In April 1865, the highest-ranking Confederate general, Robert E Lee, surrendered to his opposing number, Ulysses S Grant. The Confederate capital in Richmond, Virginia, had been taken, and the Confederate president, Jefferson Davis, was on the run. The American Civil War was won – but it was far from over.
The war came at a terrible human cost. The marvels of the industrial revolution – the railroads, the telegraph and the assembly lines – all contributed to making it the bloodiest war in terms of American lives lost to date.
But the war also came at a high financial price, and arguably changed American economic policy forever. By the middle of 1861, the year fighting began, the government's spending (the one in Washington, that is) was $1.5m a day, notes economic historian John Steele Gordon in Barron's. By the end of the war, spending had risen to $3.5m a day.
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Or, to put that another way, government debt grew from $64.8m in 1860 to $2.6bn five years later – an increase of more than 40 times. The US government puts the bill for the war at $5.2bn, when it became the first country to spend $1bn in a single year.
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Clearly, the government didn't have that much gold in its reserves. So in 1862, the Legal Tender Act was passed, allowing the printing presses to roll out the first greenbacks – $450m of them. In addition, Philadelphia financier Jay Cooke sold $500m in war bonds.
And of course, both sides raised taxes. But the poorer South couldn't raise as much as the North and had to meet the shortfall by printing its own money even faster. By the end of the war, inflation had reached 180% compared to pre-war prices in the north. In the south, inflation hit 9,000%.
That summer in 1865 following the capitulation of General Lee, the last Confederate regulars surrendered not to the Union armies, interestingly, but to the British. The Confederate raiding ship, the CSS Shenandoah, sailed into Liverpool, and the captain handed the ship over to the prime minister in a letter. The British turned the vessel over to the federal government in Washington, who sold it to the Sultan of Zanzibar.
But the insurrection continued, particularly in Texas. It was only on 20 August 1866 that President Andrew Johnson (his predecessor having been assassinated) could finally and officially declare the American Civil War over: "Order, tranquillity, and civil authority now exists in and throughout the whole of the United States of America."
As is so often the case, the side with the most money won. When the Confederate government collapsed, the bonds it had issued weren't worth the money they were printed on, hobbling the southern states for decades.
