paying　for　it。　The　problem　was　destined　to　become　insoluble。　From
  the　vantage…point　of　a　later　time　we　can　now　see　that　nothing
  could　have　provided　a　solution　short　of　appropriation　and
  mobilization　of　the　whole　industrial　power　of　the　country　along
  with　the　whole　military　powera　conscription　of　wealth　of　every
  kind　together　with　conscription　of　men。　But　in　1862　such　an　idea
  was　too　advanced　for　any　group　of　Americans。　Nor；　in　that　year；
  was　there　as　yet　any　certain　evidence　that　the　Treasury　was
  facing　an　impossible　situation。　Its　endeavors　were　taken
  lightlyat　first；　almost　gaily…because　of　the　profound　illusion
  which　permeated　Southern　thought　that　Cotton　was　King。　Obviously；
  if　the　Southern　ports　could　be　kept　open　and　cotton　could
  continue　to　go　to　market；　the　Confederate　financial　problem　was
  not　serious。　When　Davis；　soon　after　his　first　inauguration；　sent
  Yancey；　Rost；　and　Mann　as　commissioners　to　Europe　to　press　the
  claims　of　the　Confederacy　for　recognition；　very　few　Southerners
  had　any　doubt　that　the　blockade；　would　be　short…lived。　〃Cotton　is
  King〃　was　the　answer　that　silenced　all　questions。　Without
  American　cotton　the　English　mills　would　have　to　shut　down；　the
  operatives　would　starve；　famine　and　discontent　would　between　them
  force　the　British　ministry　to　intervene　in　American　affairs。
  There　were；　indeed；　a　few　far…sighted　men　who　perceived　that　this
  confidence　was　ill…based　and　that　cotton；　though　it　was　a　power
  in　the　financial　world；　was　not　the　commercial　king。　The　majority
  of　the　population；　however；　had　to　learn　this　truth　from　keen
  experience。
  Several　events　of　1861　for　a　time　seemed　to　confirm　this
  illusion。　The　Queen's　proclamation　in　the　spring；　giving　the
  Confederacy　the　status　of　a　belligerent；　and；　in　the　autumn；　the
  demand　by　the　British　Government　for　the　surrender　of　the
  commissioners；　Mason　and　Slidell；　who　had　been　taken　from　a
  British　packet　by　a　Union　cruiserboth　these　events　seemed　to
  indicate　active　British　sympathy。　In　England；　to　be　sure；　Yancey
  became　disillusioned。　He　saw　that　the　international　situation　was
  not　so　simple　as　it　seemed；　that　while　the　South　had　powerful
  friends　abroad；　it　also　had　powerful　foes；　that　the　British
  anti…slavery　party　was　a　more　formidable　enemy　than　he　had
  expected　it　to　be；　and　that　intervention　was　not　a　foregone
  conclusion。　The　task　of　an　unrecognized　ambassador　being　too
  annoying　for　him；　Yancey　was　relieved　at　his　own　request　and
  Mason　was　sent　out　to　take　his　place。　A　singular　little　incident
  like　a　dismal　prophecy　occurred　as　Yancey　was　on　his　way　home。　He
  passed　through　Havana　early　in　1862；　when　the　news　of　the
  surrender　of　Fort　Donelson　had　begun　to　stagger　the　hopes　and
  impair　the　prestige　of　the　Confederates。　By　the　advice　of　the
  Confederate　agent　in　Cuba；　Yancey　did　not　call　on　the　Spanish
  Governor　but　sent　him　word　that　〃delicacy　alone　prompted　his
  departure　without　the　gratification　of　a　personal　interview。〃　The
  Governor　expressed　himself　as　〃exceedingly　grateful　for　the　noble
  sentiment　which　prevented〃　Yancey　from　causing　international
  complications　at　Havana。
  The　history　of　the　first　year　of　Confederate　foreign　affairs　is
  interwoven　with　the　history　of　Confederate　finance。　During　that
  year　the　South　became　a　great　buyer　in　Europe。　Arms；　powder；
  cloth；　machinery；　medicines；　ships；　a　thousand　things；　had　all　to
  be　bought　abroad。　To　establish　the　foreign　credit　of　the　new
  Government　was　the　arduous　task　of　the　Confederate　Secretary　of
  the　Treasury；　Christopher　G。　Memminger。　The　first　great　campaign
  of　the　war　was　not　fought　by　armies。　It　was　a　commercial　campaign
  fought　by　agents　of　the　Federal　and　Confederate　governments　and
  having　for　its　aim　the　cornering　of　the　munitions　market　in
  Europe。　In　this　campaign　the　Federal　agents　had　decisive
  advantages：　their　credit　was　never　questioned；　and　their　enormous
  purchases　were　never　doubtful　ventures　for　the　European　sellers。
  In　some　cases　their　superior　credit　enabled　them　to　overbid　the
  Confederate　agents　and　to　appropriate　large　contracts　which　the
  Confederates　had　negotiated　but　which　they　could　not　hold　because
  of　the　precariousness　of　their　credit。　And　yet；　all　things
  considered；　the　Confederate　agents　made　a　good　showing。　In　the
  report　of　the　Secretary　of　War　in　February；　1862；　the　number　of
  rifles　contracted　for　abroad　was　put　at　91；000；　of　which　15；000
  had　been　delivered。　The　chief　reliance　of　the　Confederate
  Treasury　for　its　purchases　abroad　was　at　first　the　specie　in　the
  Southern　branch　of　the　United　States　Mint　and　in　Southern　banks。
