock back.[12] The federal government retained a greater responsibility in American finance overseeing a network of national banks, taxation policy, and the power to issue and reissue millions in notes backed by gold or silver in the U.S. Treasury. For the next thirty years, debates about money, both its volume and form, continued to serve as a forum to debate economic inequality in a changing, and increasingly industrial, market. Resolution of these issues was a long time coming. It was not until 1913, with the creation of the Federal Reserve, that the nineteenth century’s “money question” found its answer—an answer that sought to take money out of politics, but continued the trend of greater centralization of the financial system.

The history of the greenbacks does not offer a simple policy prescription for today’s economic ills. It does suggest three observations. First, while looking backwards will always be a part of our democratic politics, we can never go back to a pure moment of government-market relations—if such a thing ever existed. The Fed’s monetary policy and federal financial reform, just like the Republicans’ decision to create greenbacks and national banks, entangled the federal state with the market and fundamentally changed it. Second, building a new consensus on the appropriate relationship between the people, their government, and the economy takes a very long time. Americans fought over money, labor issues, and corporate power for decades before they found some degree of resolution in the Progressive Era and New Deal. Third, we must remember that Trump’s picture of the economy satisfies some because it offers simple answers to complex problems. Ultimately, the resolution of these difficult issues rests with the decisions that voters will make at the polls this November and in the years to come. Indeed, our ongoing debates about economic inequality and opportunity suggest that we are closer to the start than to the end of a conversation about the relationship between peoples, governments, and markets in the twenty-first century.

[1] Hillary Clinton, “My Plan to Prevent the Next Crash,” Bloomberg, October 8, 2015; “Clinton vs. Trump: Where they Stand on Economic Policy Issues,”,

[2] Aaron Blake, “The first Trump-Clinton presidential debate transcript, annotated,” The Fix (blog) Washington Post, September 26, 2016, accessed October 14, 2016,

[3] “Transcript: Donald Trump’s Speech Responding to Assault Accusations” NPR, October 13, 2016, accessed October 14, 2016,

[4] For the text of the Legal Tender Act, see Act of February 25, 1862, ch.32, 12 Statutes at Large, 345.

[5] For a table of paper money issued by the U.S. during the war, see Robert T. Patterson, Federal Debt-Management Policies, 1865-1879 (Durham, N.C.: Duke University Press, 1954), 150.

[6] Green-Back to his Country Friends (New York: 1862); “The Cost of the War, and Who Must Pay It,” The Old Guard 1, no. 1 (January 1863): 1; “National Notes vs Labor,” The Old Guard 2, no. 1 (January 1864): 8-12.

[7] Society for the Diffusion of Political Knowledge, Hand-Book of the Democracy for 1863 & 64 (New York: 1864), Documents 29, 16.

[8] “Great Purchase and Sale of Damaged Democrats,” The Old Guard 1, no. 4 (January 1864): 95.

[9] “Democratic Union Association,” New York Herald, March 8, 1863; “Untitled,” Sciotto Gazette, March 31, 1863.

[10] Alexander Delmar, The Great Paper Bubble; Or, the Coming Financial Explosion…A Campaign Document for 1864 (New York: Office of the Metropolitan Record, 1864), 14.

[11] See, for example, Nicolas Barreyre, Gold and Freedom: The Political Economy of Reconstruction (Virginia, 2015); Irwin Unger, The Greenback Era: A Social and Political History of American Finance, 1865-1879 (Princeton, N.J.: Princeton University Press, 1964).

[12] While the Specie Resumption Act declared that redemption of greenbacks for gold would occur on January 1, 1879, owing to the bank holiday on New Year’s Day, actual resumption did not occur until the next day. See Unger, The Greenback Era, 401.

Michael Caires

Michael Caires is the Mellon Post-Doctoral Fellow at the American Civil War Museum where he is helping to create an exhibit on greenbacks during the Civil War era. He received his PhD from the University of Virginia and has taught at UVA and Hampden Sydney College. He currently at work on a book on how the greenbacks and national banks of the Civil War transformed America in the nineteenth century.

One Reply to “The Bubble: Greenbacks, Corruption, and the Politics of Looking Backwards”

  1. What an insightful post. There are so many things about this cirrent election that parallel those of the 1860s–well done, good sir!

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