BEARING THE COSTS OF WAR
During the first days of the Confederacy its best financial minds asserted that most expenses of government could be met by the income from a moderate revenue tariff. Until that machinery could be set up they expected to meet expenses with an issue of $1 million of Treasury notes and a loan by means of a $15 million bond issue. The outbreak of war ended this delusion, but in most unimaginative fashion Secretary of the Treasury Christopher G. Memminger steered the Davis administration into merely expanding rather than changing the lines already taken. Consequently the financial history of the Confederacy was marked by consecutive issues of notes and bonds into the hundreds of millions. Since the Treasury notes were backed only by faith in the government's promise to redeem them in gold after the war, their value steadily declined, and the spiraling inflation that resulted wrecked havoc on public and private finance. This same inflation made government bonds a poor investment, and by mid-1863 Congress began trying to force people to buy bonds by making older Treasury notes worthless after a certain date. But even the threat of repudiation failed to halt the deterioration of the currency.
Inevitably the Confederacy had to devise more practical methods of obtaining income. The produce loans allowed planters to pledge part of their crops to the purchase of bonds; Congress began to levy a variety of taxes; and in April 1863, it levied a 10 percent tax in kind on food crops.
North Carolina's financial record during the Civil War was no more imaginative than that of the national government. In all, the convention and the General Assembly authorized $113,131,500 in bonds and $20,400,000 in Treasury notes. By November 1864, a $100 state bond sold for $7.40 and even this was better than the performance of Confederate bonds. The counties borrowed approximately $20 million, most of which was used to aid destitute families of soldiers. The tax rate on real estate was raised from one-fifth of one percent to one percent; and slaves, inheritance, and income were added to the list of subjects taxed. By 1864