by Ben Tarnoff
ON CHRISTMAS DAY 1862, firecrackers erupted all over Richmond—bright, sputtering bursts that left plumes of smoke lingering in the brisk air. John Beauchamp Jones could hear the explosions from his house. “[N]o little gunpowder is consumed in commemoration of the day,” he wrote in his diary, a rare extravagance at a time when most Richmonders were narrowly scraping by. Jones worked as a clerk for the War Department, but even with a steady government paycheck he could scarcely support his wife and four children. The day before, he had sold his silver watch to buy a proper Christmas dinner and fuel to keep him and his family warm for a month. He consoled himself with the thought that his diary, filled with shrewd sketches of life in the capital, would someday become a best seller.
Jones was better off than many. He had a home, a job, and enough food to survive, although he lost twenty pounds during the war. Not everyone enjoyed the same advantages. Poverty, overcrowding, and crime racked wartime Richmond. “A portion of the people look like vagabonds,” Jones observed. They wore “dingy and dilapidated clothes” and some seemed “gaunt and pale with hunger.” Since Richmond had become the Confederate capital, the city’s population had soared, from fewer than forty thousand in 1860 to roughly a hundred thousand three years later. Many of these new arrivals were soldiers, and they brought their favorite pastimes with them. Gambling houses opened; prostitutes solicited johns on the sidewalk and rode through the streets in open carriages. Murders, muggings, and brawls became more frequent. As the war dragged on, the ranks of Richmond’s poor swelled: widows and orphans of dead soldiers, wives and children of those gone to fight, and refugees fleeing the fighting in the countryside.
What made life especially hard in Richmond was the skyrocketing cost of living. A Christmas turkey in 1862 sold for $11, an exorbitant sum for Jones and most others. The high prices were partly due to the shortages caused by the Union blockade and the large influx of people, which drove up demand. But they were also the result of a more pervasive and ulti-mately more poisonous problem: the weakness of Confederate money. Graybacks, after holding steady for months, had begun shedding their value in August 1862, a fateful month for Confederate currency. As Southerners saw their notes’ purchasing power disappear, Memminger naturally took the blame. In his diary, Jones recalled hearing the publisher of the Daily Richmond Enquirer grumble about the secretary in December: “He says Mr. M.’s head is as worthless as a pin’s head.” Jones soon came to share the publisher’s opinion, denouncing Memminger as “headstrong, haughty, and tyrannical.” That the man responsible for running the Confederacy’s finances into the ground was “no Carolinian by birth or descent” but a German-born immigrant made it even worse.
To his credit, Memminger was acutely aware of the dangers of paper money. He repeatedly alerted the Confederate Congress to the hazards of inflation, which could be put off but never avoided entirely. “Like the moon’s attraction upon the ocean,” he told them, “the time of high-water is postponed for a certain period…but, although there may be delay, the event is certain.” Sometimes the legislators listened, periodically retiring large quantities of graybacks from circulation. But mounting expenses always forced them to authorize even more notes the next time, so that the overall volume of paper money continued to climb. The Confederacy’s dependency on paper credit was self-reinforcing: as the value of graybacks fell and prices rose, Congress ordered more Treasury bills to meet the government’s costs, further depreciating the currency.
Too much paper money wasn’t the only thing causing the decline of the Confederate dollar. The value of Treasury notes relied to a great extent on something neither Memminger nor the Confederate congressmen could control: the public’s perception of whether the South was winning the war. The better the Confederacy fared, the better chance it would keep its promise to exchange graybacks for specie, and thus the more desirable the bills. Some Treasury notes made this connection explicit, like the $5 bills that Upham first counterfeited, which promised their redemption six months after the ratification of a treaty between the Confederacy and the Union.
