History Through Coins: America’s Civil War

At the beginning of April 1861, it was still hoped that war between the United States of America and the newly formed Confederate States of America (CSA) could yet be averted. A standoff of several months had existed with regard to the Union fortresses arranged around Charleston Harbor in South Carolina, but it had been merely a war of words.

A demand by the CSA to surrender Fort Sumter, the largest of these bastions, was made on April 11, but its commander, Major Robert Anderson, stood firm. The following morning at 4:30 a.m., the Confederates commenced an artillery bombardment that lasted into the night. On the next day, Major Anderson surrendered his nearly ruined fort.

Still believing that this was just a small rebellion that wouldn’t last very long, US President Abraham Lincoln sent out the call for volunteers to recapture all federal properties seized by the CSA. Neither side then imagined that this would be a full-blown war that would last four years. It began in April 1861 and effectively ended almost four years to the day with the April 9, 1865 surrender of General Robert E. Lee.

War was an expensive undertaking, and much of each government’s energies and resources went toward financing their armies and navies. The United States Mint at New Orleans had been seized by the State of Louisiana shortly after it seceded from the Union and was later turned over to the new CSA government. The bullion on hand was made into rare issues of federal gold coins for a time, and large numbers of 1861-O Half Dollars were produced under both the state and central governments after seizure.

1861-O Seated Liberty Half Dollar, graded NGC MS 64

The Confederacy made only an abortive effort at creating its own unique coinage. Four half dollar patterns in silver were coined from a muling of the federal die for an 1861 Half Dollar with a unique CSA reverse die. By the time this die was ready, the South was nearly out of gold and silver bullion, and it relied almost solely on CSA paper currency to fund its war. Some years after the war, coin dealer John W. Scott obtained a quantity of 1861-O Half Dollars, planed down their reverses and overstruck them with the CSA die.

1861-dated CSA Half Dollar Restrike over a genuine 1861-O Half Dollar (circa 1879, Breen-8001), graded NGC UNC Details

The so-called CSA cents are most likely a post-war fantasy issue, though the ones traditionally labeled as “originals” are highly sought.

Even for the Union, the matter of financing a war was quite challenging, as the federal government was still a remarkably small institution prior to 1861. Nearly all of its revenue came from customs duties, and there was no federal income tax nor was there any federal paper currency.

Since paper money was then viewed solely as a promise to pay in legal tender, meaning gold and silver coins, it had been called upon only during times of war. Thus, did the US Treasury issue a series of notes in 1861 known as Demand Notes, which were redeemable in coin but could be issued to a value greater than the hard money on hand. These would provide the funding needed to wage war against the South.

1861 $10 Demand Note (Friedberg-7a, ex: Brent D. Pogue Collection), graded PMG 58 Choice Uncirculated EPQ

Unfortunately, early losses for the Union Army shook note-holders’ confidence, and it wasn’t long before the paper was being redeemed for coin en masse. Banks, alarmed by the draw-down of their hard money reserves, suspended the redemption of Demand Notes in specie (gold and silver coin) toward the end of 1861, and the government soon had no choice but to do the same.

In their place, the Treasury issued Legal Tender Notes. These were technically redeemable in hard money, but only at the government’s discretion. Effectively, they were non-redeemable until well after the war crisis passed, and this led to depreciation in their purchasing power. By the spring of 1862, a one-dollar note was worth less in commerce than a dollar in gold or silver coin, and both of the latter quickly disappeared from circulation.

To make up for the shortage of 3-cent through 50-cent pieces, both merchants and the general public found creative solutions. One method was to bundle or roll the copper-nickel cents into fixed quantities. These were assembled in groups of 10, 25 or 50 pieces and used in place of the missing silver coins, but the plan was successful for just a very short time.

By the summer of 1862, it seemed that the Union Army was losing one battle after another to the Confederates, and even the base-metal cents began to be hoarded as the only hard money left. The Philadelphia Mint coined many millions during 1862-63, but most were not to be found in circulation until some years after the war’s end.

1862 Copper-Nickel Indian Head Cent (ex: Newman Collection), graded NGC MS 63

Out of sheer necessity, stamps were pressed into service as substitute coins, but they became worn and filthy quite quickly. When placed into envelopes or pasted to cardstock, they lasted a bit longer. The government made their use in payment legal on July 17, though such transactions were limited to no more than five dollars.

With no sign of real coins re-entering daily commerce, Congress took more aggressive action by introducing postage notes. These debuted August 21, 1862 and were business-card-size paper money notes that actually depicted their value in stamps. For example, a 50-cent note displayed an image of five 10-cent stamps!

