25
Feb
09

On This Day, February 25: Greenbacks

February 25, 1862

Legal Tender Act passed

The U.S. Congress passes the Legal Tender Act, authorizing the use of paper notes to pay the government’s bills. This ended the long-standing policy of using only gold or silver in transactions, and it allowed the government to finance the enormously costly war long after its gold and silver reserves were depleted.

Soon after the war began, the federal government began to run low on specie. Several proposals involving the use of bonds were suggested. Finally, Congress began printing money, which the Confederate government had been doing since the beginning of the war. The Legal Tender Act allowed the government to print $150 million in paper money that was not backed by a similar amount of gold and silver. Many bankers and financial experts predicted doom for the economy, as they believed that there would be little confidence in the scheme. There were also misgivings in Congress, as many legislators worried about a complete collapse of the nation’s financial infrastructure.

These notes, called “greenbacks,” worked much better than expected. It allowed the government to pay its bills and, by increasing the money in circulation, greased the wheels of northern commerce. The greenbacks were legal tender, which meant that creditors had to accept them at face value. The same year, Congress passed an income tax and steep excise taxes, both of which cooled the inflationary pressures created by the greenbacks.

Another legal tender act passed in 1863, and by war’s end nearly a half-billion dollars in greenbacks had been issued. The Legal Tender Act laid the foundation for the creation of a permanent currency in the decades after the Civil War.

“Legal Tender Act passed.” 2009. The History Channel website. 25 Feb 2009, 12:05 http://www.history.com/this-day-in-history.do?action=Article&id=2117.

On This Day

1570 – England’s Queen Elizabeth I was excommunicated by Pope Pius V.

1836 – Samuel Colt received a patent for a “revolving gun”.

1901 – The United States Steel Corp. was incorporated by J.P. Morgan.

1913 – The 16th Amendment to the U.S. Constitution was ratified. It authorized a graduated income tax.

1919 – The state of Oregon became the first state to place a tax on gasoline. The tax was 1 cent per gallon.

1933 – The first aircraft carrier, Ranger, was launched.

1956 – Soviet leader Nikita Khrushchev criticized the late Josef Stalin in a speech before a Communist Party congress in Moscow.

1986 – Phillippino President Ferdinand E. Marcos fled the Philippines after 20 years of rule after a tainted election.

2000 – In Albany, NY, a jury acquitted four New York City police officers of second-degree murder and lesser charges in the February 1999 shooting death of Amadou Diallo.

February 25, 1948

Communists take power in Czechoslovakia

Under pressure from the Czechoslovakian Communist Party, President Eduard Benes allows a communist-dominated government to be organized. Although the Soviet Union did not physically intervene (as it would in 1968), Western observers decried the virtually bloodless communist coup as an example of Soviet expansion into Eastern Europe.

The political scene in Czechoslovakia following World War II was complex, to say the least. Eduard Benes was head of the London-based Czech government-in-exile during the war, and returned to his native land in 1945 to take control of a new national government following the Soviet withdrawal in July of that year. National elections in 1946 resulted in significant representation for leftist and communist parties in the new constituent assembly. Benes formed a coalition with these parties in his administration.

Although Czechoslovakia was not formally within the Soviet orbit, American officials were concerned with the Soviet communist influence in the nation. They were particularly upset when Benes’ government strongly opposed any plans for the political rehabilitation and possible rearmament of Germany (the U.S. was beginning to view a rearmed Germany as a good line of defense against Soviet incursions into western Europe). In response, the United States terminated a large loan to Czechoslovakia. Moderate and conservative parties in Czechoslovakia were outraged, and declared that the U.S. action was driving their nation into the clutches of the communists. Indeed, the communists made huge electoral gains in the nation, particularly as the national economy spiraled out of control.

When moderate elements in the Czech government raised the possibility of the nation’s participation in the U.S. Marshall Plan (a massive economic recovery program designed to help war torn European countries rebuild), the communists organized strikes and protests, and began clamping down on opposition parties. Benes tried desperately to hold his nation together, but by February 1948 the communists had forced the other coalition parties out of the government. On February 25, Benes gave in to communist demands and handed his cabinet over to the party. Rigged elections were held in May to validate the communist victory. Benes then resigned and his former foreign minister Jan Masaryk died under very suspicious circumstances. Czechoslovakia became a single-party state.

The response from the West was quick but hardly decisive. Both the United and Great Britain denounced the communist seizure of power in Czechoslovakia, but neither took any direct action. Perhaps having put too much faith in Czechoslovakia’s democratic traditions, or possibly fearful of a Soviet reaction, neither nation offered anything beyond verbal support to the Benes government. The Communist Party, with support and aid from the Soviet Union, dominated Czechoslovakian politics until the so-called “Velvet Revolution” of 1989 brought a non-communist government to power.

“Communists take power in Czechoslovakia.” 2009. The History Channel website. 25 Feb 2009, 12:03 http://www.history.com/this-day-in-history.do?action=Article&id=2588.

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