In the second half of 1862, the downturn picked up speed. On August 1, a gold dollar cost two Confederate paper dollars; by the end of the year, it cost $3.25, an increase of more than 60 percent. This precipitous drop in value coincided with a series of events that changed the Southern view of the war. The Battle of Antietam took place on September 17, Lincoln introduced the Emancipation Proclamation on September 22, and by November 4, most Northern states had voted in the congressional elections, leaving the Republicans in control of Congress. Taken together, these developments demonstrated the Union’s will to fight. The North sacrificed thousands of men to eke out a narrow victory at Antietam, and then committed itself to waging total war by targeting the South’s core institution. Continued Republican supremacy in Congress ensured that Lincoln’s policies would remain in place, and eliminated any possibility of a negotiated peace. The consequences for the Southern money market were clear. A protracted struggle would prolong the redemption of graybacks, perhaps indefinitely. And, in the event of a Union victory, not only would Confederate currency be worthless but the entire economic system it was based on would be dismantled.
Upham posed a dual threat to the South’s ailing currency. He helped depreciate graybacks by inflating the money supply and, in defying the Confederate government so publicly, undermined its credibility. Southern newspapers and politicians tried to use Upham as propaganda, publicizing his enterprise as another example of the enemy’s depravity. “The people, among whom such a vice can be practiced, are not a people with whom we could tolerate association,” declared the Daily Richmond Enquirer. “Such conduct but deepens the ditch which separates and increases the disgust which repels us.” While this technique might fan anti-Northern feeling, it could just as easily backfire. By loudly condemning Upham, Southern opinion-makers risked drawing attention to how successfully his counterfeits had infiltrated the Confederacy. Since perception mattered as much as reality, such an impression would only further weaken the currency.
In late 1862, as Confederate values plummeted, a challenge to Upham’s enterprise emerged. Winthrop E. Hilton was a New York City printer whose shop stood on Printing House Square, a triangular cluster of buildings opposite City Hall that housed some of the North’s most powerful newspapers. The New York Times occupied an entire block at the southern end of the square, its ornate, olive-colored walls just opposite the smaller, less majestic headquarters of Horace Greeley’s New York Tribune. Wedged between these giants of journalism was Hilton’s office on Spruce Street, where he printed fake graybacks. Upham had never before encountered competition as formidable as Hilton’s. The New Yorker used the same stone lithography method as the Confederacy’s printers, resulting in almost perfect counterfeits. He had also learned Upham’s lessons of self-promotion, and on October 4, 1862, advertised his “perfect fac-similes of Confederate Treasury notes” in Harper’s Weekly. His rates were $4 per 1,000 bills, vastly underselling Upham, whose broadside a couple of months earlier had listed $40 per 1,000.
It didn’t take long for Upham to respond. Two weeks later, he ran his own advertisement in Harper’s Weekly, slashing his prices to match Hilton’s. By January 1863, however, Hilton had adopted a new pricing model: rather than charging the same amount for each note, he factored in its face value. He now sold “$500 in Confederate Notes of all denominations” for $5. While this wasn’t quite as good a deal as he had offered before, it showed that Hilton understood his customers. Someone trying to use the facsimiles as counterfeit money would be willing to pay more for a higher-denomination note. Hilton proved far more comfortable than Upham when it came to acknowledging the reason people bought his bills. In Harper’s Weekly he boasted that his notes were “so exactly like the genuine that where one will pass current the other will go equally as well,” a direct reference to passing counterfeits. On January 31, Upham countered with his best bargain yet: $20,000 in Confederate money of various denomin
ations “sent, post-paid, to any address, on receipt of $5.” For the same price as Hilton, he was offering forty times the face value, plus free postage.
For all its strengths, Upham’s business model had a fatal flaw. The more counterfeits he sold, the less valuable Confederate notes became, depressing demand for his product. Of course, graybacks would depreciate without his help. But he hastened their decline, which would inevitably take a toll on his trade. By 1863, the future of his business looked grim. Hilton was forcing him to cut his prices even as the value of Confederate notes fell. Hemmed in by the flagging value of Confederate currency on one side and the competition of Hilton on the other, Upham couldn’t hope to continue much longer. His fortunes were tied to those of the Confederacy, a peculiar situation for a Northern patriot.
