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N0KFQ > TODAY 25.02.17 14:47l 34 Lines 1844 Bytes #999 (0) @ WW
BID : 24281_N0KFQ
Read: GUEST
Subj: Today in History - Feb 25
Path: IW8PGT<IZ3LSV<IR1UAW<IQ5KG<I0OJJ<N6RME<N0KFQ
Sent: 170225/1345Z 24281@N0KFQ.#SWMO.MO.USA.NA BPQ6.0.13
1862
Legal Tender Act passed
On this day in 1862, the U.S. Congress passes the Legal Tender Act, authorizing the
use of paper notes to pay the government’s bills. This ended the long-standing policy
of using only gold or silver in transactions, and it allowed the government to finance
the enormously costly Civil War long after its gold and silver reserves were depleted.
Soon after the war began, the federal government began to run low on specie. Several
proposals involving the use of bonds were suggested. Finally, Congress began printing
money, which the Confederate government had been doing since the beginning of the war.
The Legal Tender Act allowed the government to print $150 million in paper money that
was not backed by a similar amount of gold and silver. Many bankers and financial
experts predicted doom for the economy, as they believed there would be little
confidence in the scheme. There were also misgivings in Congress, as many legislators
worried about a complete collapse of the nation’s financial infrastructure.
The papernotes, called greenbacks, worked much better than expected. The government
was able to pay its billsand, by increasing the money in circulation, the wheels of
Northern commerce were greased. The greenbacks were legal tender, which meant that
creditors had to accept them at face value. In 1862, Congress also passed an income
tax and steep excise taxes, both of which cooled the inflationary pressures created
by the greenbacks.
Another legal tender act passed in 1863, and by war’s end nearly a half-billion
dollars in greenbacks had been issued. The Legal Tender Act laid the foundation for
the creation of a permanent currency in the decades after the Civil War.
73, K.O. Higgs (n0kfq)
N0KFQ@N0KFQ.#SWMO.MO.USA.NA
Winlink: n0kfq@winlink.org
E-Mail: kohiggs@gmail.com
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