U.S.-Dakota War: The financial aspect

Staff photo by Clay Schuldt Speaker Daniel Munson holds up a piece of gold with a stamp on it. Bits of gold like this were used as a primary form of currency in 1862 and the difficulty of supplying it over paper currency was a factor in the U.S.-Dakota War.

NEW ULM — The Brown County Historical Society’s commemoration of the US-Dakota War of 1862 continued Thursday with a presentation by Daniel C. Munson on the financial aspect of the conflict.

The war had its origins in a late annuity payment that the U.S. government owed the Dakota tribes. Under the treaties of Mendota and Traverse des Sioux, it was expected to show up in June 1862, but had not arrived.

This was not the first time the payment was late, but after a month without payment, the Dakota were concerned and hungry.

Munson explained the 1861 growing season was poor, and the Dakota relied on traders for food. However, local traders were refusing to grant the Dakota an advance on the annuity payment. Munson asked the question: why?

He wanted to know why the payment was late and why had the traders refused an advance. This annuity payment was guaranteed by the U.S. government, so why was it over a month behind schedule and why didn’t local traders have faith an advance would be covered?

Munson said the big clue was related to a line in the 1841 treaty which said the annuity payment would be delivered in “specie.” Munson explained that specie was old-fashioned way of saying “gold.”

Munson explained why gold was the top form of currency. Its rarity makes it valuable, but it also has a striking appearance people like. It’s also incredibly dense which makes it hard to counterfeit, but still easy to store.

In addition, its chemically stable, meaning gold never goes bad.

For this reason, in 1862 money was synonymous with gold and 1 ounce of 24-karat gold was worth $20.64. Paper money was often viewed as less valuable than gold, but unfortunately the U.S. government was having trouble securing enough gold.

The Civil War created an economic problem. At the start of the Civil War, President Abraham Lincoln asked for $400 million from Congress to fight the war. The circulation of gold began to go down as paper “greenbacks” were issued by the government. Early Union losses caused many to worry the United States would lose the war and the value of paper dollars would diminish. Those holding gold hoarded it and as a result the U.S. government could not send the $70,000 annuity payment to the Dakota.

The Dakota were aware of the Civil War and were uncertain if the United States would win. The late payment might lead to no payment in the future.

The traders were also aware of the government’s economic problems and many of them doubted the annuity payment would ever come, which means they could not afford to offer an advance to the Dakota people.

In August 1862, the annuity payment was en route to Fort Ridgely but it would not arrive in time. On Aug. 17 a group of four braves killed white setters, possibly due to denied service at a general store near Acton. The Lower Sioux tribes convened to decide the next course of action, which involved attacks on the Agency traders, the farmers, the Army outpost and the city of New Ulm.

The annuity payment arrived at Fort Ridgely on Aug. 18, 1862, a few hours after the first attacks started. The payment was worth $71,000 and weighed 235 pounds. It had been shipped by the railroad to St. Paul before being sent in two wagons to the fort. There were no telegraph lines in place between Fort Ridgely and St. Paul, preventing government officials from alerting the agency the payment was en route.

Munson closed his presentation by saying it was an unfortunate series of setbacks. Today, the United States is not reliant on the gold standard and could easily transfer funds. In the mid-1800’s it was a harder process and no one knew what the future had in store.

“It was a different time and a more uncertain world,” Munson said.

The U.S.-Dakota War commemoration week will continue noon Friday with a presentation by Mary Bakeman titled “After Wood Lake” at the BCHS Annex.

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