Hyperinflation and the Confederacy:

An Interdisciplinary Lesson in Economics and History


Brooke Graham Doyle

Students can learn economic concepts in the context of historical events. For example, during the Civil War, the Confederacy printed tremendous volumes of paper money, which led to hyperinflation on an unprecedented scale. It was an economic disaster for the South. In this lesson, students are challenged to interpret primary documents and to manipulate economic data, thus weaving concepts of economics and history into a meaningful learning experience. In this article, I describe the lesson and provide a sample of the primary documents; the full set of documents and further background are available on the Internet as part of the Valley of the Shadow, a website sponsored by the University of Virginia.1 This website includes a vast collection of documents from a Northern and a Southern community during the Civil War: Franklin County, Pennsylvania, and Augusta County, Virginia, respectively.

History teachers who enjoy adding an economic dimension to their teaching, or economics teachers who use historical examples to provide authenticity, will find this lesson useful. The lesson addresses the following social studies content standards: 2 Time, Continuity, and Change; 6 Power, Authority, and Governance; and 7 Production, Distribution, and Consumption.2 At the end of the lesson, students should have a basic understanding of (a) the Confederacy’s difficulty in trying to finance its war effort, (b) the consequences of a government that prints lots of money to pay its own debts, and (c) the responsibility of any government to act wisely in regulating the money supply.


The Price of Money

Inflation is an increase in the general level of prices. Hyperinflation is a very rapid and large increase in the level of prices.3 Hyperinflation can be triggered when a government prints too much paper money. For example, government leaders can be tempted simply to print money and use it to pay off government debts. The problem with this scheme is that people begin to perceive paper money as having less and less value. They fear that it might even become worthless.

A major twentieth century example is the hyperinflation that Germany experienced in 1923, when German leaders were unable to meet reparation payments from World War I and resorted to printing tremendous amounts of money. The German mark devalued to ridiculously low levels, resulting in the population’s loss of confidence in the government. During this chaotic time, an ambitious Adolf Hitler hoped to capitalize on people’s desperation by staging a coup, which landed him in jail. There, Hitler refined his strategy and began to build the Nazi party.4


Paying for a War

In America in the 1860s, the different approaches taken by the North and South to deal with the problem of financing the Civil War reflected some of the political conflicts that led up to that war. The Confederacy’s Secretary of the Treasury, Christopher Memminger, asked the states in rebellion to raise taxes to help pay for the Confederate Army, but he was unsuccessful. His appeal generated less than two percent of the Confederacy’s Treasury.5 States were reluctant to tax their own citizens, particularly in the name of a central government (the Confederacy).

Indeed, an aversion to such authority was one reason why the southern states had seceded from the federal government (the United States). Yet without the power to collect taxes, the leaders of the Confederacy were left with an impossible task: They had to supply an army at war, yet they had no effective way to finance the venture.


Reading a Primary Document

Provide your students two 1863 articles from a Virginia newspaper, The Staunton Spectator, entitled “Legislative Tinkering” and “Exhorbitant [sic] Prices” (see sidebar A; full text is available on the web). The author of one article argues against the policy of impressment (seizing private property for public use without compensation to the owner) and describes how people in various walks of life are affected differently by the inflation. Discuss the definitions of terms used in that article, such as speculator (one who buys stocks on the stock market) and producer (one who provides a real good, like food, shoes, or cloth). The author of the other article discusses the government’s role in regulating prices and currency. Use this text to explore the causes of inflation and hyperinflation. Students might also make an educated guess about each author’s social position or occupation.


Graphing a Comparison

As students begin to understand the difficulty of financing wars, provide them with an example of inflation during the Civil War, a table with comparative wholesale prices for shoes (Figure 1). For example, these numbers show that in Charleston, South Carolina, a pair of shoes that cost $1 in 1861 rose in price to $25 in 1863! Ask students whether today they can imagine what sort of problems might arise in their lives if prices were to skyrocket like this. The problem of paying inflated prices was multiplied for a government that had to pay for rifles, uniforms, wages, and food for soldiers.

