February 25, 2025 • 11 mins
Did you know the U.S. once printed emergency money to survive a crisis? During the American Civil War, “Greenbacks” were introduced as a bold financial experiment that reshaped the nation’s economy. But how did these paper notes impact the future of U.S. currency? And why were they so controversial?
In this episode, we uncover - the urgent need for Greenbacks during the Civil War, how they paved the way for modern U.S. currency, the economic chaos and debates they sparked
Don’t miss this fascinating deep dive into the origins of America’s money! #USCurrency #Greenbacks #CivilWarHistory #MoneyHistory #FinancialSecrets
Disclaimer: This episode has elements of AI created content. Download app and learn more at https://exploredays.app
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Welcome back for another deep dive.
(00:02):
This time we're going all the way back to the 1860s.
The 1860s.
Yes, the Civil War era, to uncover the story of greenbacks.
Ah, greenbacks.
That emergency paper money that helped the Union
finance the war.
Imagine the US in the 1860s, the nations totally divided,
battles are raging everywhere.
And of course, the costs of this massive war
(00:24):
are just out of control.
Back then, gold and silver were the standard, right?
But they weren't exactly practical for funding
something this enormous.
And then to make things even worse,
you had all these private banknotes
issued by different banks just floating around.
Yeah, they were all over the place.
And their value, totally questionable.
You never knew if the bank that issued your note
would even be around tomorrow.
(00:45):
Exactly.
It was a real financial mess.
Before the Civil War, the US financial system was, well,
it was decentralized, largely unregulated.
So these private banknotes, they were only as good
as the bank that issued them.
And if a bank went bankrupt, your banknotes poof.
Worthless.
Just like that.
It was a risky system, especially in times of, well,
(01:06):
turmoil, like the Civil War.
So the Lincoln administration, they're
facing this huge dilemma.
How to pay for this massive war when
the traditional ways of funding it
were either not enough or completely unreliable?
They had to think outside the box.
Get creative.
Exactly.
And that's where the story of the greenback begins.
It all started with something called demand notes.
(01:28):
Congress authorized them in July of 1861.
These notes, think of them as like an early IOU
from the government, redeemable for gold or silver on demand.
On demand.
They had to instill confidence somehow.
Right.
And the promise to redeem these notes for species,
that's what they called gold and silver back then,
well, it was meant to do just that.
You know, if you could trade your paper
(01:49):
note for actual physical precious metal.
It seemed like a much safer bet.
Oh, absolutely.
Way safer than some private bank note that could just
become worthless overnight.
So basically, the government was saying,
trust us, this paper is as good as gold.
But here's where it gets interesting.
Just a few months later, December of 1861,
the government suspended species redemption.
(02:11):
Oh, yeah.
That was a big deal.
I bet that sent shockwaves through the economy.
Absolutely.
It did.
People were probably thinking, wait, you promised.
You said we could trade these for gold.
It really shook people's confidence in those demand
notes.
And their value.
Started to decline.
It showed something really important about money.
Its value.
Ultimately, it's based on trust.
Trust.
(02:31):
If people don't believe a currency is going to hold its value,
they're not going to want to accept it.
Makes sense.
It does, doesn't it?
So then comes, I guess you could call it,
the pivotal moment in the whole greenback saga.
Yeah.
February 25, 1862, Congress passes the first legal tender
act, authorizes $150 million in United States notes.
(02:53):
These notes, they were also printed with green ink.
So they got the nickname greenbacks just like the demand
notes.
But there was a big difference, a crucial difference.
These United States notes, they were declared legal tender.
Legal tender for most transactions.
This is where the story gets a little tricky,
because now you've got two types of greenbacks circulating,
(03:14):
demand notes, and United States notes.
And they both have the same nickname.
Two different kinds of greenbacks.
Yeah.
The key difference, United States notes,
they were legal tender for most transactions.
Demand notes weren't.
So for the first time, the government
was basically saying, you have to accept this paper money
as payment.
Wow.
That was huge, a huge shift.
(03:34):
And I'm sure, not without controversy.
You got it, lots of controversy.
So OK, you have these two types of greenbacks just
floating around out there, same nickname,
but different rules, different values.
It sounds like a recipe for confusion.
It definitely caused some confusion,
and maybe even some exploitation.
People probably took advantage of the situation.
Oh, they did.
(03:54):
Demand notes, they could be used to pay import duties, which,
back then, was a major source of government revenue.
