Submitted by Sammy Smith ([email protected])

How do you make money?

(Get a job? Ask mom? Umm….)

How do you make money—if you’re a “country”?

(Hmm….)

Image from New York Times online; caption: “A $1000 Confederate bill printed at the National Bank Note Company.” Source: Uncle Davey’s Americana.

Ben Tarnoff, in a March 14th, 2011, article titled “Money for Nothing” in the New York Times online, discusses activities of the Confederate treasury in 1861.

Jefferson Davis had been inaugurated president of the Confederacy a month earlier, and, as Tarnoff reports, on March 9th:

…the congressmen passed a bill that gave the Confederate treasury the power to print notes. The amount they authorized was relatively small: only $1 million. In the coming months, however, that number would increase dramatically. Over time, Confederate paper currency would outgrow its modest origins in Montgomery and become the South’s single most important source of revenue—the financial fuel without which the machinery of its government would cease to function.

So, how did governments of this time “earn” money? Tarnoff writes:

In those days, tariffs provided the federal government with most of its income. Memminger [Secretary of the Confederate treasury Christopher Gustavus Memminger, a delegate from South Carolina] instructed customs officers to continue collecting it as before. He also borrowed money from Southern banks and issued bonds. Confiscated bullion from federal mints in New Orleans and Dahlonega, Ga., offered another infusion of funds.

However, as the war went on, a funding crisis arose. Secretary Memminger proposed a taxation program. The proposition was not embraced; resistance was strong. Thus:

As the optimism of the Confederacy’s first months receded, a difficult reality set in. Memminger faced a headstrong Congress, recalcitrant states, and interminable logistical challenges. The Southern economy was agricultural, illiquid: New York City’s banks had more coin in their vaults than all the Southern banks combined.

Printing money became the only option to raise funds. As the presses churned out more bills, inflation set in—and undermined the war effort.

As Tarnoff points out, this short-term solution became a long-term dilemma.

Think of other examples of short-term solutions that are not long-term solutions. They can be present-day or from history. They can be from your own life, or from the greater world. Login and join the discussion.

*Click here to go to the Tarnoff/*NYTimes story. The Tarnoff article is one of a series called “Disunion,” collected online here.

Posted online on Friday, March 18th, 2011