Confederate war finance

The Confederate States of America financed its war effort during the American Civil War of 1861–1865 through various means, fiscal and monetary. As the war lasted for nearly the entire existence of the Confederacy, military considerations dominated national finance.

Early in the war the Confederacy relied mostly on tariffs on imports and on taxes on exports to raise revenues. However, with the imposition of a voluntary self-embargo in 1861 (intended to "starve" Europe of cotton and force diplomatic recognition of the Confederacy), as well as the blockade of Southern ports, declared in April 1861 and enforced by the Union Navy, the revenue from taxes on international trade declined. Likewise, the financing obtained through early voluntary donations of coins and bullion from private individuals in support of the Confederate cause, which early on proved quite substantial, dried up by the end of 1861. As a result, the Confederate government had to resort to other means of financing its military operations. A "war-tax" was enacted but proved difficult to collect. Likewise, the appropriation of Union property in the South and the forced repudiation of debts owed by Southerners to Northerners failed to raise substantial revenue. The subsequent issuance of government debt and substantial printing of the Confederate dollars contributed to high inflation, which plagued the Confederacy until the end of the war. Military setbacks in the field also played a role by causing loss of confidence and by fueling inflationary expectations.^[1]

At the beginning of the war, the Confederate dollar cost 90 cents in gold dollars. By the war's end, its price had dropped to 1.7 cents.^[2] Overall, prices in the South increased by more than 9000% during the war, averaging about 26% a month.^[3] The Secretary of the Treasury of the Confederate States, Christopher Memminger (in office 1861–1864), was keenly aware of the economic problems posed by inflation and loss of confidence. However, political considerations limited internal taxation ability, and as long as the voluntary embargo and the Union blockade remained in place, it was impossible to find adequate alternative sources of finance.^[1]