So they became even more valuable, because the US notes,
they couldn't be used for that.
So savvy importers, they were buying up all the demand notes,
because they knew they were worth more.
While everyday people, they were stuck using the United
(04:14):
States notes, those values were just
fluctuating all over the place.
It's almost like having two completely different currencies
within the same country.
It really was a complex situation, for sure.
But it also shows something deeper about money.
It's not just about the physical thing,
whether it's gold or silver or paper.
It's about perception, trust, and the rules
(04:37):
that govern how it's used.
So I imagine this must have caused a lot of anxiety
for everyday people.
You go to the market, and you don't even
know if your money's going to be worth the same tomorrow.
It was a tough time.
People probably tried to hoard gold and silver.
Some did, but it wasn't always practical.
The government needed to get these greenbacks circulating
to fund the war.
They encouraged people to use them.
So last time, we left off with the US government issuing not
(05:00):
one, but two kinds of greenbacks during the Civil War.
The demand notes and the United States notes.
And they both caused their own share of confusion
and even some exploitation.
I mean, it made you wonder, did people even
trust these new greenbacks?
It's a good question.
You see, the greenback's value, it fluctuated throughout the war.
(05:20):
A lot of it was tied to how well the union was
doing on the battlefield.
Really?
Oh, yeah.
When things were looking up for the north, the greenback,
it held its value pretty well.
But then when they had setbacks, well, its value,
it would just plummet.
So people were basically betting on the outcome of the war
every time they made a transaction.
In a way, yeah.
I can't even imagine the stress.
I know, right?
It was a really turbulent time.
(05:41):
And all that uncertainty, it had a big impact on people's lives.
And then you also have this underlying tension
between the people who wanted hard money, backed by gold
and silver, and those who saw the potential of, well,
a more flexible, managed currency.
Wait a minute.
Are we talking about the same debate that's still going on today?
Kind of, yeah.
About government control versus free markets.
(06:03):
Exactly.
It's like history repeating itself.
Wow.
It's fascinating, right?
Some of these questions about money
and what the government's role should be,
they just keep popping up over and over.
Back then, you had the hard money folks
believe that money, it had to be backed by precious metals.
Just like before the war, they saw greenbacks
(06:25):
as a dangerous thing, a slippery slope
towards inflation and economic chaos.
Because they just wanted to go back to the gold standard.
Exactly.
They thought it would keep the government in check,
limit their interference.
It sounds like they just wanted some stability.
Oh, yeah.
They wanted things to be predictable, something
that was really lacking during the war.
But then on the other side, you had the folks who
(06:45):
saw the potential in this new managed currency.
OK, so what did they see?
Well, they argued that a more flexible system where
the government could adjust the money supply when needed,
that could be really good.
They said, look, the greenbacks, despite all the ups and downs,
they allowed the union to finance the war.
A managed currency could be used to get the economy moving,
(07:06):
fund important projects, even help manage inflation.
So one side wanted the security of gold,
and the other side, they wanted a system
controlled by the government.
That must have been a heated debate.
Oh, it was a real clash of ideologies.
And it wasn't just some abstract debate either.
It had real consequences for everyday people.
(07:27):
The value of their money was going up and down
as these different policies were being tossed around.
I can't imagine trying to plan for the future
when you don't even know what your money is going
to be worth next month.
So who won this debate?
Do we stick with the greenbacks or go back to gold?
Well, it was a long road, but the US did eventually
return to the gold standard in the 1870s.
1870s.
(07:47):
Yep.
But the greenback experiment, it left its mark.
I bet it did.
It showed that you could have a currency that
wasn't directly backed by gold or silver, a fiat currency.
And you know what?
It worked.
Wow.
It laid the foundation for, well, the Federal Reserve.
The Fed.
The one that controls interest rates.
When it only.
So the greenback is connected to the Fed.
That's incredible.
(08:07):
But you know what's even more interesting?
The greenback story, it isn't just about economics and policy.
It's about people and the choices they made during a really
challenging time.
It's a reminder that history, it's
about more than just dates and battles.
Exactly.
It's about real people just trying to figure things out.
But hey, there's more to the story.
Oh.
This whole greenback experiment, it
(08:29):
raises some questions that are still relevant today
about what money really is, about trust
in our financial systems.
Welcome back to our deep dive into the world of greenbacks.
We've been through the chaos of the Civil War,
the introduction of these controversial paper notes,
and even the debates they sparked about what money really is.
