page_title: Greenback Party
section_title: Background
hierarchical_section_title: Greenback Party / Organizational history / Background
caption_attribution_description: Salmon Portland Chase (13 January 1808 – 7 May 1873) was an American politician and jurist who served as United States Senator from Ohio and the 23rd Governor of Ohio; as U.S. Treasury Secretary under President Abraham Lincoln; and as the sixth Chief Justice of the United States Supreme Court.
context_page_description: The Greenback Party was an American political party with an anti-monopoly ideology which was active between 1874 and 1889. The party ran candidates in three presidential elections—in the elections of 1876, 1880, and 1884, before fading away.
  The party's name referred to the non-gold backed paper money, commonly known as "greenbacks", issued by the North during the American Civil War and shortly afterward. The party opposed the deflationary lowering of prices paid to producers entailed by a return to a bullion-based monetary system, the policy favored by the Republican and Democratic Parties. Continued use of unbacked currency, it was believed, would better foster business and assist farmers by raising prices and making debts easier to pay.
  Initially an agrarian organization associated with the policies of the Grange, from 1878 the organization took the name Greenback Labor Party and attempted to forge a farmer–labor alliance, adding industrial reforms to its agenda, such as support of the 8-hour day and opposition to the use of state or private force to suppress union strikes.
context_section_description: The American Civil War of 1861 to 1865 greatly affected the financial system of the United States of America, creating vast new war-related expenditures while disrupting the flow of tax revenue from the Southern United States, organized as the Confederate States of America. The act of Southern secession prompted a brief and severe business panic in the North and a crisis of public confidence in the Federal government. The government's initial illusions of a quick military victory proved ephemeral and in the wake of Southern victories the federal government found it increasingly difficult to sell the government bonds necessary to finance the war effort.
  Two 1861 bond sales of $50 million each conducted through private banks went without a hitch, but bankers found the market for the 7.3% securities soft for a third bond issue. A general fear arose that the country's gold supply was inadequate and that the nation would soon leave the gold standard. In December runs on deposits began in New York City, forcing banks there to disburse a substantial part of their hard metal reserves. On December 30, 1861, New York banks suspended the redemption of their banknotes with gold. This spontaneous action was followed shortly by banks in other states suspending payment on their own banknotes and the U.S. Treasury itself suspending redemption of its own Treasury notes. The gold standard was thus effectively suspended.
  United States Secretary of the Treasury Salmon P. Chase had already anticipated the coming financial crisis, proposing to Congress the establishment of a system of national banks, each empowered to issue banknotes backed not with gold but with federal bonds. This December 1861 proposal was initially ignored by Congress, which in February 1862 decided instead to pass the First Legal Tender Act, authorizing the production of not more than $150 million of these legal tender United States Notes. Two additional issues were deemed necessary, approved in June 1862 and January 1863, so that by the end of the war some $450 million of this non-gold-backed currency was in circulation.
  The new United States Notes were popularly known as "greenbacks" due to the vibrant green ink used on the reverse side of the bill. A dual currency system emerged in which this fiat money circulated side by side with ostensibly gold-backed currency and gold coin, with the value of the former bearing a discount in trade. The greatest differential in value of these currencies came in 1864, when the value of a gold dollar equaled $1.85 in greenback currency.
  Congress finally enacted Treasury Secretary Chase's National Bank plan in January 1863, creating a yet another form of currency, also backed by government bonds rather than gold and redeemable in United States Notes. This non-gold-based currency became the functional equivalent of greenbacks in circulation, further expanding the money supply.
  With the production of consumer goods impacted by the conversion of factories to wartime production and the expansion of the money supply, the United States of America experienced a period of protracted inflation during the Civil War. Between the years 1860 and 1865, the cost of living nearly doubled. As is the case in all inflationary periods, there were winners and losers created by the significant fall in currency value, with banks and creditors receiving less real value from the loans repaid by debtors. Pressure began to build in the financial industry for a rectification of the weak currency situation.
  A change of heads at the Treasury Department in March 1865 proved the occasion for a change of course in American monetary policy. New Secretary of the Treasury Hugh McCulloch not only declared himself sympathetic to the banking industry's desire for restoration of a gold-based currency, but he declared the resumption of gold payments to be his primary aim. In December 1865 McCulloch formally sought approval from Congress to retire the greenback currency from circulation, a necessary first step towards restoration of the gold standard. In response, Congress pas
caption: Salmon P. Chase, Abraham Lincoln's Secretary of the Treasury, was a leading exponent of so-called "greenback" currency during the American Civil War
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