n taxation and leaned throughout the war largely upon
loans. It also had recourse to the perilous device of paper money, the
gold value of which was not guaranteed. Beginning in March, 1861, it
issued under successive laws great quantities of paper notes, some of
them interest bearing, some not. It used these notes in payment of its
domestic obligations. The purchasing value of the notes soon started
on a disastrous downward course, and in 1864 the gold dollar was worth
thirty paper dollars. The Confederate Government thus became involved in
a problem of self-preservation that was but half solved by the system of
tithes and impressment which we shall encounter later. The depreciation
of these notes left governmental clerks without adequate salaries and
soldiers without the means of providing for their families. During most
of the war, women and other noncombatants had to support the families or
else rely upon local charity organized by state or county boards.

Long before all the evils of paper money were experienced, the North,
with great swiftness, concentrated its naval forces so as to dominate
the Southern ports which had trade relations with Europe. The shipping
ports were at once congested with cotton to the great embarrassment of
merchants and planters. Partly to relieve them, the Confederate Congress
instituted in May, 1861, what is known today as "the hundred million
loan." It was the first of a series of "produce loans." The Treasury was
authorized to issue eight percent bonds, to fall due in twenty
years, and to sell them for specie or to exchange them for produce or
manufactured articles. In the course of the remaining months of 1861
there were exchanged for these bonds great quantities of produce
including some 400,000 bales of cotton.

In spite of the distress of the planters, however, the illusion of King
Cotton's power does not seem to have been seriously impaired during
1861. In fact, strange as it now seems, the frame of mind of the leaders
appears to have been proof, that year, against alarm over the blockade.
For two reasons, the Confederacy regarded the blockade at first as a
blessing in disguise. It was counted on to act as a protective tariff
in stimulating manufactures; and at the same time the South expected
interruption of the flow of cotton towards Europe to make England feel
her dependence upon the Confederacy. In this way there would be exerted
an economic coercion which would compel interve