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

Burdekin, Richard C. K.; Weidenmier, Marc

doi:10.1093/ei/cbg018

Cited by 13 publications

(5 citation statements)

References 10 publications

(7 reference statements)

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“…We argue that the tranquility in the market for bank notes reflected Southern expectations that, one way or another, the conflict would end with their social structure intact. 40 See Burdekin and Weidenmier (2003) for an analysis of these funding acts and their asymmetric effect on asset and commodity prices. 41 Notes is~ued after December I, 1862, could only be converted into 7% bonds.…”

Section: Discussionmentioning

confidence: 99%

“…The relation between the Confederate money supply and mflauon has been explored by Lerner (1955Lerner ( , 1956, Godfrey (1978), and Burdekin and Weidenmier (2001). The role of fiscal policy and currency reforn1s has been examined by Lerner (1954), Pecquet (1987, Burdekin and Langdana (1993), Grossman and Han (1996), and Burdekin and Weidenmier (2003). TI1e behavior of financial markets during the conflict has been studied by Roll (1972), Calomiris (1988), Davis and Pecquet (1990), Weidenmier (2000), and Brown and Burdekin (2000).…”

Section: The Establishment Of Confederate Currency As a Medium Of Exchangementioning

confidence: 99%

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The Emancipation Proclamation, Confederate Expectations, and the Price of Southern Bank Notes

Pecquet

Davis²,

Kanago³

2004

Southern Economic Journal

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We examine the behavior of a semimonthly series of the Confederate dollar price of bank notes. These notes traded at par with Confederate dollars from October of 1861 until November 5, 1862. We use a model of the demand for two currencies to argue that this departure from par results from altered Southern expectations after the 1862 Congressional elections assured the enactment of the Emancipation Proclamation. Previously, Southerners believed a win or a negotiated settlement would allow a return to the Union intact. When these expectations changed, bank notes appreciated against Confederate dollars. In addition, our empirical work shows that notes appreciated following Northern victories.

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Section: Discussionmentioning

confidence: 99%

Section: The Establishment Of Confederate Currency As a Medium Of Exchangementioning

confidence: 99%

The Emancipation Proclamation, Confederate Expectations, and the Price of Southern Bank Notes

Pecquet

Davis²,

Kanago³

2004

Southern Economic Journal

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“…Money and bond demand fell as citizens and speculators sold Confederate-denominated securities that would become worthless in the event of defeat. Confederate Treasury notes traded for less than 2 cents on the gold dollar, and interest rates on government debt in Richmond and Amsterdam climbed to more than 150% in January 1865 (Brown and Burdekin, 2000;Burdekin and Weidenmier, 2003).…”

Section: The March 1865 Interest Paymentmentioning

confidence: 99%

Gunboats, reputation, and sovereign repayment: lessons from the Southern Confederacy

Weidenmier

2005

Journal of International Economics

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Many states that formed the Southern Confederacy defaulted on sovereign debt sold in international capital markets during the 1840s. The Confederacy also elected President Jefferson Davis, who openly advocated the repudiation of U.S. states' debts while a member of Congress. Despite its poor credit record, the Confederate government managed to float cotton bonds in England that constituted under 2% of its expenditures. The bonds were largely issued to settle overdue debts with gun contractors who had cut off trade credit. The South serviced the bonds as late as March 1865, a time of domestic hyperinflation and weeks before the fall of Richmond. Although the Confederate experience shows that trade sanctions can promote debt repayment, the gunboat model can only account for a small amount of lending. A reputation or another type of sanction would be necessary to support higher levels of lending in international capital markets. D

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“…However, the author of this letter was allegedly James Spence, a well-known Southern sympathizer (New York Times, December 9, 1865). compelling citizens to exchange money for bonds (Burdekin and Weidenmier, 2003). Ball (1991) estimated that debt issue accounted for approximately 33 percent of Confederate revenues during the war.…”

Section: A Country With a Very Poor Capital Market Reputationmentioning

confidence: 99%

“…Money and bond demand fell as citizens and speculators sold Confederate denominated securities that would become worthless in the event of defeat. Confederate Treasury notes traded for less than two cents on the gold dollar and interest rates on government debt in Richmond and Amsterdam climbed to more than 150 percent in January 1865 (Burdekin and Weidenmier, 2003).…”

Section: The Importance Of Sanctions and Reputationmentioning

confidence: 99%

Gunboats, Reputation, and Sovereign Repayment: Lessons from the Southern Confederacy

Weidenmier¹

2004

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Many states that formed the Southern Confederacy defaulted on sovereign debt sold in international capital markets during the 1840s. The Confederacy also elected President Jefferson Davis, who openly advocated the repudiation of U.S. states' debts while a member of Congress. Despite its poor credit record, the Confederate government managed to float cotton bonds in England that constituted under two percent of its expenditures. The bonds were largely issued to settle overdue debts with gun contractors who had cut off trade credit. The South serviced the bonds as late as March 1865, a time of domestic hyperinflation and weeks before the fall of Richmond. Although the Confederate experience shows that trade sanctions can promote debt repayment, the gunboat model can only account for a small amount of lending. A reputation or another type of sanction would be necessary to support higher levels of lending in international capital markets.

show abstract

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

Cited by 13 publications

References 10 publications

The Emancipation Proclamation, Confederate Expectations, and the Price of Southern Bank Notes

The Emancipation Proclamation, Confederate Expectations, and the Price of Southern Bank Notes

Gunboats, reputation, and sovereign repayment: lessons from the Southern Confederacy

Gunboats, Reputation, and Sovereign Repayment: Lessons from the Southern Confederacy

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