The Confederate, like the Union, Treasury did not have the courage to force the issue upon taxation and leaned throughout the war largely upon loans. It also had recourse to the perilous device of paper money, the gold value of which was not guaranteed. Beginning in March, 1861, it issued under successive laws great quantities of paper notes, some of them interest bearing, some not. It used these notes in payment of its domestic obligations. The purchasing value of the notes soon started on a disastrous downward course, and in 1864 the gold dollar was worth thirty paper dollars. The Confederate Government thus became involved in a problem of self-preservation that was but half solved by the system of tithes and impressment which we shall encounter later. The depreciation of these notes left governmental clerks without adequate salaries and soldiers without the means of providing for their families. During most of the war, women and other noncombatants had to support the families or else rely upon local charity organized by state or county boards.
Long before all the evils of paper money were experienced, the North, with great swiftness, concentrated its naval forces so as to dominate the Southern ports which had trade relations with Europe. The shipping ports were at once congested with cotton to the great embarrassment of merchants and planters. Partly to relieve them, the Confederate Congress instituted in May, 1861, what is known today as "the hundred million loan." It was the first of a series of "produce loans." The Treasury was authorized to issue eight percent bonds, to fall due in twenty years, and to sell them for specie or to exchange them for produce or manufactured articles. In the course of the remaining months of 1861 there were exchanged for these bonds great quantities of produce including some 400,000 bales of cotton.
In spite of the distress of the planters, however, the illusion of King Cotton's power does not seem to have been seriously impaired during 1861. In fact, strange as it now seems, the frame of mind of the leaders appears to have been proof, that year, against alarm over the blockade. For two reasons, the Confederacy regarded the blockade at first as a blessing in disguise. It was counted on to act as a protective tariff in stimulating manufactures; and at the same time the South expected interruption of the flow of cotton towards Europe to make England feel her dependence upon the Confederacy. In this way there would be exerted an economic coercion which would compel intervention.
Such reasoning lay behind a law passed in May forbidding the export of cotton except through the seaports of the Confederacy.
Similar laws were enacted by the States. During the summer, many cotton factors joined in advising the planters to hold their cotton until the blockade broke down. In the autumn, the Governor of Louisiana forbade the export of cotton from New Orleans. So unshakeable was the illusion in 1861, that King Cotton had England in his grip! The illusion died hard. Throughout 1862, and even in 1863, the newspapers published appeals to the planters to give up growing cotton for a time, and even to destroy what they had, so as to coerce the obdurate Englishmen.
Meanwhile, Mason had been accorded by the British upper classes that generous welcome which they have always extended to the representative, of a people fighting gallantly against odds.
