in U.S. history, legal tender notes unsecured by specie (coin). In 1862, under the exigencies of the Civil War, the U.S. government first issued legal tender notes (popularly called greenbacks) that were placed on a par with notes backed by specie. By the end of the war such notes were outstanding to the amount of more than $450 million. They had been issued as temporary, and in accordance with the Funding Act of 1866 Secretary of State Hugh McCulloch
began retiring them. The hard times of 1867 caused many, especially among Western debtor farmers, to demand that the currency be inflated rather than contracted, and Congress suspended the retirement. George H. Pendleton
advanced the so-called Ohio Idea, recommending that all government bonds not specifying payment in specie should be paid in greenbacks. John Sherman
, more conservative, was nevertheless willing to let the greenbacks stay in circulation on a redemption basis. The question was warmly debated in 1869 and was ended by a compromise, which left greenbacks to the amount of $356 million in circulation. The law creating them was declared constitutional in the later Legal Tender cases
, and the matter rested until the Panic of 1873. The hard-hit agrarians then wanted to inflate the currency with more greenbacks. An inflation bill passed Congress in 1874, but so intense was conservative opposition that President Grant reversed his former position and vetoed the bill. Although the Greenback party worked hard to oppose them, the conservatives triumphed in Jan., 1875, with the Resumption Act, which fixed Jan. 1, 1879, as the date for redeeming the greenbacks in specie. The Secretary of the Treasury accumulated a gold reserve of $100 million, and confidence in the government was so great that few greenbacks were presented for surrender in 1879. Congress provided in 1878 that the greenbacks then outstanding ($346,681,000) remain a permanent part of the nation's currency.
See W. C. Mitchell, A History of the Greenbacks (1903, repr. 1960); D. C. Barrett, The Greenbacks and the Resumption of Specie Payments, 1862–1879 (1931, repr. 1965); I. Unger, Greenback Era (1964).
The Columbia Electronic Encyclopedia, 6th ed. Copyright © 2012, Columbia University Press. All rights reserved.
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