(08:51):
But there's more to uncover, right?
There is.
The greenback saga, it's full of twists and turns
that we can still learn from today.
Remember how the government suspended
speciary redemption for those demand notes?
Yeah, they basically said, no more gold for your paper.
Exactly.
They were no longer backed by anything tangible.
So they became what economists now call fiat currency.
(09:13):
Me.
Money that's valuable simply because the government says it
is.
That's it.
Not because it's tied to gold or silver and back then.
That was radical.
I bet.
People thought money had to be backed by something real.
Something with intrinsic value, yeah.
But the greenback experiment, it showed that fiat currency
could work.
At least in some situations, yeah.
It makes you wonder what those folks back in the 1860s
(09:35):
would think if they could see us now.
Almost all the world's currencies are fiat currencies now.
It's like they accidentally started a financial revolution.
It's a pretty remarkable legacy.
It shows how much power a government has
to shape how people think and act,
even when it comes to something as basic as money.
But the greenback era also highlighted something else.
(09:57):
Trust.
Yeah, in the system.
You see, if people lose faith in a currency,
its value crashes.
It doesn't matter what the government says.
That makes sense.
I mean, money is just a tool, right?
Right.
It helps us exchange things.
If people don't trust it, it's useless.
So what can we learn from all this about building trust
in a financial system?
Well, one thing is for sure.
(10:17):
Transparency is key.
People need to understand how things work.
Like the rules of the game.
Exactly.
They need to feel confident that the government won't just
mess everything up with bad policies or sneaky tricks.
It's almost like a promise.
Kind of, yeah, like a contract.
The government says, we'll handle this responsibly.
And the people say, all right, we trust you.
(10:37):
We'll use this money.
And how is that trust built?
Over time, with good policies and a commitment to stability.
The greenback era, it was pretty wild,
but it led to things like the Federal Reserve.
And they're all about maintaining that trust today.
So the greenbacks, something born out of a chaotic war,
laid the foundation for what we have today.
(10:58):
It's a story of innovation and resilience.
And it has echoes that we can still hear today.
We have digital currencies now.
Technology is changing so fast.
And we're still debating what role
the government should play in the economy.
The lessons of the greenback.
They're more relevant than ever.
It's true.
History isn't just about the past.
It helps us figure out the present
and even shape the future.
(11:19):
Who knew a simple piece of green paper
could teach us so much?
That's it for our deep dive into the world of greenbacks.
We hope you enjoyed it.
And maybe you'll look at that dollar bill
a little differently now.
Until next time, keep exploring
and keep those minds working.
Welcome back for another deep dive.
(00:02):
This time we're going all the way back to the 1860s.
The 1860s.
Yes, the Civil War era, to uncover the story of greenbacks.
Ah, greenbacks.
That emergency paper money that helped the Union
finance the war.
Imagine the US in the 1860s, the nations totally divided,
battles are raging everywhere.
And of course, the costs of this massive war
(00:24):
are just out of control.
Back then, gold and silver were the standard, right?
But they weren't exactly practical for funding
something this enormous.
And then to make things even worse,
you had all these private banknotes
issued by different banks just floating around.
Yeah, they were all over the place.
And their value, totally questionable.
You never knew if the bank that issued your note
would even be around tomorrow.
(00:45):
Exactly.
It was a real financial mess.
Before the Civil War, the US financial system was, well,
it was decentralized, largely unregulated.
So these private banknotes, they were only as good
as the bank that issued them.
And if a bank went bankrupt, your banknotes poof.
Worthless.
Just like that.
It was a risky system, especially in times of, well,
(01:06):
turmoil, like the Civil War.
So the Lincoln administration, they're
facing this huge dilemma.
How to pay for this massive war when
the traditional ways of funding it
were either not enough or completely unreliable?
They had to think outside the box.
Get creative.
Exactly.
And that's where the story of the greenback begins.
It all started with something called demand notes.
(01:28):
Congress authorized them in July of 1861.
These notes, think of them as like an early IOU
from the government, redeemable for gold or silver on demand.
On demand.
They had to instill confidence somehow.
Right.
And the promise to redeem these notes for species,
that's what they called gold and silver back then,
well, it was meant to do just that.
You know, if you could trade your paper
(01:49):
note for actual physical precious metal.
It seemed like a much safer bet.
Oh, absolutely.
Way safer than some private bank note that could just
become worthless overnight.
So basically, the government was saying,
trust us, this paper is as good as gold.
