Interest Rates in the Civil War South

Abstract

Interest rates in the Civil War South were quite stable and even declined a bit during the war. In this article we explain the mechanism that produced this puzzling result. The existence of a fixed-rate call certificate redeemable at par anchored interest rates expressed in terms of Confederate dollars. When expressed in terms of gold, they were volatile, high, and reflected war events.

Suppressing Asset Price Inflation: The Confederate Experience, 1861–1865

“…9. Although we have seen no references to these bonds actually circulating, Davis and Pecquet (1990) show that they were nevertheless liquid financial instruments with active secondary markets.…”

“…8. Davis and Pecquet (1990) stress the importance of substitution between call certificates and bonds and point to the existence of an approximate 2% premium on the bonds over much of the 1862±64 period. The role played by call certificates changed substantially when their free exchangeability for Treasury notes ended under the 23 March 1863 act, however.…”

Victory or Repudiation? The Probability of the Southern Confederacy Winning the Civil War

“…to 20 years. Coupon payments were paid semi-annually on January 1st and July 1st (Davis and Pecquet, 1990;Todd, 1954;Dinger, 1868). 5 Ball (1991) and Sexton (2006) estimate that the Southern Confederacy shipped more than 14 million gold dollars in domestic bonds to Europe during the war.…”

“…Ransom (2005) has written a counterfactual history of the Southern Confederacy assuming that McClellan was elected President of the United States on a peace party platform.2 Roll (1971) estimates the probability that the United States would return to the gold standard using Greenback and gold bonds. Other studies of Civil War financial markets have examined the effect of war and political news on exchange rates and bond prices to identify events seen as important to contemporaries of the Civil War(Willard et al, 1996: Brown andBurdekin, 2000;Davis and Pecquet, 1990;Weidenmier, 2002).…”

Turning Points in the U.S. Civil War: A British Perspective

“…8. Davis and Pecquet (1990), in examining estimated gold yields on the Confederate bond issues of 1861 (the $15 million loan and the $100 million loan), find similar evidence of a recovery in 1864, with the rate in September 1864 being close to its March level. Their series otherwise show the expected upward spikes following Gettysburg and Vicksburg in July 1863 and the fall of Atlanta in September 1864.…”