Figure 1
Price of a pair of shoes during the Civil War

Sources: Data Adapted from Friedman (1952); Gallman (1994); Lerner (1955)

Ask students to use the numerical data to create by hand a graphical representation of inflation during the Civil War. Graphing the two data sets on one scale is challenging—can students arrive at how to do this and end up with a graph, such as the one shown in Figure 1?

Using large increments along the y axis is the key to containing all the data on one graph. After students struggle to do this task by hand, consider having them use a spreadsheet program, such as Microsoft Excel. Although spreadsheet programs make the task easier, the problem of graphing such disparate data sets in one chart remains. Expanding the y axis enough to capture the South’s data masks the fluctuations in the North’s prices. Once the graph is drawn, a picture of two very different experiences emerges: the North struggled economically but survived. The South, however, became insolvent and collapsed.


Playing a Role

What would it be like to try to save money, borrow from a bank, sell goods, or pay employees under conditions of hyperinflation? Ask students whether these vastly inflated conditions might have actually benefited some people. If so, which people and in what positions? Leave that question hanging as you divide students into five groups with each group assigned to one of the following southern roles:

• Planter: a farmer who owned slaves as well as a sizable plot of land and who sold substantial quantities of his crops on the market, usually for a significant profit;

• Yeoman: a farmer who generally did not have many slaves, owned a small-sized plot, and struggled to make ends meet;

• Skilled wage earner: a carpenter, shoemaker, or seamstress;

• Unskilled wage earner: a deliveryman, day laborer, or washerwoman;

• Merchant: the owner of a general store or tavern.

Give each group the same set of primary documents, articles from newspapers in Virginia in 1863, which deal with some of the economic realities of the Civil War as experienced in the South (a sample of these are shown in Sidebar B; the full set is available on the web). Keeping in mind their assigned role, students read the set of articles to determine how the South’s economic policies affected them. Students will have to make inferences based on the documents and what they know about the South’s economic policies. Depending on how much background knowledge students have, you may wish to offer students Sidebar C as an additional handout to guide their reading of the primary documents. After carefully reading the documents individually, students should discuss with their group how they interpreted the readings. Once students have grappled with the documents together, have the group write a paragraph, in the first person, describing how a person in their group’s role (e.g., an unskilled wage earner) fared during the war. Students may also wish to use the documents from Sidebar A in the group activity. Encourage students to remember the context of a bitter Civil War and the bias associated with writing in the first person.


Summarizing the Lesson

Assemble the whole class. Ask one student from the group that wrote a paragraph as a southern planter to come forward and read it. Continue this task with each occupation. Generate a chart listing the positive and negative economic consequences of hyperinflation for the five occupations. In your discussion, try to bring out the tensions among different segments of society.

For example, because prices rose faster than wages, many southern businessmen made profits, whereas wage earners and those on fixed incomes suffered most. These folks could not pass on higher costs to anyone; they could not raise prices or pressure the government to protect them. Many southerners believed that inflation was caused by speculators or government impressment agents, so much anger was directed at these individuals. In reality, “Southerners confused the forces that actually instigated inflation—the increase in the stock of money and the decrease in real output—with the process through which these forces operated.”6 Some southerners wanted speculators hung, whereas others wanted them to join the army “and live off raw, stinking beef and black bread.”7

After students have taken this more personal approach, provide the data in Table 2, which summarizes the North’s and South’s differing approaches to financing the war. Have students discuss the reasons behind the differing approaches and the consequences of the differences.

Students could draw pie charts from these data to make them more graphical and dramatic.

Table 2
Methods of financing the Civil War, North and South Compared
The numbers shown are the percent of the government's budget that was derived from the various methods.

Source: Lerner (1955b); U.S. Department of Commerce (1949).
* Rather than contributing in the form of money, some citizens gave food or horses, for example, to help the war effort. Alternatively, these goods were forcefully taken from citizens. This practice is called impressment.


Assessing the Lesson

Ask students to imagine that it is 1863 and they are Christopher Memminger, the Confederacy’s Secretary of the Treasury. Students must think of a policy that raises sufficient funds for the Confederacy’s war effort and is both effective and popular. Students should write a persuasive letter that will appear in papers across the South outlining the economic components of their policy and convincing people that the policy is sound and worthwhile. Encourage students as they brainstorm to look at the structure of the southern economy and the North’s approach.

