The Legal Tender Acts: Study Questions and Resources

The Legal Tender Acts (1862-1865): A Revolution In U.S. Monetary Policy

Study questions and resources

1. What did Secretary of the Treasury Salmon Chase’s Report to Congress on December 9, 1861 reveal about the Union’s financial status?

2. Why could the government no longer borrow from the banks?

3. How much was the Civil War costing the Union per day?

4. Describe the main features of the initial Legal Tender Bill.

5. What does legal tender mean?

6. What is a fiat currency?

7. What were the features of an alternate plan to fund the war proposed by the bankers?

8. Why did leaders of Congress oppose the banker’s plan?

9. Why was Chase not a major player in the formation of the Legal Tender Bill?

10. In Wesley Clair Mitchell’s opinion was the Legal Tender Bill a necessity? Why?

11. Representative Spaulding’s argument concerning the constitutionality of the bill rested on which Constitutional Clause.

12. What is the “Necessary and Proper” clause of the U.S. Constitution?

13. Describe how Spaulding used the above clause to prove that the legal tender bill was constitutional.

14. In Thaddeus Stevens’ opinion who (branch of government) gets to describe what is a necessary and proper means?

15. From which Supreme Court case and which judges opinion did Stevens draw his opinion from?

16. Which constitutional amendment was cited by those opposed to the bill?

17. Describe how the 10th Amendment was used to prove the unconstitutionality of the Legal Tender bill.

18. What did President Andrew Jackson believe about Supreme Court precedents?

19. What danger did Representative say would exist if Congress can determine the extents of the “Necessary and Proper” clause?

20 What was the fate of the Continental Dollar from 1775 – 1780? Explain.

21. What does it mean when a currency depreciates?

22. Why did Representative Spaulding say depreciation would not be a problem?

23. What did Representative Morrill say about taxes and depreciated notes?

24. What did Representative Pendleton say would result from the printing of greenbacks?

25. What is definition of inflation?

29. What is Gresham’s Law?

30. What are the moral implications of inflation?

31. Did the proponents of the Legal Tender Bill prove that greenbacks were absolutely necessary to continue the war effort? Why or Why not?

32. What was the total amount of greenbacks authorized in dollars?

33. What percent of the war did they finance?

34. Describe some of the effects of greenback printing on the wartime economy? Did the predictions of the opposition come true?

35. What was Salmon Chase’s opinion on greenbacks when he was a Supreme Court justice?

36. What was the final Supreme Court ruling on the constitutionality of greenbacks?

37. Was Chase able to finance the war in the months before the issuance of greenbacks?

38. How did the issuance of greenbacks act as a hidden tax?

39. What did Senator Sherman say about a national monetary system.

40. What were the National Banking Acts?


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Murray N. Rothbard, A History of Money and Banking in the United States, 2002.

Wesley Clair Mitchell, A History of the Greenbacks, 1903.

Mark Thornton and Robert B. Ekelund, Jr. Tariffs, Blockades, and inflation: The Economics of the Civil War, 2004.

Roger L. Ransom, The Economics of the Civil War

H.A. Scott Trask, Paper Money, Taxes and War

Report of the Secretary of the Treasury, December 9th, 1861

Elbridge Gerry Spaulding, History of the Legal Tender Paper Money Issued During the Great Rebellion, 1869.

Philip W. Newcomer, The Illegality of Legal Tender

F.A. Hayek, A Choice in Currency: A Way to Stop Inflation