QUESTION: Hi Marty,
I have read that Lincoln’s treasury issued “Greenbacks” to help fund the North during the civil war.
1. Was this a direct printing, issuing of paper currency, aka like your “The Solution” ? (Bill Still, creator of the money masters documentary claims such…)
2. Others claim that it was meant all along to be backed by gold, and they point to the Specie Payment Resumption Act of January 14, 1875 as evidence..
So many different conflicting opinions / explanations out there, and was hoping you would tell us all what you believe about the Greenbacks. Thanks once again for all you do!

DC

ANSWER: Paper currency was issued to fund the Civil War beginning in 1861. Demand notes were issued between August 1861 and April 1862 to fund the American Civil War in denominations of 5, 10, and 20 USD. Demand notes were the first issue of paper money by the United States that achieved wide circulation. They were used to pay expenses incurred during the Civil War including the salaries of its workers and military personnel.

There was a reluctance to accept the demand notes, for there was no intent on redeeming them in gold. Instead, the government issued currency that was really a form of circulating bearer bonds. They were interest-bearing notes that had the table on the reverse, expressing the value of the note in terms of interest.

Demand notes became known as “greenbacks,” which distinguished them from the interest-bearing notes that displayed the interest table on the reverse. The demand note only had green ink.

The demand notes were discontinued, and their successors were the legal tender notes. The legal tenders could not be used to pay import duties, which were the taxes imposed at that time (indirect taxation). Demand notes took precedence and were acceptable. As a result, most demand notes were redeemed.

Therefore, the issue of paper money to pay the expenses worked. There was no such promise to repay these notes in gold when they were issued.

COMMENT: Hi Marty

I agree with Trump. Assembling in the U S is not sufficient. We need the supply chain parts (eg manufacturing ) in the US. What do we do when we get in a war with say China – do we submit an order to china for parts to assemble a ship? Does not fly.

Kyle Bass and Bannon have come out speaking about the duty american companies have to our country. They use our legal system, tax system, to date favorable non tariffs and other incentives — where is the pay back to us? The days when our country was simply for sale and being sold out by politicians is gone – or we won’t have much of a country left. We have lost about half of our manufacturing jobs since nafta.

It needs to stop. Too bad if countries whine and cry that we can no longer be taken advantage of
We have been used and abused for a long time…people are sick of it.

thanks for the blog

Alice

REPLY: It is true that parts are shipped and then the final assembly takes place in the USA. But we also have to ask why did manufacturing leave in the first place? I testified before the House Way & Means Committee on this topic back in 1996. They wanted to know why no American companies got contracts in China to do the Yellow River Dam, which went to the Germans. I explained that Americans are taxed on worldwide income whereas Europeans pay taxes on what is earned in their territory. Why should someone pay taxes on income generated outside the USA when they are not using any services in the United States? It turns out that we are economic slaves because whatever we produce anywhere belongs to the government. It is no different from the 19th century – we are still the property of the state.

What we must understand is that American companies began to set up offshore just to be competitive. It was not that labor was $5 an hour v $15. That is the popular image they create to target corporations. The real problem is our tax code looks like the brainwave of a schizophrenic.

On top of that, we had a period of really hostile unions. Just look at New York City. Here is a photo of horse-drawn express wagons, moored ships, and piers at New York City’s South Street Seaport back in 1901. New York City was the largest port for trade. The unions became so corrupt and militant, they simply drove the port to other cities. There is nothing left in New York City anymore.

Then there was the fact that the militant unions took the position that they were exploited so the quality of their work declined. The Germans and Japanese offered quality and that was fair competition which eventually forced changes in the United States. Instead of workers, not much is done by robots. If we are really concerned about jobs, then address the elimination of income taxes which would make American workers more competitive. Restore the Constitution to indirect only.

Many people are confused as to why corporations have been buying back their shares in mass. The latest figures for 2018 are in and they demonstrate that the S&P 500 listed companies spent more on dividends and buybacks in 2018 than they actually made in total reported earnings ($1.26 trillion vs $1.1 trillion). What is really fascinating is that of the 500 listed companies, 444 have bought back their own shares. Buybacks alone have actually come in at 66% of reported earnings over the last five years. Since 2014, buybacks and dividends combined have exceeded the total increase in S&P 500 market capitalization by $1.3 trillion. In other words, buybacks alone represent 87% of the increase in S&P 500 market capitalization during that period.

Buying back shares at this stage has been massive, but companies have been taking advantage of the cheap interest rates. When interest rates collapsed to artificially low levels, it became economically more efficient to buy back the shares at such a low cost, and this, in turn, will increase the dividend yields. This mix of low interest rates has had a reverse impact on equities. There is no question that companies are keenly aware of just how important their buyback programs are to their share prices. As long as interest rates are cheap, then it’s hard to see them stopping unless the cost of borrowing forces them to do so. This is also setting the stage for a shortage in equities when capital begins to realize that there is a huge problem brewing on the public debt side of the balance sheet.