There are several ways a government can pay for a war. It can raise taxes on its citizens. It can also borrow money, or it can just print it. The South was generally against tariffs and especially raising them, which restricted one source of revenue for the South. The South had fewer people and was generally poorer than the North. This made it harder for the South to borrow money. The South was able to...
There are several ways a government can pay for a war. It can raise taxes on its citizens. It can also borrow money, or it can just print it. The South was generally against tariffs and especially raising them, which restricted one source of revenue for the South. The South had fewer people and was generally poorer than the North. This made it harder for the South to borrow money. The South was able to generate less than half of the revenue to cover the cost of the war through taxes and through borrowing. Thus, the South turned to printing money. As a result, inflation was a significant issue for the South. By January 1862, inflation in the South was about 12% a month. Overall, by the end of the Civil War, the South experienced an inflation rate of 9000%.
There was inflation in North. However, inflation was more manageable in the North because the North was able to raise more revenue from tariffs and from the sale of bonds. The North was able to generate about 90% of the revenue needed to cover the cost of the war from these sources of revenue. The North did print money, but not to the extent that the South did. The North experienced an inflation rate of about 180%. While this wasn’t ideal, it was far better than what the South faced.
Inflation was an issue for both sides during the Civil War. However, it was much worse in the South.
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