An Article by H.A. Scott Trask from Mises.org
<most of article deleted.
Because the notes were redeemable in specie only at the Philadelphia bank, they depreciated everywhere else. In addition, the new Superintendent of Finance, Robert Morris, issued treasury notes, known as "Morris notes," which promised to be redeemable in hard currency at the treasury department at a future date designated on the note. They too depreciated. By means of these three forms of credit currency, Congress purchased supplies, paid the troops, and met interest on its debts. The army, however, continued to give certificates for impressed goods.
Morris was a man both admired by some (mostly the wealthy who held government obligations) and feared by many. On October 27, 1783, James Warren wrote to John Adams, "Morris is a King, and more than a King. He has the Keys to the Treasury at his Command, Appropriates money as he pleases, and everybody must look up to him for Justice and for Favour."
The Americans could have adopted a hard currency after 1779, for specie was pouring into the country from the Havana trade, French loans, and the disbursements of English and French troops. What is more, large sums remained in hoards. However, because of Gresham's Law none of it remained in circulation; it flowed back out to purchase imports, and the country was left with no domestic currency
except depreciated paper.
This situation reversed itself shortly, with the passage of the Articles of Confederation which forbade Congress from issuing money or directly taxing. The States were given that right, exclusively.
By the mid-1780s the country had sunk into a great recession and state tax revenues plummeted. Much of the country's gold and silver were flowing offshore (mainly to England) to pay for imported goods and to repay debts agreed to by the treaty which ended the war. Many creditors had their holdings seized because laws required payment in specie which was scarce. Congress was insisting on some means to pay for military pensions and other obligations. Their idea was the Impost on imported goods.
In 1783 Congress, after several rejected recommendations, suggested that collectors be chosen by the states (one of the major sticking points) and that the Impost be limited to 25 years (they originally asked for an open-ended ability to Impost). And guess who was placed in charge of administering this Impost? You guessed it, Robert Morris.
When the Constitution was adopted one of the key changes was to place Congress in control of "interstate commerce" and an ability to use impost and excise to raise funds. Most of the delegates to the Constitutional Convention had been given explicit instructions by their state legislators not to allow Congress these rights, but it appears that many/most ignored them.
The feeding frenzy of debt and taxation by Congress this set off grew markedly in the early 1800s. Due to economic factors most of the burden fell on the Southern states (at one point it was estimated that in some years they were paying up to 80% of the Federal expenses). During Andrew Johnson's administration the Governor of South Carolina refused to collect the excises at Charleston Harbor (the main Southern port) precipitating a political rent in Congress. Lincoln, in his first inaugural address, told the Southern States that he had no interest in curbing slavery but if they attempted to do to him what they did to Johnson (i.e., interfere with excise collections) that they should expect a prompt military response. It should come as little surprise then that one of the first actions of the Rebellion, on April 12 and 13, 1861, was to attempt to isolate and disable Fort Sumter which overlooked and could fire on all traffic entering Charleston Harbor, and whose main duty was collection of the excise.
Lincoln schemed to get the Confederates to attack first and so inflame those in the North who were heavily anti-war at the time. Shelby Foote, consultant for Glory and author of The Civil War, stated, "Lincoln had maneuvered [the Confederates] into the position of having either to back down on their threats or else to fire the first shot of the war." As it is no one was seriously injured in the attack which prevented the resupply of food to the fort. A flotilla of northern ships stood by during the attack but never fired a shot to protect the fort, that was never their intention.
steve
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