The actual cash outlay of the national government for war expenses, during the four years of the war, was approximately three billion dollars. Such a sum was wholly beyond the capacity of the government to raise by taxation, and some other means had to be devised. Early in 1862 Congress authorized the issue of $150,000,000 of "greenback" paper money and made it a legal tender for all debts, public and private, except customs duties, which were to be paid in coin. The gold received from the customs was held in reserve to pay interest on the government's gold bonds. This flood of legal tender paper money, without any gold reserve behind it, and without an accompanying promise of redemption at a specified time in the future, constituted a startling innovation in American government finance. The greenback paper dollar was merely a piece of paper, adorned with scroll work, a patriotic picture, and the words "One Dollar." It was essentially different from the paper dollar of to-day, which is exchangeable at any time for gold. The Legal Tender Act was passed only after considerable debate; the administration urged its passage as an absolute necessity. After that there were other emissions of paper money, until January, 1864, when the outstanding total was about $450,000,000.

One of the first results of the Legal Tender Act was to put a premium on gold. Consequently gold became a commodity and its price ran up and down in terms of paper money. A Gold Room in the New York Stock Exchange was opened for speculation in the precious metal. When the greenbacks first appeared their value in gold was about 97 cents to the dollar, but before a year had passed the paper dollars had dropped to 75 cents. In the middle of 1863 they were down to 58 cents, but even this value was not stable. The price of gold in relation to paper fluctuated widely in response to news from the war. In July, 1864, the paper dollar touched its lowest market

value, when it declined to 35 cents. In other words, a man who possessed a gold dollar at that time could buy nearly three paper dollars with it.

The Legal Tender Act was like a gorgeous Christmas gift to debtors, to people who owed money on promissory notes, to farmers whose lands were under mortgage. All such obligations could be, and many of them were, settled in depreciated paper.

But it was not beneficial in the least to the working people and factory hands of the big towns. Their wages rose a little, but not much, while the cost of living went to the sky. The cities were full of discontented and suffering people.

These issues of greenbacks relieved temporarily the acute financial distress of the government, but if enough legal tender money to meet the total expenditure on account of the war had been set afloat it would have wrecked the economic system of the Northern states, just as a similar expedient, carried out in wholesale fashion, destroyed the finances of the Confederacy.

The chief fiscal reliance of the Lincoln administration was on bond issues, and in the sale of the bonds to the people another innovation appeared. Until the Civil War the average working citizen of the Republic knew nothing about bonds. He thought of them-if at all-as sacrosanct documents in the vaults of banks. The Treasury called to its aid the house of Jay Cooke & Company, of Philadephia, a concern that had made a reputation in the successful flotation of railroad bonds.

Cooke was the originator of the modern "drive" method of bond selling. He appointed agents all over the country-men who addressed public meetings and stood on street corners urging the ordinary public to buy government securities. There were flaring advertisements in the newspapers, and as a contemporary writer remarked-"every device that had been successful in patent medicine selling was used." The campaign was a phenomenal success. The sales soon rose to twelve

Fortunes in Bonds

275

million dollars a week. Men who were experienced in financial affairs were astonished to learn that the country contained so much ready money.

There was a tremendous profit to be made at the expense of the government in purchasing these war bonds. The principal and interest of the six per cent bonds was payable in gold, but the bonds could be bought with paper money. Let us consider a typical transaction made, let us say, when gold was selling at 150. A man with a thousand dollars in gold could turn it into fifteen hundred dollars in paper money. Then with this fifteen hundred dollars he could buy an equivalent amount of six per cent gold bonds. The fifteen hundred dollars in bonds would bring him ninety dollars a year in interest, or nine per cent on his original investment. But the nine per cent was not all. The government would eventually redeem the bonds at par--that is, it would buy back his bonds for fifteen hundred dollars in gold. He would thus make an additional fifty per cent on his thousand dollars. No wonder the bonds sold well. The government paid from ten to fifteen per cent for the money it borrowed.

§ 5

There is not even an echo of any of this in Grant's war career. He never mentions bonds, or finance, or business in any of his letters that have come to light. We must conclude that he was a single-minded soldier, completely absorbed in the duties that lay near at hand.

Along with the growth of tawdry ideals, the tolerance of moral evasions, and the worship of material success, there arose the contempt for law and order which is an inevitable outcome of all wars. This sense of lawlessness among the people was nourished by the course of the Lincoln administration.

The President and other executive heads of the government paid small attention to the constitutional limitations of their authority-and their example was contagious. Free speech was virtually abolished; newspaper offices were raided by squads of soldiers; newspapers were suppressed without warning and without opportunity for defense or explanation; all the telegraph offices were invaded and stacks of miscellaneous telegrams were seized; the writ of habeas corpus was suspended; and thousands of men were imprisoned because of their opinions. During the course of the war not less than 36,000 Northern citizens were put in jail for speaking or writing against the administration, on the ground that they were giving "aid and comfort to the enemy."

In some respects Congress became an innocuous debating society, and the Supreme Court's rulings-when they interfered with the administration's course-were disregarded, as one disregards the chatter of children. William H. Seward, the Secretary of State, boasted to Lord Lyons, the British envoy, that he possessed more power than the sovereign of the British Empire. "I can send any man to prison," he declared, "with or without cause, and keep him there." Wendell Phillips, himself an abolitionist, attacked Lincoln, and declared him "a more unlimited despot than the world knows this side of China."

How did all this come about? How did it happen that Lincoln, the most thorough-going believer in popular government, in democracy, in the right of free speech and opinion, who has ever occupied the White House, felt impelled to turn himself into an American Czar?

The explanation is that he had one fixed idea during the Civil War . . . he wanted to save the Union. That is the clue to all his actions. "Of what use is it to preserve the Constitution," he said, in effect, over and over, "if by preserving it we lose the Union? In that case, what would the Constitution be worth?"

He understood clearly that he was breaking down constitu