California and the Gold Standard During the American Civil War Shearer, Ronald Alexander, 1932-
In late December 1861 the New York banks stopped redeeming their monetary liabilities in gold or silver legal tender coins. The New York suspension was followed by banks throughout the east and midwest and by the government of the United States. Combined with a subsequent act that declared United States notes (“greenbacks”) to be legal tender, the suspension effectively put most of the Union on an inconvertible paper standard. The glaring exceptions were on the Pacific coast where support for the gold standard was strong and where some states remained on the gold throughout the period of inconvertibility. The western recalcitrance with respect to the greenback standard is an interesting and puzzling episode in the American monetary history. Several questions suggest themselves. What does it mean to say that some far western states remained on the gold standard? Given the presumed supremacy of the federal government in monetary affairs, how were these states able to remain on gold while the rest of the country was on an inconvertible paper standard? What were the consequences of remaining on gold? The purpose of this paper is to explore these issues. The scope of this paper is limited in two ways. First, although the period of inconvertibility in the east extended from December 30, 1961 to January 1, 1879, I focus on the Civil War period and its 1 immediate aftermath. This was the period during which the western commitment to gold was aggressively asserted and was placed under severe political stress. Second, I limit the analysis to California. Other western states and territories either adhered to gold (Oregon and Idaho) or contained strong but defeated support for the gold standard (Washington and Nevada) but California was the leader and the lynch- pin in the western gold standard movement. If California had abandoned gold, the role of San Francisco as the financial centre for the coast made it is almost certain that the others would have also. For this reason, understanding why and how California remained on gold is fundamental to understanding the coexistence of the gold standard and an inconvertible paper standard in the United States at this time.
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