Gold dollar vs Greenbacks: Civil War and After

Every 50 years or so over the last century and a half of time, free market forces have eventually given the US government a full gold accounting by her Official US Gold Reserves.

On this website we have covered in much detail the last 2 times gold accounted for outstanding US dollars (e.g. gold vs dollars).

We along with many of our customers fully expect similar occurrences to come, given the well documented poor US financial situation of our government and various financial institutions today.

The following is a similar gold accounting for runaway deficit spending which occurred beginning with the US Civil War through the late 1870s (with gold doing the work, while silver was demonetized for assistance for many decades to follow).

You may have heard someone in your lifetime call Federal Reserve notes (i.e. US dollars) by an old nickname derived from the Civil War era. The ‘Greenback’ is trading up or down, this is still common to hear.

Many financial and FX traders often still refer to Federal Reserve notes as greenbacks and it is not too far off the mark in the sense that they are both fiat currencies.

Trouble is the latter had an implicit promise to one day be exchanged for gold bullion specie at face value par, after the Union had eventually won the Civil War (although that was in doubt for many years according to US history).

The definition of ‘Greenback’ today is as follows:

Greenback - (n) an informal reference to US dollars but more explicitly today, legal tender Federal Reserve notes. Originally a fiat currency used from 1861 to 1865 A.D. by the winning Union side of the US Civil War, as they lacked gold bullion reserves to finance their ongoing Civil War efforts at the time.

Wars are expensive, in fact when if you look at financial history WWII and prior, most major wars were followed by rampant price inflations as a result of the misallocated capital and pricing adjustments to goods and services which followed shortly after.

A long term gold price chart in US dollar terms can tell you as much.

Gold dollars vs greenback vs gold dollar SD Bullion SDBullion.com

Back in 1860, the United States banks ran out of gold and silver specie coin to lend to the government during the Civil War efforts. Further complicating matters was their war advisory, the southern Confederate states issued their own Confederate dollar (which later hyper-inflated to worthlessness, or perhaps a mere numismatic collectible note today).

Rather than pay usurious high interest rate loans that foreign banks were charging at the time (e.g. 1860 AD), the United States’ Union government issued "fiat currency" to finance their Civil War efforts.

These soon to be nicknamed greenbacks were legal tender by law in the Union, but were not backed by gold or silver, only the credibility of the then U.S. government.

Patented in April 1860, an original design and print is pictured below. Obviously greenbacks got their name based on the green colored ink covering their backsides or obverse of the notes.

April 1860 Greenback One Dollar

Greenbacks were issued over a 5 year timeframe in two forms: Demand Notes, issued in 1861 and 1862, and United States Notes issued in 1862 and 1865.

Note the slight but critical change between Demand Notes vs simple Legal Tender Notes from before and after 1862.

Legal tender greenback vs gold dollar SD Bullion SDBullion.com

This change in greenback note variations led to a 2-tier pricing structure for the two varying greenback notes.

As the former greenback demand note version was usable in extinguishing many more debts than the latter greenback legal tender note versions (i.e. demand notes were usable in paying various taxes at the time, customs duties, etc.).

You can see the demand vs legal tender greenback note price discrepancies priced in gold dollars at the time of the Civil War in the chart below.

Two Different Greenbacks

None of this fiat currency issuance policy was without criticism. It was indeed the first time the then restricted democratic republic of the United States had officially issued a full fiat currency legal tender note.

Newspaper cartoons at the time painted the greenback issuance policy often in a poor light, citing Lincoln’s Civil War battle failures, and various greedy special interests carteling the greenback issuance table.

Greenback vs Gold dollar Coin values SD Bullion Running the Machine Cartoon

Cartoon Source

These various greenback fiat currency values were derived not merely from whether they were the original demand or later legal tender note versions, but also from the public's faith that the Union would even be able to someday keep its promise to exchange either type greenback notes for physical gold dollar bullion coins.

Gold rich states like California flexed their legal states rights over the then Federal government decrees, effectively avoiding greenbacks usage in business outside of a few exceptions in person to person bilateral agreements and trades.