As an extension activity, students could investigate other examples of financing wars throughout history.

How do nations attempt to pay for their military campaigns? Do these policies sometimes affect the outcome of a war?


Students as Historians and

Economic literacy is a capacity to apply reasoning processes when making decisions about using scarce resources. Economic reasoning implies having the capacity to: define the choice-related problems which confront us; use knowledge (facts and concepts) to analyze the probable consequences of choosing each alternative; and take action based upon the evaluation of the costs and benefits of various alternative choices.8


True historical understanding requires students to engage in historical thinking: to raise questions and to marshal solid evidence in support of their answers; to go beyond the facts presented in their textbooks and examine the historical record for themselves; to consult documents, journals, diaries, artifacts, historic sites, works of art, quantitative data, and other evidence from the past, and to do so imaginatively—taking into account the historical context in which these records were created and comparing the multiple points of view of those on the scene at the time.9


In this lesson, students develop the fundamental skills of the social sciences as they do the work of historians and economists. Students make sense of a complicated period in U.S. history and an economic concept by working with primary texts and numerical data. In this way, students do not learn facts and theories in isolation, but come to understand how social attitudes and economic policy contributed to historical outcomes. The lesson is ambitious, but isn’t our agenda as educators equally so?



1. A version of this lesson plan is available on the web at curry.edschool.virginia.edu/teacherlink/oldsite/social/instructional/inflation/ The lesson links to resources provided by the Valley of the Shadow, a project of the University of Virginia, on the web at jefferson.village.virginia.edu/vshadow2/choosepart.html.

2. National Council for the Social Studies, Expectations of Excellence: Curriculum Standards for Social Studies (Washington, DC: Author, 1994).

3. Richard M. Hodgetts and Terry L. Smartt, Economics (Menlo Park, CA: 1988); Gary M. Walton and Hugh Rockoff, History of the American Economy, 8th ed. (New York: Dryden, 1998).

4. John and Gwenneth Stokes, Europe and the Modern World 1870-1983, 2nd ed. (Hong Kong: Longman, 1973, 1989).

5. James M. McPherson, Battle Cry of Freedom (New York: Ballantine, 1988).

6. Eugene Lerner, “Money, Prices, and Wages in the Confederacy: 1861-1865,” Journal of Political Economy 63 (1955): 20-40.

7. Wilmington Journal (July 6, 1862, and November 20, 1862).

8. S. Symmes and J.V. Gilliard, “Economic Literacy—What Is It?” S. Symmes, ed., Economic Education: Links to the Social Studies (Washington, DC: National Council for the Social Studies, 1981), 5.

9. National Standards for History Grades 5-12 (California: National Center for History in the Schools, 1996).



Friedman, Milton. “Price, Income, and Monetary Changes in Three Wartime Periods,” American Economic Review 52 (May 1952): 624.

Gallman, J. Matthew. The North Fights the Civil War: The Home Front. Chicago: Ivan R. Dee, Inc., 1994, 22-34 and 92-108.

Lerner, Eugene. “Money, Prices, and Wages in the Confederacy: 1861-1865,” Journal of Political Economy 63 (1955a): 20-40.

Lerner, Eugene. “The Monetary and Fiscal Programs of the Confederate Government, 1861-5,” Journal of Political Economy 62 (1955b): 507.

Symmes, S., and J. V. Gilliard, “Economic Literacy—What Is It?” In Economic Education: Links to the Social Studies, edited by S. Symmes. Washington, DC: National Council for the Social Studies, 1981, 5.

U.S. Department of Commerce. Historical Statistics of the United States 1789-1945. Washington, DC: U.S. Government Printing Office, 1949, 249-306.


Brooke Graham Doyle is an associate at the Committee for Children, a nonprofit organization that promotes the social-emotional development of children, based in Seattle, Washington.


Sidebar A


The Spectator, October 27, 1863, p. 2, c. 1


Exhorbitant Prices

We were surprised to learn that flour had suddenly risen in Staunton to $50. per barrel. There certainly can be no sufficient reason for this rapid increase. Although the last wheat crop was not a large one, it was not much below the average, and there ought to be a considerable surplus in Augusta. Bad as our currency is, it would not, of itself, warrant so great a rise—other causes must have contributed to it.