But here's where it gets interesting.
Just a few months later, December of 1861,
the government suspended species redemption.
(02:11):
Oh, yeah.
That was a big deal.
I bet that sent shockwaves through the economy.
Absolutely.
It did.
People were probably thinking, wait, you promised.
You said we could trade these for gold.
It really shook people's confidence in those demand
notes.
And their value.
Started to decline.
It showed something really important about money.
Its value.
Ultimately, it's based on trust.
Trust.
(02:31):
If people don't believe a currency is going to hold its value,
they're not going to want to accept it.
Makes sense.
It does, doesn't it?
So then comes, I guess you could call it,
the pivotal moment in the whole greenback saga.
Yeah.
February 25, 1862, Congress passes the first legal tender
act, authorizes $150 million in United States notes.
(02:53):
These notes, they were also printed with green ink.
So they got the nickname greenbacks just like the demand
notes.
But there was a big difference, a crucial difference.
These United States notes, they were declared legal tender.
Legal tender for most transactions.
This is where the story gets a little tricky,
because now you've got two types of greenbacks circulating,
(03:14):
demand notes, and United States notes.
And they both have the same nickname.
Two different kinds of greenbacks.
Yeah.
The key difference, United States notes,
they were legal tender for most transactions.
Demand notes weren't.
So for the first time, the government
was basically saying, you have to accept this paper money
as payment.
Wow.
That was huge, a huge shift.
(03:34):
And I'm sure, not without controversy.
You got it, lots of controversy.
So OK, you have these two types of greenbacks just
floating around out there, same nickname,
but different rules, different values.
It sounds like a recipe for confusion.
It definitely caused some confusion,
and maybe even some exploitation.
People probably took advantage of the situation.
Oh, they did.
(03:54):
Demand notes, they could be used to pay import duties, which,
back then, was a major source of government revenue.
So they became even more valuable, because the US notes,
they couldn't be used for that.
So savvy importers, they were buying up all the demand notes,
because they knew they were worth more.
While everyday people, they were stuck using the United
(04:14):
States notes, those values were just
fluctuating all over the place.
It's almost like having two completely different currencies
within the same country.
It really was a complex situation, for sure.
But it also shows something deeper about money.
It's not just about the physical thing,
whether it's gold or silver or paper.
It's about perception, trust, and the rules
(04:37):
that govern how it's used.
So I imagine this must have caused a lot of anxiety
for everyday people.
You go to the market, and you don't even
know if your money's going to be worth the same tomorrow.
It was a tough time.
People probably tried to hoard gold and silver.
Some did, but it wasn't always practical.
The government needed to get these greenbacks circulating
to fund the war.
They encouraged people to use them.
So last time, we left off with the US government issuing not
(05:00):
one, but two kinds of greenbacks during the Civil War.
The demand notes and the United States notes.
And they both caused their own share of confusion
and even some exploitation.
I mean, it made you wonder, did people even
trust these new greenbacks?
It's a good question.
You see, the greenback's value, it fluctuated throughout the war.
(05:20):
A lot of it was tied to how well the union was
doing on the battlefield.
Really?
Oh, yeah.
When things were looking up for the north, the greenback,
it held its value pretty well.
But then when they had setbacks, well, its value,
it would just plummet.
So people were basically betting on the outcome of the war
every time they made a transaction.
In a way, yeah.
I can't even imagine the stress.
I know, right?
It was a really turbulent time.
(05:41):
And all that uncertainty, it had a big impact on people's lives.
And then you also have this underlying tension
between the people who wanted hard money, backed by gold
and silver, and those who saw the potential of, well,
a more flexible, managed currency.
Wait a minute.
Are we talking about the same debate that's still going on today?
Kind of, yeah.
About government control versus free markets.
(06:03):
Exactly.
It's like history repeating itself.
Wow.
It's fascinating, right?
Some of these questions about money
and what the government's role should be,
they just keep popping up over and over.
Back then, you had the hard money folks
believe that money, it had to be backed by precious metals.
Just like before the war, they saw greenbacks
(06:25):
as a dangerous thing, a slippery slope
towards inflation and economic chaos.
Because they just wanted to go back to the gold standard.
Exactly.
They thought it would keep the government in check,
limit their interference.
It sounds like they just wanted some stability.
Oh, yeah.
They wanted things to be predictable, something
that was really lacking during the war.
But then on the other side, you had the folks who
(06:45):
saw the potential in this new managed currency.
