[MrRadar]

Keep in mind at the time that the world was on the gold standard so the value of every currency was measured against gold (and all currencies were, in theory, convertible directly to gold). The Gold Dollar[1] was an actual coin (made of an alloy of 90% gold and 10% copper) in circulation at the time so it was literally impossible for it to be worth less than its face value under the gold standard.

In contrast Greenbacks (paper money issued by the US government) were only a promise to provide gold in exchange for the note. The value of the greenback relative to hard currency would have effectively been a measurement of how much faith people would have had that the government could make good on that promise. During the civil war, when the government was short on cash due to half their tax base leaving and the enormous costs of fighting the war, it's unlikely they would have been able to redeem all of those Greenbacks for hard currency (and in fact that was the whole reason they printed them: they didn't have enough hard currency to mint new coins) so under those conditions it's only rational that Greenbacks would trade at a discount.

[1] https://en.wikipedia.org/wiki/Gold_dollar

[benj111]

'gold' coins can and were debased. So theres a legitimate fear of nations minting coins with lower gold content but the same face value. Devaluing your own coin with it (if people cant differentiate).

Also if I'm a European cotton trader, do I want to be left with north US currency if the south won, and visa versa?

So yes the gold itself has a value, but as the article itself shows, currency without backing has value.

With that in mind, I would prefer to see a comparison to an independent currency.

[MrRadar]

At the time (and I believe also today but I'm not sure) the metal content of coins issued by the US government was set by Congress in law. The law authorizing the minting of the Gold Dollar coins specified they needed to be worth exactly $1.00[1] and, based on the statutory exchange rate of $20.67 per troy ounce of gold between 1849 and 1861[2] (which was also effectively fixed in law[3]), they contained exactly 0.04837 troy ounces of gold (as noted in the Wikipedia article I linked in first reply). Thus it would literally be illegal for the Mint of the United States to debase US currency.

That's why paper money was issued: it was outside of the purview of the Mint and not subject to the legal restrictions on debasement. Referencing [2] again, we can see that at the height of the war in 1864 the market price of gold rose from its statutory price of $20.67 to $47.02 (which, due to the effective disappearance of hard currency from ordinary commerce, would have been relative to the paper currency). In other terms, each Gold Dollar was effectively worth $2.27 in Greenbacks or each Greenback could only buy 44% of a Gold Dollar. That matches up pretty closely with the figure cited in the linked article.

If you were a foreign person holding US gold coins in the Civil War era you could sell those gold coins for their gold content (whose value matched their pre-war face value exactly) even if the US government collapsed. You could not do the same with US paper currency.

[1]https://fraser.stlouisfed.org/title/1094

[2]http://onlygold.com/Info/Historical-Gold-Prices.asp

[3]https://en.m.wikipedia.org/wiki/Coinage_Act_of_1834