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Paper Money Appeared: The printing of paper money appeared to be the only practical choice, so in February 1862, Congress authorized an issue of $150 million of U. S. notes. These notes were also known as "legal tenders" and were popularly called "green¬backs" because they were printed in green ink, in contrast to the backs of gold certificates, which were printed in yellow.
The greenbacks were the first paper money is¬sued by the U. S. government. They were fiat money, since their only backing was the govern¬ment's promise to pay. But they were legal tender for all debts, public and private, except interest on the public debt and customs duties.
In 1862 the U. S. Treasury needed money quickly to finance the Civil War. There were three possibilities: taxation, borrow¬ing, and printing paper money. New tax laws could not be passed and made effective quickly enough to raise the money that was immediately needed; the second choice, borrowing, would be too costly, because the government's credit was so weak that it would have to pay interest rates of over 10% to bond buyers.See Also Money Makes:Acquisitive individualism, once the pastime of Bronze Age kings, now became the general watchword of the age: for the first time in world history it is said that "money makes the man." The introduction of a money economy in Greece in the 6th century B. c. was accompanied by social and political upheavals. The supremacy of the landed aristocracy was undermined by the emancipation of the small peasants and craftsmen from the village and their reorientation toward the market in the city.
GRESHAM'S LAW, gresh'amz, in economics, is usually stated as "bad money drives out good." The law stems from the fact that money has a value both as money and as a commodity in the open market. The former value is set arbitrarily by law and is relatively fixed; the latter is deter¬mined by supply and demand and varies from time to time, "Good money" has a higher value as a commodity than as money and will dis¬appear from circulation.
On The Other Hand See Ship- Money Tax:Resistance to the levy was met by further decrees, extending the tax to the whole kingdom, and directing that every landholder and other inhabitant be assessed according to his means, and the tax collected by distress if neces¬sary. When John Hampden refused to pay.the tax, and was brought to trial, the judges de¬cided, eight to four, in favor of the crown. One of the early acts of the Long Parliament in 1640 was to declare the ship- money taxmoney tax illegal and no attempt has since been made to collect ship money in England.
Resistance. In 1637, John Hampden (q.v.) refused to pay his ship money. By a narrow ma¬jority the judges decided that the tax was legal. There was no constitutional remedy. In 1638, English taxpayers went on strike. In that year the government collected only 39% of its ship money levy compared with 89% in 1637. An army, painfully recruited, marched northward; it proved undisciplined, mutinous, and most un¬willing to fight. It could not stop the Scots from invading England. |
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