California and Oregon remained on a gold standard during the 1862 to 1879 period when the rest of the country transacted business on an inconvertible paper standard. During the Civil War the Confederate 
government abandoned all monetary discipline and flooded the South with Confederate paper money. In 1862, the North began issuing inconvertible greenbacks, and only in 1879 provided for the redemption of greenbacks in gold and silver specie. During the 1862 to 1879 period, Gresham’s law drove all gold and silver coins out of circulation in the eastern United States, but state laws and organized business interests kept
gold in circulation on the Pacific coast.  The Pacific coast could boast of no less than $25 million of gold and silver coins in circulation during the period when the rest of the country used paper money as a medium of exchange and standard of value.
Before the Civil War, both California and Oregon relied exclusively on gold and silver coins rather than banknotes to circulate as money. When greenbacks were first issued, banknotes accounted for almost half of the circulating money in the East. The constitutions of both California and Oregon banned the issuance and circulation of paper money, and banks were forbidden to create “paper to circulate as money.” 
Aside from legal barriers to the circulation of paper money, merchants collectively agreed not to accept greenbacks on par with gold. The merchants of San Francisco agreed to neither receive nor make payment in greenbacks at any rate other than the greenback market value in terms of gold. They set prices in gold
and accepted greenbacks at whatever discount the market dictated. When leading merchants in Portland agreed to accept greenbacks at the going rate in San Francisco, merchants throughout Oregon enforced the same policy. The merchants in Portland went so far as to circulate an announcement that customers
who insisted on paying debts in greenbacks would find their names on a blacklist of the Portland merchants’
association. Commercial ostracism awaited any businessperson who paid a business debt in greenbacks, that is, who “greenbacked” a creditor. Banks in California and Oregon refused to accept deposits in greenbacks, and newspapers worked to keep down the circulation of greenbacks.
After the federal government began issuance of greenbacks, the legislatures of both California and Oregon enacted measures allowing people to contract debts in either coin or greenbacks but requiring that payment be made as specified in the contract. The Oregon legislature enacted legislation requiring the payment of state and local taxes in only gold and silver coin, ruling out greenbacks. The California Supreme Court ruled that greenbacks were not acceptable in the payment of state and county taxes.
Organized opposition to greenbacks triggered a bitter debate on the Pacific coast. Critics charged that repudiation of greenbacks was tantamount to refusing to share in the financial burden of the Civil War. Crowding all the greenbacks on to the East Coast caused faster depreciation of the greenbacks, putting a greater burden of inflation on the East Coast. Although prices in greenbacks doubled over the course of the Civil War, Oregon prices in gold increased only 25 percent. 
Two factors may help explain opposition to greenbacks on the Pacific coast. First, gold discoveries in California had already given that region a taste of inflation caused by increases in the money supply. A paper issue would only accelerate money growth, contributing to further inflation. Second, as a gold-producing
region, the Pacific coast did not want to encourage the use of any other form of money. As abundant gold production drove out silver money, the Pacific coast moved essentially to a gold standard between 1862 and 1879, a unique exception to the paper standard that reigned in the rest of the country.
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