place beside the Minnesota, she waited for the dawn, and about eight o'clock saw the Merrimac coming toward her, and, starting out, began the greatest naval battle of modern times. When it ended, neither ship was disabled; but they were the masters of the seas, for it was now proved that no wooden ships anywhere afloat could harm them. The days of wooden naval vessels were over, and all the nations of the world were forced to build their navies anew. The Merrimac withdrew from the fight; when the Confederates evacuated Norfolk, they destroyed her (May, 1862). The Monitor sank in a storm at sea while going to Beaufort, N.C. (January, 1863).1 463. Capture of the Coast Forts and Waterways. - Operations along the coast were begun in August, 1861, by the capture of the forts at the mouth of Hatteras Inlet, N.C., the entrance to Pamlico Sound; and by the capture of Port Royal in November. A few months later (early in 1862) control of 1 Battles and Leaders of the Civil War, Vol. I., pp. 719-750. Pamlico and Albemarle sounds was secured by the capture of Roanoke Island, Elizabeth City, and Newbern, all in North Carolina, and of Fort Macon, which guarded the entrance to Beaufort harbor. McClellan's capture of Yorktown in May, 1862, was soon followed by the hasty evacuation of Norfolk by the Confederate forces, so that at the end of the first year of the war most of the seacoast from Norfolk to the Gulf was in Union hands. Along the Gulf coast naval operations resulted in opening the lower Mississippi and capturing New Orleans in April (p. 392), and Pensacola in May, 1862. In April, 1863, a naval attack on Charleston was planned, but was carried no farther than a severe battering of Fort Sumter. In August, 1864, Admiral Farragut led his fleet past Forts Morgan and Gaines, that guarded the entrance of Mobile Bay, captured the Confederate fleet and took the forts. Mobile, however, was not taken till April, 1865, just as the Confederacy reached its end. Fort Fisher, which commanded the entrance to Cape Fear River, on which stood Wilmington, the great port of entry for blockade runners, fell before the attack of a combined land and naval force in January, 1865. SUMMARY 1. The naval operations of the war opened with the blockade of the coast of the Confederate States. 2. This was necessary in order to prevent cotton, sugar, and tobacco being sent abroad in return for materials of war. 3. As a result blockade running was carried on to a great extent. 4. In order to destroy our commerce a fleet of cruisers was built in Eng. land, purchased and manned by the Confederate government. They inflicted very serious damage. 5. But the great event of the war was the battle between the ironclads Monitor and Merrimac, which marked the advent of the ironarmored war ship. CHAPTER XXIX THE COST OF THE WAR 464. The Cost in Money.. When Fort Sumter was fired on in 1861 and Lincoln made his call for volunteers, the national debt was $90,000,000, the annual revenue was $41,000,000, and the annual expenses of the government $66,000,000. As the expenses were vastly increased by the outbreak of war, it became necessary to get more money. To do this, Congress, when it met in July, 1861, began a financial policy which must be described if we are to understand the later history of our country. 465. Power to raise Money. The Constitution gives Congress power 1. "To lay and collect taxes, duties, imposts, and excises." 2. "To borrow money on the credit of the United States." 3. To apportion direct taxes among the several states according to their population. 466. Raising Money by Taxation; Internal Revenue. - Exercising these powers, Congress in 1861 increased the duties on articles imported, laid a direct tax of $20,000,000, and imposed a tax of three per cent on all incomes over $800. The returns were large, but they fell far short of the needs of the government, and in 1862 an internal revenue system was created. Taxes were now imposed on spirits and malt liquors; on manufactured tobacco; on trades, professions, and occupations; till almost everything a man ate, drank, wore, bought, sold, or owned was taxed. The revenue collected from such sources between 1862 and 1865 was $780,000,000. 467. Raising Money on the Credit of the United States." Money raised by internal revenue and the tariff was largely used to pay current expenses and the interest on the national debt. The great war expenses were met by borrowing money in two ways: 1. By selling bonds. 2. By issuing" United States notes." 468. The Bonded and Interest-paying Debt. — The bonds were obligations by which the government bound itself to pay the holder the sum of money specified in the bond at the end of a certain period of years, as twenty or thirty or forty. Meantime the holder was to be paid interest at the rate of five, six, or seven per cent a year. Between July 1, 1861, and August 31, 1865, when our national debt was greatest, $1,109,000,000 worth of bonds had been sold to the people and the money used for war purposes. 469. United States Notes. - The United States notes were of two kinds: those which bore interest, and those which did not. Those bearing interest passed under various names, and by 1866 amounted to $577,000,000. United States notes bearing no interest were the "old demand notes," the "greenbacks," the "fractional currency," and the "national bank notes." The greenbacks (a name given them from the green color of their backs) were authorized early in 1862, were in denominations from $1 up, bore no interest, were legal tender in payment of all debts, public and private, except duties on imports and interest on the public debt. In time $450,000,000 were authorized to be issued, and in 1864, $449,000,000 were in circulation. 470. Fractional Currency. The issue of the demand notes in 1861, and the fact, apparent to every one, that Congress must keep on issuing paper money, led the state banks to suspend specie payment in December, 1861. As a consequence, the 3, 5, 10, 25, and 50 cent silver pieces (and of course all the gold) disappeared from circulation. This left the people without small change, and for a time they were forced to pay their car fare and buy their newspapers and make change with postage stamps and "token" pieces of brass and copper, which passed from hand to hand as cents. Indeed, one act of Congress, in July, 1862, made it lawful to receive postage stamps (in sums under $5) in payment of government dues. But in March, 1863, another step was taken, and an issue of $50,000,000 in paper fractional currency was authorized. 471. The National Banking System. Yet another financial measure to aid the government was the creation of national banks. In 1863 Congress established the office of "Comptroller of the Currency," and authorized him to permit the establishment of banking associations. Each must consist of not less than five persons, must have a certain capital, and must deposit with the Treasury Department at Washington government bonds equal to at least one third of its capital. The Comptroller was then to issue to each association bank notes not exceeding in value ninety per cent of the face value of the bonds. It was supposed that the state banks, which then issued $150,000,000 in 7000 kinds of bank notes, would take advantage of the law, become national banks, and use this national money, which would pass all over the country. This would enable the government to sell the banks $150,000,000 and more of bonds. But the state banks did not do so till 1865, when a tax of ten per cent was laid on the amount of paper money each state bank issued. Then, to get rid of the tax, hundreds of them bought bonds and became national banks. 472. The National Debt and State Expenditures. - On the 31st of August, 1865, the national debt thus created reached its highest figure, and was in round numbers $2,845,000,000. Besides the debt incurred by the national government, there were heavy expenditures by the states, and we might say by almost every city and town, amounting to $468,000,000. But even when the war ended, the outlay on account of |