"A Crisis Unprecedented" > The Costs of War
As the Chamber had predicted, the Civil War had been “a crisis unprecedented,” which had called for extraordinary innovations. The nation’s finances had been revolutionized. From a mere $63 million in 1860, the federal budget topped one billion dollars five years later, while the national deficit had meanwhile increased by 14,000 percent. This expansion had required enormous loans and bond issues – with much of the capital provided by New York’s elites – as well as the issuance of “greenbacks,” paper currency to cover expenses for which the government could not pay in specie.
With the crisis over, it was time – in the Chamber’s opinion – to get rid of the popular greenbacks. More cash was popular in capital-poor areas of the nation, but the City favored currency contraction. Merchants held numerous government bonds and they wanted to be repaid in coin, not paper. “Measures that were justified by the emergencies of war,” President Low declared, “will not be tolerated now that peace is restored.”