The concept worked, and this program was revised the following year to omit the stamp images in place of vignettes that made the small notes look more like their big brothers. They also included security features, as the postage currency had been too easily counterfeited.

1862 10 Cent Postage Currency Note (Friedberg-1242), graded PMG 65 Gem Uncirculated EPQ

While the matter of small change had been addressed fairly successfully with fractional currency notes, these quickly became worn and dirty, as they were printed on fairly thin paper. The public clamored for actual coins, though how such pieces could circulate at face value had to be addressed first.

In the summer of 1864, the federal paper dollar fell to a low of only about 50 cents as reckoned in gold or silver coin, which meant that the pre-war standard could not possibly be used. The US Mint facilities did still coin all denominations throughout the war, but the numbers made at the Philadelphia Mint were generally quite small, and these coins were not seen by the public.

For the San Francisco Mint, however, the production of silver and gold continued unabated, as westerners scorned paper money of all kinds. The high prices for all commodities in the distant West meant that the coins circulated freely at par value all through the war years. The financial disconnect between East and West could not have been greater.

1863-S Coronet Liberty Double Eagle, graded NGC MS 62

Various proposals were floated in Congress for a coinage of reduced weight and/or fineness, but lawmakers were so opposed to tinkering with the nation’s legal standards that nothing much came of these efforts beyond an extensive series of pattern coins during 1869-70. These so-called “standard silver” patterns were produced in a dizzying array of die and metal combinations, with only a few favored coin collectors benefiting from all the work.

That program was still a few years away when the US Mint and Congress came together to make their first solid step to restoring a circulating coinage. Observing that the absence of one-cent pieces in commerce had prompted a flurry of cent-sized tokens to be made and circulated in their place, Mint Director James Pollock advocated that the United States revise its one-cent piece to mimic the size and composition of these tokens, which seemed to circulate freely.

1863 Civil War Patriotic Token (Fuld-6/268), graded NGC MS 65 RB

On April 22, 1864 a new law provided for a cent made of 95% copper with 5% tin and zinc and weighing just 48 grains (3.11 grams). This superseded the much-thicker and more intrinsically valuable copper-nickel cents, and they proved to be an immediate success.

1864 Bronze Indian Head Cent (ex: Newman Collection), graded NGC MS 64+ RD

To speed the restoration of small change, the same law provided for a two-cent piece of exactly double the weight of the cent. This, too, found great favor with the public and both coins were of sufficiently low metallic value to not tempt hoarders. The two-cent piece made history by becoming the first United States issue to carry the motto IN GOD WE TRUST, which is now mandatory on all coins and notes.

1864 Two Cents, graded NGC MS 65 BN

Once the ice had been broken with respect to introducing new coins that were worth much less than their stated value, this concept assumed tremendous momentum. So unpopular were the fractional paper notes that it was desired to replace all with base metal coins. Congress, however, declined to consider this for anything higher than the five-cent piece.It was thus that bills were passed for base metal coins to replace absent silver three-cent and five-cent issues. The Act of March 3, 1865 authorized a replacement for the silver “trime” that was composed of 75% copper and 25% nickel.

1865 Copper-Nickel Three Cents, graded NGC MS 64

This same composition was adopted for the half dime’s replacement on May 16, 1866. Why these were made from a copper-nickel alloy and not the “French bronze” alloy of the new cent and two-cent pieces is explained by the lobbying efforts of nickel-mining tycoon Joseph Wharton. He pressured Congress to subsidize his Pennsylvania mines by utilizing nickel in the nation’s coins, as he then possessed the only domestic supply.

All four of the new coins found ready acceptance in daily circulation, and the equivalent three-cent and five-cent notes soon were retired in exchange for the coins. Congress supposed that both of the two higher denominations would be discontinued once the federal “greenbacks” achieved value parity with gold and silver coin, but one proved to be remarkably durable. While the two-cent and three-cent pieces were discontinued altogether in 1873 and 1889, respectively, the copper-nickel five-cent piece remains essentially unchanged to the present day.

1866 Shield Five Cents, graded NGC PF 67 Ultra Cameo

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History Through Coins previous columns:

• History Through Coins: The Ides of March
• History Through Coins: Sports
• History Through Coins: Chinese New Year
• History Through Coins: Circulating US Coins in 2020, 1920 and 1820
• History Through Coins: World War I
• History Through Coins: Transylvania