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Did you know less than a year after Lincoln's assassination, U.S. Congress authorized the Treasury to “retire” the extremely popular greenbacks in circulation—thereby contracting the money supply and causing U.S. families to suffer extreme financial hardship?
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The Full Story
Lincoln's greenbacks retired
On April 12, 1866, Congress passed the Contraction Act, with the backing of President Johnson. This act instructed the U.S. Treasury—the effective monetary authority during that period—to retire the supply of greenbacks.
The Treasury reduced the monetary base by 20 percent between 1865 and 1867.
Depression
By 1876, two thirds of the nation's money supply had been called in by the bankers.
A contraction of the money supply, when demand is high, causes depressions.
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