Edward Alfred Pollard, The lost cause; a new Southern history of the War of the Confederates ... Drawn from official sources and approved by the most distinguished Confederate leaders.

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[422] these measures other loans in heavy amounts, upon bonds at long dates, were periodically made; and the baneful system was instituted of Treasury notes put out in the form of notes of circulation, in amounts ranging from the fractions of a dollar up to notes of five hundred dollars. If to these measures we add the cotton bonds, which were employed in England and Europe for the purchase of war material, and the cotton loan upon which they were based at home, we shall have mentioned all the leading measures of finance employed by the Confederacy.

The fifteen million loan was early disposed of at satisfactory rates. For a time the interest which had been stipulated to be paid in specie was actually discharged according to the terms of the contract; but before the close of the war the bondholders were either not paid at all or consented to arrangements less difficult to the Treasury than the payment of specie. This fifteen million loan in fact produced sore inconvenience to the Government during the later years of the war, and was the first subject with reference to which it was obliged to forfeit its faith to the holders of its paper.

The temporary loans negotiated from the banks were easily provided for. By the time that the loans matured, the Treasury was able to discharge them by means of the Treasury notes prepared for circulation. But it was found in the sequel that these accommodations cost the banks dearly. It has already been mentioned that at the outbreak of the war the circulation of the Southern banks was quite inconsiderable in amount. To meet the demand of the Government for loans, the banks very consider ably increased their outstanding circulation ; in fact, they doubled, and, in many instances, qradrupled it; a thing which was perfectly safe during a suspension of specie payments. Indeed, a large increase of circulation was found to be quite necessary, after the disappearance of specie and under the stimulus imparted by the war to all branches of trade. The fifty millions of currency found in circulation by the war was wholly inadequate to the active state of business superinduced by the war. The banks accomplished two objects by one measure. In granting a loan to the Secretary of the Treasury, they placed a large amount of funds in the hands of the Confederate Government; and they supplied, by the same act, the deficiency of currency which was so stringently felt by the people. But the act proved their ruin. The notes of circulation which they thus put forth, following that law of finance which makes a base. currency drive out of circulation one less base, were hoarded. The bank notes, when lent by these institutions to the Government soon spread over the country. They were succeeded by similar paper issued in the form of currency by the Confederate Government. The Treasury notes were distrusted, and in proportion as they were distrusted, the notes of the banks were hoarded. The law of finance which has been adverted to had a quick and striking exemplification. The notes of the old familiar banks of the States were reserved