Financial History 145 Spring 2023 - Page 32

Benjamin G . Armstrong Big Eagle Thomas Gere
notes in large amounts to do their part for the war effort , began to lose their faith in those US government notes as their depositors began to redeem their bank notes for gold . By late December 1861 , these state banks had lost half their gold reserves and such reserves were dwindling further each day . The banks suspended gold exchange on December 30 , 1861 . It is one of the recurring themes in financial history : war causes gold to disappear into private hands as prospects of a quick military victory dim and as the costs of the war effort mount .
The federal government was out of options , and it began printing new , unsecured paper currency in February 1862 . This new federal currency that was no longer exchangeable for gold was called a “ greenback ,” and it became a derogatory term as the war dragged on and the greenbacks printed to pay for the war declined in purchasing power .
These financial events in Washington , DC were of considerable interest out in Minnesota . Those 1851 treaties between the government and the Dakota Indians were negotiated around that stable , gold-backed dollar . The Indians and their leaders would naturally wonder as to the government ’ s ability , during time of war , to meet the treaty terms . They could be understandably concerned as to whether they would be paid at all .
These fiscal problems of the federal government would have been of considerable interest to the agents and traders at the Indian agencies along the Minnesota River as well . Their trading with the Indians was dependent on the US government coming through with the yearly treaty payments . Perhaps , the traders might speculate , the annuity payment would be made in greenbacks rather than in gold . Perhaps it would be smaller than usual due to senior government claims . Or perhaps payment would simply be delayed or suspended until the war was over .
The traders would likely have communicated this uncertainty to the Indians who lived nearby , and the Indians would have understood . The Indians would understand the situation somewhat differently , however . The traders might see most clearly the financial uncertainty , and the Indians perhaps the military uncertainty . Once war commenced , tribal leaders knew , the outcome could never be certain . If their treaty was with a government that could be defeated in battle and fail , then did they not have a potentially unenforceable treaty ?
The Indians had little in the way of stored provisions — their crop yields had been poor in 1861 due to a generally poor growing season . The crops of 1862 were looking very good , but they were not ready just yet , and the Indians were hungry and increasingly impatient .
The federal government initially answered the question as to how the Dakota would be paid by treating the Dakota just like everyone else . Thomas Riggs was working with his father on his father ’ s mission to the Dakota along the Minnesota River in 1862 . He recalled that , “ Currency had been sent out first instead of [ gold ] coin , but it had to be returned because the Indians would not accept currency .”
Bishop Henry Whipple , cousin of Union General Henry Hallock and the head of the Episcopal diocese in Minnesota , was a great friend of the Dakota Indians of his state . He described the cluster of Indians that began to gather about the Lower Agency in late July 1862 , demanding food for their tribes .
“ I had never seen the Indians so restless ,” he wrote . “ The Indians had heard that they were not to receive their payment [ in gold ],” Bishop Whipple recalled , and he tried to assure them they would . The bishop addressed one of the clerks and told the clerk that “ Major Galbraith [ the US government ’ s agent ] is coming down to enroll the Indians for payment .”
The clerk tried to impress upon the bishop that he knew better . “ Galbraith is a fool ,” the clerk told the bishop . “ Why does he lie to them ? I have heard from Washington that most of the appropriation has been used to pay claims against the Indians . The payment will not be made . I have
30 FINANCIAL HISTORY | Spring 2023 | www . MoAF . org