In this crisis of our affairs the policy of our Government should be directed to stimulate productions, and to diminish consumption. But by some strange infatuation, our officials act as if they were influenced by an opposite purpose.

The administration of the impressment law tends directly to repress production. No man knows when he sows his crop, whether he will be allowed to reap and market it. The act regulating impressment seemed to be very fair on its face. It provides, while property might be taken at schedule prices, in the hands of “speculators”, it could only be taken at a fair impressment value in the hands of the “producer”. This was fair and right, and farmers were content with it. The discrimination was formed in sound policy. But by a system of indirection, the law is practically set aside.

When a farmer’s grain or cattle is taken now, and valued by disinterested parties, if the valuations be higher than the schedule, an appeal is taken by the Government agent to the Commissioners, and they cut down the price to the schedule [illegible]. The speculator thus fares better than the farmer, for he gets his pay promptly, while the producer gets the same pay after a long delay, and some [illegible] heavy expense, in trying [illegible] his rights.



The Spectator, October 27, 1863, p. 2, c. 2


Legislative Tinkering

We perceive that some of those members of the Legislature who are particularly wise in their own conceit, but in the estimation of nobody else, are tinkering with the question of prices.

The idea of regulating prices by act of Legislature, is not only absurd, but is positively mischievous. These quack legislators, ignore the teachings of history, as well as the deductions of reason. This same experiment has been tried, over and over again, in other countries, and always failed. Our fathers attempted it in the revolutionary struggle, and Washington admonished them, if they did not stop it, they would starve the army.

We say that the whole thing is simply absurd. Prices depend on the condition of the currency, and the rates of supply and demand.

What is the “price” of anything? It depends on its relation to the currency for the time being. When gold and silver are the circulating medium, it means the amount of gold and silver for which the whole can be exchanged. So when gold and silver are abandoned, and paper substituted as a currency, it means the amount of paper for which it can be exchanged. If [you] render money plenty, prices will be high—if you render it scarce, they will be low. Here is the whole matter in a nutshell. Before the war, gold was the standard of value, and wheat would bring one dollar, and corn half a dollar per bushel.—Since the war, we have adopted paper as the currency, and we have ten times as much paper as we had gold. As a matter of course, prices have risen to ten times their old rates, and wheat now brings near ten dollars and corn five.—The only practical way of bringing down prices, is by reducing the amount of currency. Retire half the currency, and you will reduce prices one half.—Double the currency, and you will double the prices.

But to talk of leaving the currency as it is, and then, arbitrarily requiring certain classes of people to sell their commodities for one-half the present rates, is so preposterous, that we wonder how sane men can entertain the proposition for an instant.

Let us look at it for a moment. Shoes are now worth $35. Suppose Legislature provides that no man shall sell shoes for more than $12.50, under a heavy penalty; what will be the result? Will it cheapen shoes? Unquestionably not, for no man can afford to make and sell them for that price. He will therefore not sell at a loss, but close up his shop. So with the blacksmith, the tailor, and the weaver. The moment that they find they are required to sell at a loss they will stop work. Instead of high priced goods, we will have none.

How will it be with the farmer? It formerly cost a farmer about $300 to hire and maintain a hand. He could then afford to sell flour at $5. Now his expenses, in the depreciated currency, are ten times as great, and of course he must have ten times as great, and of course he must have ten times as much for his flour. When you say to him by law you must not sell your flour for more than five dollars, and if you do, you must go to jail, he will say, “very well! I shall not violate your law by selling at more than $5—I will not sell at al#151;I will keep what I have for my own use, and in future, I will raise no more than is necessary for my family consumption.” What will be the effect? Production will stop and starvation will follow. Instead of high priced grain, we will have none!

These silly legislators are very innocently, but very ignorantly, striving to aggravate the very evil of which they complain. They will shut up all the workshops and stop all production of agricultural productions, and what then? Scenes of unparalleled distress will ensue, followed by mobs, anarchy and bloodshed! People will take by force, if they cannot buy for money. They will not see their wives and children starve.

