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The Suppression of State Banknotes: A Reconsideration

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  • Selgin, George

Abstract

It is generally believed that Congress, in imposing a prohibitive 10% tax on state banknotes in 1865, made the public better off by doing away with inferior brands of currency while simultaneously helping finance the Civil War by stimulating bond sales to national banks. In truth, the tax served neither purpose. The true purpose of the 10% tax was not to enhance bond sales or to improve the quality of the currency but to offset the inflationary effects of greenbacks and national banknotes. In the long run, the public might have been better off had state banks retained their right to issue currency. Copyright 2000 by Oxford University Press.

Suggested Citation

  • Selgin, George, 2000. "The Suppression of State Banknotes: A Reconsideration," Economic Inquiry, Western Economic Association International, vol. 38(4), pages 600-615, October.
    • Handle: RePEc:oup:ecinqu:v:38:y:2000:i:4:p:600-615
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    Cited by:

    1. Jaremski, Matthew, 2017. "Privately Issued Money in the US," Working Papers 2017-05, Department of Economics, Colgate University, revised 20 Sep 2017.
    2. Matthew Jaremski, 2013. "State Banks and the National Banking Acts: Measuring the Response to Increased Financial Regulation, 1860–1870," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 45(2‐3), pages 379-399, March.
    3. Nicholas A. Curott & Tyler Watts & Benjamin R. Thrasher, 2020. "Government-Cheerleading Bias in Money and Banking Textbooks," Econ Journal Watch, Econ Journal Watch, vol. 17(1), pages 1-98–151, March.
    4. Selgin, George & Lastrapes, William D. & White, Lawrence H., 2012. "Has the Fed been a failure?," Journal of Macroeconomics, Elsevier, vol. 34(3), pages 569-596.

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