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Greenbacks were paper currency printed by the Union in 1962 during the Civil War. Their value fluctuated with the Union's chances of winning, dipping to just 40 cents per dollar in early 1864, but rising to 67 cents per dollar by the end of the war. Greenbacks were supposed to be redeemable in gold eventually, but that right of redemption was indefinitely postponed. Creditors disliked being paid in greenbacks and pushed to retire them from circulation. Farmers liked the inflation caused by the greenbacks, and a compromise allowed $356 million worth of greenbacks to remain in circulation in the late 1860s.

The Panic of 1873 was the worst depression yet in American history. President Grant vetoed a bill to expand the currency. Conservatives won the passage of the Specie Resumption Act of 1875, which required retirement of all greenbacks at face value on January 1, 1879. The National Greenback Party formed to work for the repeal of this law. In 1878 a compromise provided that there would be no repeal of the Resumption Act, the money supply would be increased slightly with additional specie-backed currency, and a limited coinage of silver dollars would be allowed by passing the slightly inflationary Bland-Allison Act (1878).

The government built up its gold reserves to prepare for massive redemption on January 1, 1879, but by then the public had full confidence in the currency and there was no run on gold. The greenback controversy was over, and had been replaced by a movement for free and unlimited coinage of silver.