We earnestly hope the legislators will have common sense enough to reject these demagogue ideas. Let them strike at the root of the evil. Reduce the currency. Put that on a secure foundation, and prices will soon adjust themselves.



Sidebar B


Staunton Spectator, March 17, 1863


A Patriotic Citizen

In these times, when that desolating moral simoom, a spirit of exhorbitant speculation, has converted society into a vast Sahara, by withering the flowers of benevolence and drying up the fountains of charity, it affords us much pleasure to be enabled to state that there are yet remaining a few oases to redeem the scene from total desolation. . . We have the pleasure to announce that there is at least one man in this county, and we hope there are many more, who furnishes supplies to the families of the soldiers at the following rates:

Bacon at 12 1-2 cents per lb; butter at 25 cents per lb; corn at 75 cents per bushel...The market price in his neighborhood for these articles is as follows: Bacon, $1.00 per lb; butter, $1.00 per lb; and corn, $3.00 per bushel. This citizen will be surprised and possibly shocked by seeing his name in this connection given to the public, but as we give it that others may be induced, by his example, to “go and do likewise,” we hope he will pardon us for giving publicity to his name. We allude to Mr. Solomon Miller. . . He belongs to the army of “Home soldiers,” and both, as a patriot and christian, is “fighting the good fight,” and will reap the patriot’s and christian’s reward. Let others follow this noble example, whilst speculators and extortioners, if they have sensibility, will, with crimson blushes, hang their heads in shame. They should remember that their ill-gotten gains will never profit them nor their children.



Republican Vindicator, March 27, 1863


The System of Impressment


“The present practice is exciting a very wide-spread and bitter dissatisfaction. The seizure itself, under the best management, is very distasteful to the people, but when it is accompanied by what they feel to be a refusal of just compensation, it renders the policy of the Government, and ultimately the Government itself, hateful.”


Reprint of letter from Honorable John B. Baldwin to Honorable James A. Seddon, Secretary of War and of reply from J.A. Campbell. . . Baldwin complains about the “repeated seizures of private property” in his district and argues that the acts have no legal basis.

Further, he calls for just compensation. Campbel#146;s replay states that the War Department does not deem a discussion of the legality of impressments or of just compensations important, in light of “the extraordinary and anamolous [sic] conditions that now exist.”


Staunton Spectator, April 7, 1863


A Homily on the Times

Summary: Writer addresses complaints of civil liberties violations such as impressment of goods as a necessary wartime measure to counteract the avarice of exploiters and speculators who would starve the army with their greed.





Staunton Spectator, August 25, 1863


Property Holders

To whom much is given, of them will much be expected of those who possess an abundance of this world’s goods. Those who have the means should relieve the wants of the poor. The very high prices of the necessaries of life make it impossible for many to procure them honestly unless aided by the contributions of those who are more fortunate. Those who have the means, and particularly those who have made money since the war commenced, should contribute liberally and generously to the support of the needy.

This is the first duty of the property-holder. The second is, to be willing to take the lead in meeting the invaders of our country. If the enemy waged war against our liberties only, then all would be equally interested in defeating them, for liberty is as valuable to the poor man as to the wealthy, and is as highly prized by him; but as the enemy are also making war against property as well as liberty, the property-holder is more interested in the result of the struggle than the man who has no property to lose, and should be willing, therefore, to take the lead in any enterprise which has for its object the protection of our liberties and property. There are some property-holders so intent upon greater accumulations that they cease to have a single patriotic sentiment, and there are some poor men who have suffered their prejudices against such characters to blind them to their duties as patriots, and have resolved not to strike a blow til they see such Shylocks in the army.

Both have duties to their country to perform, and the remissness of the one is not a justifiable excuse for the other. The property-holder should take the lead, and say: “Come on, boys.”


Staunton Spectator, August 25, 1863


The Tax in Kind

The Tax in Kind.—It is well known to all that our Congress, at its last session, levied a tax in kind on the products of the earth. It is the duty of our planters to pay this tithe, upon such crops as has been gathered in, at the very earliest opportunity.

Our armies are now needing the provisions which these tithes will furnish, and ought not to be deprived of them a moment longer than is sufficient to get them to some depot where they can be shipped to the order of the Government. Besides, a prompt compliance with the provisions of the law will save the Government much expense and trouble. We say to all who have a “tax in kind” to pay, do your duty patriotically—at once, with the least possible delay. Do not wait to be called upon and forced to do it.


