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Paper money holds value better than thought?

One of the fun aspects of being a coin collector is finding things that I wasn’t looking for. This can happen on the bourse floor. This can happen with information.

A couple of days ago I was looking for something else, but I found a booklet written by the late Brent Hughes called “The Confederate Treasure Train, The Facts and the Fables.”

Being just 33 pages long, the copyrighted 1989 work was just what I wanted to sit down and read.

But the thing that captured my attention was a bit of information about the workings of the Confederate Treasury in Richmond, Va., in March 1865, the month before the end of the Civil War.

The Confederate government issued huge quantities of paper money to pay the costs of the war with the federal Union.

We collectors know this paper money had value at the outset. We know it ended up worthless. But what exactly the ravages of inflation were 1861-1865 we are less likely to put a number on.

Hughes, who was an authority on Confederate numismatics and history, reported that in March 1865 the Confederate Treasury sold silver coins to the people of Richmond who needed them.

These were standard federal coin issues familiar to collectors. The price was $60 in Confederate paper money for $1 face value in silver coins.

Hughes quotes an official saying the sales were conducted “for the relief of the people, to furnish them a means to buy supplies outside our lines and also to call in currency to pay off the troops.”

The southern government at the time was in its final days. We know what happened to it.

But what does that $60 figure work out to be in terms of the price of an ounce of silver?

When the coins were new according to the federal weight standard that went into effect in 1853, $1 in silver (two half dollar coins) contained .7198 ounce of silver.

This works out to $83.34 a troy ounce, a price that is not all that far from the $50 record price in federal currency set over 100 years later in 1980.

If we assume that $1 in silver could be exchanged for $1 in gold, that would put the price of an ounce of gold in Confederate money in March 1865 at $1,240.20.

This is an interesting number considering the present price of gold bullion as reported by the Kitco website is $1,210.10 in federal money.

What is the lesson in these numbers besides curiosity value?

It might be that paper money holds its value much more stubbornly than many assert.

A government six weeks from surrender having paper money that still commanded any value at all shows the power of the phrase “full faith and credit” of that government with the people.

In other words, the government disappeared before the value of the paper money did.

Inflation in terms of paper money was high in the Confederacy but not fatal.

The Confederate paper dollar declined in less than four years by an amount it has taken a federal dollar 82 years (since 1933) to match from the same $20.67 a troy ounce gold price starting point.

Buzz blogger Dave Harper is winner of the 2014 Numismatic Literary Guild Award for Best Blog and is editor of the weekly newspaper "Numismatic News."