APRIL 12, 1866 – CONGRESS PASSES THE CONTRACTION ACT

1866 – CONGRESS PASSES THE CONTRACTION ACT
The Act authorized the Secretary of the Treasury to begin retiring Greenbacks (public debt-free money first issued by the Lincoln Administration) in circulation and to contract the money supply. By 1876, two-thirds of the nation's money had been called in by the bankers. A contraction of the money supply when demand is high causes depressions, which is what happened from 1873-79.