The Three Monetary Systems During the Civil War
Since Paul Krugman is talking about the 150th anniversary of the U.S. Civil War outbreak, it is worth recalling the great monetary experiments created by the Civil War. This great event resulted in the establishment of three monetary regions in the United States: the Greenback monetary system, the Yellowback monetary system, and the Confederate monetary system. The Greenback monetary system emerged in the East when the gold standard was suspended so fiat currency could be introduced in 1862. There was no central bank at the time, so the new fiat money popularly known as the greenback was introduced by the U.S. Treasury. Ironically, the Treasury Secretary who introduced the Greenbacks, Salmon Chase, would later become Chief Justice of the Supreme Court and rule that the fiat currency was unconstitutional. The Greenbacks were highly inflationary as seen in the figure below: Between 1862 and 1865, the price level rose about 60% be...