Staunton Spectator, September 8, 1863


Relief of the Poor

Summary: Describes the suffering of the South’s poor and criticizes those who “grind the faces of the poor” in pursuit of profits. The article recommends the enactment of a tax on the wealthy that will provide for the maintenance of the poor in their midst.



Sidebar C


Background Information

Financing the Civil War

Both the North and the South faced a struggle in financing the Civil War, but the North fared much better for several reasons. The North was able to continue raising tariffs. For example, the Morrill Tariff, enacted just before the war began, raised import duties to 47 percent. In contrast, the South struggled to import goods against the North’s blockade after 1863.

Christopher Memminger, the Confederacy’s Secretary of the Treasury, enthusiastically attempted to raise revenue, initially through taxes. Memminger asked states to use their own tax systems to raise a certain figure to contribute to the Confederacy’s war effort.

States contributed some money to Memminger’s fund, but he generated the fund by printing more money rather than actually raising revenue or increasing production. His plan generated less than two percent of the Confederacy’s Treasury. States were reluctant to take wealth from their citizens, particularly when the tax was imposed as an order from the “nationa#148; level of the Confederate government. This type of action was precisely the reason that they resented Lincoln’s government. The idea of a strong central government directly contradicted the purpose of the Confederacy.

The North had a great deal of success raising money through bonds. Individuals voluntarily bought bonds to support the war effort, hopeful that they would enjoy a return on their investment in the long term. They did. Salmon P. Chase, Secretary of the U.S. Treasury, and Jay Cooke, a Philadelphia merchant, spearheaded the effort. Cooke’s assertive door-to-door campaign was extremely successful at selling bonds, which were “easy” for the average citizen to afford: Bonds were available in some low denominations that could be purchased in ten installments over a five-month period. A $50 bond earned a penny a day of interest.

Other notes were available in higher denominations, paying seven percent interest. Given the nascent financial market born with railroad bonds, a relatively prosperous economy, an urban society, and a considerable number of middle and upper middle class citizens who could afford to invest, the war bonds did well, creating great profits for investors, for Cooke, and for the North.

The attempt to sell bonds in the South was a different story. The southern states, in general, did not have a strong financial infrastructure, were an agrarian society with assets tied up in land and slaves, and lacked large numbers of middle class citizens with money to invest. The Confederate war bonds did not take off. Memminger did try to sell bonds, but with such rapid inflation, the bonds lost value almost instantly. Anyone who invested in them did so as a gift to the Confederacy rather than as a real investment.

Impressment and confiscation are generally not successful policies because of the immense disincentives they create for productivity. For example, during the Civil War, once farmers realized that their crops would be confiscated, they had little reason to produce more. Furthermore, confiscation intensified resentment for the government and destroyed morale. Both sides avoided these policies.

Unfortunately, without many alternative sources of revenue, the South’s only solution was to print more paper money. Inflation was occurring anyway because of a decrease in the production of goods: Men were leaving the work force to become soldiers. Later, production stayed low because of disruptive invading armies and the Northern blockade. When goods become scarce, prices go up, and they did.

Inflation tends to breed more inflation as people realize that their money is losing value every minute they hold onto it. Inflation can be thought of as a tax on holding onto money: A consumer is penalized for holding onto money because it is losing value over time.

Thus, consumers try to spend money as quickly as possible, and the cycle intensifies. With no incentive to save, consumers spend. Southerners started to see that the only way to avoid inflation was to reduce cash holdings. They began to resort to bartering (a method of exchange that avoids currency by trading goods) and using more stable currencies, such as greenbacks (the currency of the North), or durable goods, such as metals and land, in exchanges. A Confederate dollar was worth one percent of its original value at war’s end. Unable to constrain the individual states from printing excessive amounts of paper money, the Confederate government struggled to conduct the war while experiencing the worst case of hyperinflation in U.S. history.


† Paludan, Phillip Shaw, “A People’s Contest”: The Union and the Civil War, 1861-1863 (Lawrence: University of Kansas, 1996), 109.