  The　former　the　Confederacy　seized　and　converted　to　its　own　use。
  Of　the　latter　it　lured　into　its　own　hands　a　very　large　proportion
  by　what　is　commonly　called　〃the　fifteen　million　loan〃an　issue
  of
  eight　percent　bonds　authorized　in　February；　1861。　Most　of　this
  specie　seems　to　have　been　taken　out　of　the　country　by　the
  purchase　of　European　commodities。　A　little；　to　be　sure；　remained；
  for　there　was　some　gold　still　at　home　when　the　Confederacy　fell。
  But　the　sum　was　small。
  In　addition　to　this　loan　Memminger　also　persuaded　Congress　on
  August　19；　1861；　to　lay　a　direct　taxthe　〃war　tax；〃　as　it　was
  calledof　one…half　of　one　per　cent　on　all　property　except
  Confederate　bonds　and　money。　As　required　by　the　Constitution　this
  tax　was　apportioned　among　the　States；　but　if　it　assumed　its
  assessment　before　April　1；　1862；　each　State　was　to　have　a
  reduction　of　ten　per　cent。　As　there　was　a　general　aversion　to　the
  idea　of　Confederate　taxation　and　a　general　faith　in　loans；　what
  the　States　did；　as　a　rule；　was　to　assume　their　assessment；　agree
  to　pay　it　into　the　Treasury；　and　then　issue　bonds　to　raise　the
  necessary　funds；　thus　converting　the　war　tax　into　a　loan。
  The　Confederate；　like　the　Union；　Treasury　did　not　have　the
  courage　to　force　the　issue　upon　taxation　and　leaned　throughout
  the　war　largely　upon　loans。　It　also　had　recourse　to　the　perilous
  device　of　paper　money；　the　gold　value　of　which　was　not
  guaranteed。　Beginning　in　March；　1861；　it　issued　under　successive
  laws　great　quantities　of　paper　notes；　some　of　them　interest
  bearing；　some　not。　It　used　these　notes　in　payment　of　its　domestic
  obligations。　The　purchasing　value　of　the　notes　soon　started　on　a
  disastrous　downward　course；　and　in　1864　the　gold　dollar　was　worth
  thirty　paper　dollars。　The　Confederate　Government　thus　became
  involved　in　a　problem　of　self…preservation　that　was　but　half
  solved　by　the　system　of　tithes　and　impressment　which　we　shall
  encounter　later。　The　depreciation　of　these　notes　left
  governmental　clerks　without　adequate　salaries　and　soldiers
  without　the　means　of　providing　for　their　families。　During　most　of
  the　war；　women　and　other　noncombatants　had　to　support　the
  families　or　else　rely　upon　local　charity　organized　by　state　or
  county　boards。
  Long　before　all　the　evils　of　paper　money　were　experienced；　the
  North；　with　great　swiftness；　concentrated　its　naval　forces　so　as
  to　dominate　the　Southern　ports　which　had　trade　relations　with
  Europe。　The　shipping　ports　were　at　once　congested　with　cotton　to
  the　great　embarrassment　of　merchants　and　planters。　Partly　to
  relieve　them；　the　Confederate　Congress　instituted　in　May；　1861；
  what　is　known　today　as　〃the　hundred　million　loan。〃　It　was　the
  first　of　a　series　of　〃produce　loans。〃　The　Treasury　was　authorized
  to　issue　eight　percent　bonds；　to　fall　due　in　twenty　years；　and
  to　sell　them　for　specie　or　to　exchange　them　for　produce　or
  manufactured　articles。　In　the　course　of　the　remaining　months　of
  1861　there　were　exchanged　for　these　bonds　great　quantities　of
  produce　including　some　400；000　bales　of　cotton。
  In　spite　of　the　distress　of　the　planters；　however；　the　illusion
  of　King　Cotton's　power　does　not　seem　to　have　been　seriously
  impaired　during　1861。　In　fact；　strange　as　it　now　seems；　the　frame
  of　mind　of　the　leaders　appears　to　have　been　proof；　that　year；
  against　alarm　over　the　blockade。　For　two　reasons；　the　Confederacy
  regarded　the　blockade　at　first　as　a　blessing　in　disguise。　It　was
  counted　on　to　act　as　a　protective　tariff　in　stimulating
  manufactures；　and　at　the　same　time　the　South　expected
  interruption　of　the　flow　of　cotton　towards　Europe　to　make　England
  feel　her　dependence　upon　the　Confederacy。　In　this　way　there　would
  be　exerted　an　economic　coercion　which　would　compel　intervention。
  Such　reasoning　lay　behind　a　law　passed　in　May　forbidding　the
  export　of　cotton　except　through　the　seaports　of　the　Confederacy。
  Similar　laws　were　enacted　by　the　States。　During　the　summer；　many
  cotton　factors　joined　in　advising　the　planters　to　hold　their
  cotton　until　the　blockade　broke　down。　In　the　autumn；　the　Governor
  of　Louisiana　forbade　the　export　of　cotton　from　New　Orleans。　So
  unshakeable　was　the　illusion　in　1861；　that　King　Cotton　had
  England　in　his　grip！　The　illusion　died　hard。　Throughout　1862；　and
  even　in　1863；　the　newspapers　published　appeals　to　the　planters　to
  give　up　growing　cotton　for　a　time；　and　even　to　destroy　what　they
  had；　so　as　to　coerce　the　obdurate　Englishmen。
  Meanwhile；　Mason　had　been　accorded　by　the　British　upper　classes
  that　generous　welcome　which　they　have　always　extended　to　the
  representative；　of　a　people　fighting　gallantly　against　odds。
  During　the　hopeful　days　o