Changes

The revenue from tariffs was not enough.  Lincoln started an income tax for the first time (expired in 1872).  He suspended the payment by the government to citizens in gold and silver, to protect its reserves.  He taxed manufacturers and the public through sales taxes.  But most of all, Lincoln financed the Civil War by issuing greenbacks, similar to our green dollar bills today.  This was a change from monetary practices under Alexander Hamilton, when all currency was backed by gold or silver.  Lincoln’s greenbacks were not backed by anything at all.  The government simply printed and distributed them.

The revenue from tariffs was not enough.  Lincoln started an income tax for the first time (expired in 1872).  He suspended the payment by the government to citizens in gold and silver, to protect its reserves.  He taxed manufacturers and the public through sales taxes.  But most of all, Lincoln financed the Civil War by issuing greenbacks, similar to our green dollar bills today.  This was a change from monetary practices under Alexander Hamilton, when all currency was backed by gold or silver.  Lincoln’s greenbacks were not backed by anything at all.  The government simply printed and distributed them.

When the government increases the amount of money out there, it causes inflation.  Everyone starts to realize that the money is not worth as much anymore because the government is printing more of it.  So inflation increased during the Civil War.  What cost $100 when the War started in 1861 cost about $170 after it was over.  That’s 70% inflation in just a few years, which is terrible if you have money in the bank.  Your savings are then worth only a little more than half what it was before the war.  Guess how much that $100 cost in 1861 would be today.  (About $2054!)

When the government increases the amount of money out there, it causes inflation.  Everyone starts to realize that the money is not worth as much anymore because the government is printing more of it.  So inflation increased during the Civil War.  What cost $100 when the War started in 1861 cost about $170 after it was over.  That’s 70% inflation in just a few years, which is terrible if you have money in the bank.  Your savings are then worth only a little more than half what it was before the war.  Guess how much that $100 cost in 1861 would be today.  (About $2,282!)

You can compare inflation between any two years with this website: http://www.westegg.com/inflation/

You can compare inflation between any two years with this website: http://www.westegg.com/inflation/