Wars can also bring about currencies that blur the line between scrip and legal tender. During the American Civil War, uncertainty drove Northerners and Southerners alike to hoard coins for their metal value.
The cash-strapped Union abandoned the gold standard in late 1861 and stopped minting new coins, switching instead to emergency notes known as greenbacks. The move meant people could not be certain banks would exchange their notes for gold and silver, which spurred speculation in coinage and drove down the value of paper notes. The availability of coins, particularly in the East, dried up. Merchants resorted to using stamps to make change, but the flimsy and sticky bits of paper were a poor substitute. In response, the government printed “postage currency” notes with images of stamps in denominations of 5, 10, 25, and 50 cents. (The government abandoned the stamp images in later iterations.) These fractional notes were not officially legal tender but worked as such and remained in circulation into the late 1870s.
The Confederacy never minted currency backed by gold and silver reserves. Instead the Confederate government, along with individual states and banks, issued bills of credit to be paid if the South won the war. As the tide turned against the Confederates, confidence in these “graybacks” cratered; inflation spiked, and prices increased by as much as 9,000%. By the end of the war a cake of soap could cost as much as 50 Confederate dollars. And if the newly clean shopper desired a fresh suit, he could easily spend 2,000 dollars or more.
While war often destroys the value of a currency, it can also drive a government to deliberately do so. On January 10, 1942, the United States government recalled almost all the printed currency in Hawaii. But the territory wasn’t left moneyless. Hawaiians could change their cash for new notes that were identical to the old ones in every way but one—they had the word Hawaii printed on them. Those notes could easily be declared null and void if Japan succeeded in occupying the islands, as military planners feared. Real money instantly made worthless to residents and occupiers alike.
Perhaps the most well-known examples of scrip were those issued by American mining companies beginning in the late 19th century. These operations were often located far from the beaten track, which limited access to cash and supplies. Miners were paid their wages in cash, but if they ran out before their next paycheck, they could use the company’s scrip as a loan to buy goods at the only store nearby, the company store.