outbreak of the Civil War, North Carolina and the other southern
states that left the Union were no longer bound by the United States
Constitution's restrictions on the production of state-issued currencies.
Though fiercely loyal to the "southern cause," the Tar Heel State
and each of the other rebelling states closely guarded its own independence,
especially in economic affairs. This independence was recognized
and underscored by the Confederate Constitution, which guaranteed
the allied states the right to print their own money. Along with
the various state governments, the national government of the Confederacy
(in Montgomery, Alabama, and later in Richmond, Virginia) issued
massive amounts of paper currency to finance the war. The wide variety
of notes only added to the chaos caused by the South's inability
to absorb this huge money supply. The Confederate treasury alone
issued at least 72 types of notes during the war, amounting to an
estimated two billion dollars.
A $5 note printed by the Confederate Goverment; State Capitol
at Richmond, Va., C.G. Memminger at right, Richmond, 1864; NCC
The back side of this same note
Overissue, the ever-tightening Union blockade of southern ports,
and Rebel losses on the battlefield combined to make the solvency
of southern currencies impossible. Counterfeiting also weakened
the South's financial structure. At the beginning of the war, northern
printers produced bogus Confederate notes to be sold as cheap souveniers,
as keepsakes for what had been expected initially to be a brief
conflict. In one case a Philadelphia printer advertised $2,000 in
Confederate notes for 50 United States cents. Aside from profit,
conterfeiting southern currencies was also a deliberate act of war.
By desseminating phony money throughout the South, the Federal government
hoped to accelerate the collapse of the Confederacy's fragile economy.
Between 1861 and 1865, North Carolina's General Assembly authorized
the printing and distribution of over $20,000,000 in state treasury
notes, ranging in denominations from five cents to $100. This amount
seems rather modest for financing years of war, especially when
compared to the monstrous sums issued by the Confederate government;
but for North Carolina these millions proved too much to handle
financially. The strains of war soon made it impossible for the
state's currency to hold its value. On the homefront North Carolinians
struggled against an appalling rate of inflation. For example, over
the course of the war the price of wheat rose over 1,600 per cent;
and flour almost 2,800 per cent. The confusing mix of money types
and styles in circulation added to the ruinous inflation rates and
the resulting economic mayhem. North Carolina's treasury alone issued
over 25 different types of notes in more than 150 varieties. These
notes were in addition to the seemingly endless variety of notes
produced in neighboring states and by the Confederacy's national
government. The issue of governmental or public currencies during
the war did not end private issues by businesses and other institutions.
In North Carolina, as elsewhere in the South, private merchants,
insurance companies, banks, railroads, and many factories continued
to print and issue their own currencies or scrip.
The Civil War led to the nationalization of United States currency.
In financing its war effort, the Federal government also resorted
to paper moneys, including national bank notes. These notes were
printed by or for the government and were issued by private banks
throughout the North and eventually, the reunited country. Between
1863 and 1935, thousands of private banks were granted charters
that allowed them to issue national bank notes. In North Carolina,
147 banks received these national banking charters. In 1865 the
First National Bank of Charlotte was the first Tar Heel bank to
receive such a charter.
In 1913, in an effort to further the United States monetary system,
the Federal government established the Federal Reserve System. This
is the system under which our present currency is introduced into
the economy. The obligation for federal reserve banknotes is borne
totally by the government, not by individual banks. The system is
composed of 12 federal reserve district banks that are responsible
for issuing the government's money supply to commercial banks. North
Carolina is within the Fifth Reserve District, which is administered
by the Federal Reserve Bank of Richmond, Virginia.