IT WAS RAINING IN NEW YORK on New Year’s Eve 1863, a hard, driving rain that pummeled the grimy streets. At the Astor House annual ball, guests danced under the glow of gaslights, the music rising above the rattling of the storm outside. U.S. Marshal Robert Murray stood less than a mile away, preparing to pull off the sting he had been carefully planning for a week. Murray’s men had been tailing Upham’s old competitor Winthrop E. Hilton around the clock, watching him commute between his office at Printing House Square and his home on Forty-ninth Street, compiling lists of his employees and business partners. Tonight, while the rest of the city was too drunk to notice, Murray would strike.
He split his men into two groups. One headed for Hilton’s main shop at 11 Spruce Street; the other raided a location a few blocks away, above a saloon at the corner of Ann and Gold streets. It was there that the officers found Hilton and an accomplice named Williams, along with lithographic stones for printing $100, $50, and $5 Confederate notes. At two in the morning, Murray and his team stormed a third site, an apartment on Park Row across from the Astor House. They knocked down the door and discovered a cache of machines for printing money, including a geometric lathe, an expensive contraption that engraved highly detailed designs onto a steel plate. They also found millions of dollars’ worth of freshly printed Confederate notes and bonds. By the time Hilton’s lawyers began looking for him the next day, their client was confined within the brick walls of Fort Lafayette, an island fortification off the southern coast of Brooklyn. There would be no trial. Hilton was a prisoner of war.
Upham had left the counterfeiting business four months before, in August 1863. By that time, Confederate currency was in a free fall. Runaway inflation and deepening distrust of the Richmond government had driven the price of gold in graybacks up 500 percent in the past year. That summer, the Battle of Gettysburg dealt the Confederacy a painful defeat, and when the news reached the South, it triggered another steep decline in the money market. With graybacks falling and Hilton continuing to give him stiff competition, Upham decided to abandon his facsimile trade, and avoided his rival’s fate.
In an irony peculiar to the Civil War, federal authorities arrested Hilton not because he was a counterfeiter—forging Confederate notes was fine—but because they believed he was making genuine notes. They had recently unearthed evidence that the rebel government had hired Hilton to print its money, with his facsimile venture providing the perfect cover. The investigation began in December 1863, when New York City postmaster Abram Wakeman saw a suspicious envelope in the day’s mail. It was addressed to Alexander Keith Jr. of Halifax, Nova Scotia—a known Confederate agent. Wakeman seized the letter and forwarded it to Secretary of War Edwin M. Stanton in Washington. Inside the envelope was something even more suspicious: an encrypted message, coded in strange symbols. Stanton’s clerks at the War Department spent two days trying to decipher it before they gave the letter to a trio of young cryptographers from the telegraph office. These men were the Union’s best code-breakers—the “Sacred Three,” as they called themselves. It took them about four hours to crack the cipher. What they uncovered confirmed Wakeman’s initial hunch: the letter was a covert Confederate communication from an operative in New York to his counterpart in Halifax, providing news on smuggling rifles into the South and other intrigues.
Two days later, another letter to the Halifax address appeared at the New York post office. The message had been encrypted with the same cipher, and the War Department cryptographers quickly decoded it. “Say to Memminger that Hilton will have the machines all finished and dies all cut ready for shipping by the first of January,” it read. “The engraving of the plates is superb.” The contraband would be shipped from New York to Halifax, from there to the Bahamas, and then brought into Florida by blockade-runner. “The main part of the work has been under the immediate supervision of Hilton,” the letter continued, “who will act in good faith in consequence of the large amount he has and will receive.” Determined to catch Hilton before he got the moneymaking materials to Halifax, Secretary Stanton ordered Murray to round up the printer and his collaborators. He also gave his three code-breakers a raise.
Murray’s sweep went smoothly. He arrested everyone, even the machinist who had built Hilton’s geometric lathe, a former Treasury Department employee living in New Jersey. The New York Times hailed the operation as “a great victory by our forces in the field,” sure “to discourage the rebel leaders.” To Hilton’s friends, however, it came as a shock. He was a loyal Union man, they said, and an early supporter of Lincoln. A native of New Hampshire, he had arrived in New York ten years earlier and made a name for himself as an honest printer. They couldn’t believe he would conspire with the rebels.