California Rejects the Greenback vs Gold dollar coins


During the Civil War, investment brokers who traded in gold bullion and gold dollar coins, created fluctuating exchange rates between the two asset classes: greenbacks vs gold bullion.

The fluctuating price for gold in greenbacks rose and fell in a volatile fashion with the Union's latest performance on the Civil War battlefields.

After the Civil War and the Union’s victory, the US Treasury Department began selling gold bullion in exchange for outstanding already issued greenbacks, as they had promised to do

Greenback vs Gold dollar values Black Friday Wall Street

There was even a major scandal on Wall Street involving a sordid story of speculative financial conspirators, a then US President, and other historic names all perhaps colluding to drive the then price of gold to $160 oz by late 1869 AD.

What is often referred to as ‘Black Friday’ has some interesting similarities to the 1980 Hunt Brothers silver scapegoating.

As you can see in the greenback vs gold dollar chart below, it took decades for many greenback holders to recoup their savings in equivalent or close to gold dollar coin specie values (if they ever indeed did).

The Greenback Era

U.S. government's efforts to prop up gold as the sole currency standard were on full display during what is often referred to as “The Crime of 1873”. When the then US Congress demonetized and halted the production of silver dollar coins.

The following year lawmakers began curbing greenback circulation in a bid to increase the currency's value in gold dollar coins.

By 1879, US lawmakers once again pegged the value of the greenback to gold, promising to redeem them fully once they reached parity with gold, which happened the following year.

That left a gold standard in tact, one in which paper dollars could be exchanged freely for gold.

You might now want to refer back to the prior charts we have posted, specifically the gold price chart throughout this greenback vs gold Civil War and post 20 year timeframe. By doing so you will likely better be able to appreciate the consternation affecting those citizens who held greenbacks vs gold dollar coins.

Gold dollar vs Greenbacks Currier and Ives cartoon 1875 SD Bullion SDBullion.com

Those who held gold specie throughout this timeframe not only preserved their wealth, they even lived through a speculative bubble which likely was just gold accounting for the rampant amount of greenbacks outstanding at the time. But yet one in which gold price speculators could have traded gold at nearly 8Xs its typical $20.67 oz price for over a century’s time spanning well before and after the Civil War era.

It took the US government to literally de-define silver as money in 1873, to bring the US financial system and the gold price back under wraps with the long standing explicitly defined $20.67 oz gold dollar price it would remain at up and until the 1933 gold confiscation. A polite robbery in broad daylight of the US citizenry as the then US currency was devalued by some -70% to gold with the stroke of then US President, Franklin D. Roosevelt's pen.

You can learn more about on our Gold Price History page.

“They (US Congress) are required to ensure a valid weight to the currency and ensuring the gold and silver will be legal tender. The Congress should not be creating money out of thin air, which is what Lincoln did when he created greenbacks. But it is a congressional responsibility to maintain gold and silver as a legal tender.” -Dr. Ron Paul

As we ponder the future value of the fully fiat Federal Reserve note (i.e. gold vs dollar).

It is important to look back at history for it is replete with examples of the sound long term monetary choice at hand, one still available to US citizens today (e.g. this was not always the case, illegal private gold savings 1934-1974).

For an even deeper dive on this greenback vs gold dollar topic, the following video will give you further details on this critical matter which arguably helped usher in the founding of the private Federal Reserve central bank by 1913.


Greenback vs Gold dollar: A Choice of Necessity?


Thank you for visiting us here at SD Bullion.


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James Anderson
James Anderson
Senior Market Analyst & Content

A bullion buyer years before the 2008 Global Financial Crisis, James Anderson is a grounded precious metals researcher, content creator, and physical investment grade bullion professional. He has authored several Gold & Silver Guides and has been featured on the History Channel, Zero Hedge, Gold-Eagle, Silver Seek, Value Walk and many more. You can pick up Jame's most recent, comprehensive 200+ Page book here at SD Bullion.

Given that repressed commodity values are now near 100-year low level valuations versus large US stocks, James remains convinced investors and savers should buy and maintain a prudent physical bullion position now, before more unfunded promises debase away in the coming decades...