Confederate dollars were the paper money issued by the Confederacy (of Southern States) to help fund the war against the Union. After the South seceded early in 1861, fighting broke out on April 12 at Fort Sumter, South Carolina: It was the first battle of the American Civil War (1861–65).
The North held much of the nation's wealth, and so the newly formed Confederacy was faced with the problem of financing its war effort. The South's agricultural economy made it difficult to raise taxes and the large sums of money required to make war against the Union. In need of funds the provisional government of the Confederacy issued $100 million in paper currency in August 1861. As the war continued, the Confederacy was forced to print more paper money. Because there was nothing to back up the currency, the dollars quickly lost value and became almost worthless.
As the currency became devalued, inflation climbed: In 1861 the price per bushel of salt was eighty cents in Confederate currency; by the end of the following year this price rose to 30 Confederate dollars per bushel. By January 1865 wartime inflation had reduced the value of Confederate paper money to $1.70 per $100 (or just under two cents to the dollar).
The South's inability to raise the capital it needed to wage war was a major factor in its eventual defeat. While funding the war was also a struggle for the Union, the industrial-based economy of the northern states helped the country sustain, and eventually win the conflict. On April 9, 1865, General Robert E. Lee (1807–70) surrendered his ragged Confederate troops to Union General Ulysses S. Grant (1822–85) at old Appomattox Court House, Virginia.