Although it would take months to learn the truth, they were right: Hilton was innocent. The first clue came in late January, when a Southern general in North Carolina saw a report of Hilton’s capture in a Northern newspaper and passed the article along to Secretary Memminger in Richmond. “The Treasury has no connection whatever with the matter,” Memminger replied, “but it would be well to leave the Yankee police under their present impressions.” Hilton didn’t work for the South: his notes were counterfeits. What Memminger didn’t say, and perhaps didn’t know, was that Hilton had been the victim of an elaborate Confederate conspiracy.
The details eventually leaked to the New York World, which published a long account on April 29, 1864, drawing on information gleaned from secret government documents. In late 1863, the South dispatched a team of undercover agents to New York in order to put a stop to Hilton, whose bad bills were pouring into the Confederacy at an alarming rate. The Southerners came up with a clever plan. They would write an encrypted letter incriminating Hilton, knowing it would be intercepted and decrypted by Union officials. For the hoax to work they needed someone close to the counterfeiter, so they tracked down one of his employees: George H. Briggs, a former Confederate spy who had defected to the North. In a room at the St. Nicholas Hotel on Broadway, one of the agents put a gun to Briggs’s head and threatened to blow his brains out if he didn’t help them jail his boss. They also enlisted James S. Chalker, a customhouse official who despised Hilton and desperately wanted to see him behind bars.
The Confederacy had eliminated a major counterfeiter by tricking the Union into thinking his forgeries were in fact genuine—the same deception perpetrated by Hilton on a wider scale in the South. It was a brilliant tactic, using the counterfeiter’s logic against him. No doubt the agents would have targeted Upham instead if he had still been in business by the time they came North. His notes were certainly still coursing through the Confederacy, at least twenty-five different kinds in all. During the year and a half he spent counterfeiting, Upham made a lot of Southern money. In 1874, when a historian researching a book about Confederate currency asked him for specifics, he estimated he had printed about $15 million in bogus bills. If all of that ended up in the South, it would have made up almost 3 percent of the entire Confederate money supply—a significant chunk for a single counterfeiter. In his letter to the historian, Upham refused to admit his facsimiles had been anything other than curiosities. He insisted that Hilton had been the counterfeiter, not him. The
New Yorker had ripped off his designs, he claimed, and then sold “large quantities to bogus Jew cotton brokers and other scalawags, who passed through the Confederate lines and purchased cotton from the Rebel planters.”
More than a decade after their feud, Upham still hated Hilton. He had nothing to worry about: in the long run, the Philadelphian came out ahead. He was a better businessman, and when he ended his moneymaking venture, he had plenty to fall back on. In the fall of 1863, Upham sold his store at 403 Chestnut Street and opened a different kind of shop five blocks away. With no medical training whatsoever, he began hawking cures for almost anything. Upham’s Bay Rum alleviated dandruff, burns, sores, fever, and headaches; his “Tish-Wang” Chinese lozenges treated gonorrhea, syphilis, and a host of other venereal diseases. He styled himself a chemist and called his store a laboratory, marketing his remedies as vigorously as he had his counterfeits. He took out ads in newspapers and distributed circulars with endorsements from satisfied customers. He patented his treatments and took measures to discourage bootleggers. “Beware of Counterfeits,” one of his flyers warned.
Upham had moved from one swindle to another, from counterfeiting to quackery. He had nothing to recommend him but his talent as a salesman, which was considerable. His business thrived. He enjoyed an impeccable reputation, paid his debts on time, and had no trouble obtaining credit. Hilton, on the other hand, fell apart. By the end of the war, the authorities had released him and he became a printer again. But he struggled financially, and before long had ruined his credit by borrowing a large sum of money that he couldn’t repay. In the summer of 1870 he went through bankruptcy, and seven years later he went out of business.