OK, so what did they see?
Well, they argued that a more flexible system where
the government could adjust the money supply when needed,
that could be really good.
They said, look, the greenbacks, despite all the ups and downs,
they allowed the union to finance the war.
A managed currency could be used to get the economy moving,
(07:06):
fund important projects, even help manage inflation.
So one side wanted the security of gold,
and the other side, they wanted a system
controlled by the government.
That must have been a heated debate.
Oh, it was a real clash of ideologies.
And it wasn't just some abstract debate either.
It had real consequences for everyday people.
(07:27):
The value of their money was going up and down
as these different policies were being tossed around.
I can't imagine trying to plan for the future
when you don't even know what your money is going
to be worth next month.
So who won this debate?
Do we stick with the greenbacks or go back to gold?
Well, it was a long road, but the US did eventually
return to the gold standard in the 1870s.
1870s.
(07:47):
Yep.
But the greenback experiment, it left its mark.
I bet it did.
It showed that you could have a currency that
wasn't directly backed by gold or silver, a fiat currency.
And you know what?
It worked.
Wow.
It laid the foundation for, well, the Federal Reserve.
The Fed.
The one that controls interest rates.
When it only.
So the greenback is connected to the Fed.
That's incredible.
(08:07):
But you know what's even more interesting?
The greenback story, it isn't just about economics and policy.
It's about people and the choices they made during a really
challenging time.
It's a reminder that history, it's
about more than just dates and battles.
Exactly.
It's about real people just trying to figure things out.
But hey, there's more to the story.
Oh.
This whole greenback experiment, it
(08:29):
raises some questions that are still relevant today
about what money really is, about trust
in our financial systems.
Welcome back to our deep dive into the world of greenbacks.
We've been through the chaos of the Civil War,
the introduction of these controversial paper notes,
and even the debates they sparked about what money really is.
(08:51):
But there's more to uncover, right?
There is.
The greenback saga, it's full of twists and turns
that we can still learn from today.
Remember how the government suspended
speciary redemption for those demand notes?
Yeah, they basically said, no more gold for your paper.
Exactly.
They were no longer backed by anything tangible.
So they became what economists now call fiat currency.
(09:13):
Me.
Money that's valuable simply because the government says it
is.
That's it.
Not because it's tied to gold or silver and back then.
That was radical.
I bet.
People thought money had to be backed by something real.
Something with intrinsic value, yeah.
But the greenback experiment, it showed that fiat currency
could work.
At least in some situations, yeah.
It makes you wonder what those folks back in the 1860s
(09:35):
would think if they could see us now.
Almost all the world's currencies are fiat currencies now.
It's like they accidentally started a financial revolution.
It's a pretty remarkable legacy.
It shows how much power a government has
to shape how people think and act,
even when it comes to something as basic as money.
But the greenback era also highlighted something else.
(09:57):
Trust.
Yeah, in the system.
You see, if people lose faith in a currency,
its value crashes.
It doesn't matter what the government says.
That makes sense.
I mean, money is just a tool, right?
Right.
It helps us exchange things.
If people don't trust it, it's useless.
So what can we learn from all this about building trust
in a financial system?
Well, one thing is for sure.
(10:17):
Transparency is key.
People need to understand how things work.
Like the rules of the game.
Exactly.
They need to feel confident that the government won't just
mess everything up with bad policies or sneaky tricks.
It's almost like a promise.
Kind of, yeah, like a contract.
The government says, we'll handle this responsibly.
And the people say, all right, we trust you.
(10:37):
We'll use this money.
And how is that trust built?
Over time, with good policies and a commitment to stability.
The greenback era, it was pretty wild,
but it led to things like the Federal Reserve.
And they're all about maintaining that trust today.
So the greenbacks, something born out of a chaotic war,
laid the foundation for what we have today.
(10:58):
It's a story of innovation and resilience.
And it has echoes that we can still hear today.
We have digital currencies now.
Technology is changing so fast.
And we're still debating what role
the government should play in the economy.
The lessons of the greenback.
They're more relevant than ever.
It's true.
History isn't just about the past.
It helps us figure out the present
and even shape the future.
(11:19):
Who knew a simple piece of green paper
could teach us so much?
That's it for our deep dive into the world of greenbacks.
We hope you enjoyed it.
And maybe you'll look at that dollar bill
a little differently now.
Until next time, keep exploring
and keep those minds working.
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