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<p>[QUOTE=&quot;GrimReaper, post: 501777, member: 2584&quot;]Confederate bonds were used to raise funds for desperately needed food and supplies for the southern troops during the war. They were a way for the Confederacy to raise money by borrowing from its citizens. A person would lend money to the Confederate government and in return receive one of these bonds, a piece of paper bearing a written promise to repay the lender--with interest--beginning on a certain date in the future.</p><p><br /></p><p>Needless to say, most of the people who lent money in support of the Lost Cause never got a dime back. And so they tucked those Confederate bonds away in a drawer or in a trunk in the attic, never bothering to try to redeem the attached coupons, now rendered worthless by the South&#039;s defeat.</p><p><br /></p><p><br /></p><p><br /></p><p><br /></p><p>As with any war, the Confederate States of America (CSA) needed to raise money to finance their huge war effort.&nbsp; The two primary ways to do this was by taxes and debt.&nbsp;&nbsp; Confederate Secretary of the Treasury Christopher G. Memminger assumed his duties in February 1861 by floating government loans and creating an instant national debt. In 1861 the Confederacy sold bonds worth $150 million in the so-called Bankers Loan, which secured much-needed specie. The government also tapped agricultural staples through the Produce Loan, in which planters pledged their produce in exchange for government paper. Against the receipts of these loans, Memminger issued Treasury notes, circulating paper money with which the government paid its bills. In August, 1861 the Confederate Congress passed a War Tax on various kinds of property to increase government resources. Unfortunately Memminger&#039;s department was inefficient in collecting the produce subscribed to the Produce Loan, and he allowed taxes to be paid in inflated state currency. Consequently government paper money fed inflation, which served as an inverse tax on Confederate citizens.</p><p><br /></p><p>&nbsp;&nbsp; &nbsp; By 1863 Memminger realized that inflation was threatening the government&#039;s ability to support itself and the war. Accordingly he proposed and Congress passed a graduated Income Tax and a 10% Tax In Kind on agricultural products. In March, 1863 the Confederacy accepted a $15 million loan from the French banking house of Emile Erlanger that yielded much less than its face value (about $8.5 million), but given the tenuous nature of Southern nationhood, the Confederates made the best deal possible. Still, Memminger&#039;s printing presses moved faster than the government could collect revenue, and inflation accelerated. In desperation, in 1864 Memminger imposed a Compulsory Funding Measure, which devalued those Treasury notes not exchanged for non circulating government bonds. This failed too, as Confederates continued to exchange government paper for goods and services.</p><p><br /></p><p>&nbsp;&nbsp; &nbsp; In July 1864 Jefferson Davis replaced Memminger with another South Carolinian, George A. Trenholm, but there was little Trenholm could do. The Confederacy never had more than $27 million of specie. The national debt ran over $700 million and the overall inflation was about 6,000%. That the Confederacy persisted as long as it did amid this financial chaos was a wonder. History from Historical Times History of the Civil War</p><p><br /></p><p><br /></p><p>This is also an interesting little read <a href="http://eh.net/encyclopedia/article/weidenmier.finance.confederacy.us" target="_blank" class="externalLink ProxyLink" data-proxy-href="http://eh.net/encyclopedia/article/weidenmier.finance.confederacy.us" rel="nofollow">http://eh.net/encyclopedia/article/weidenmier.finance.confederacy.us</a></p><p><br /></p><p><br /></p><p>And another Excellent read <a href="http://www.claremontmckenna.edu/econ/papers/1999-14.pdf" target="_blank" class="externalLink ProxyLink" data-proxy-href="http://www.claremontmckenna.edu/econ/papers/1999-14.pdf" rel="nofollow">http://www.claremontmckenna.edu/econ/papers/1999-14.pdf</a>[/QUOTE]</p><p><br /></p>

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