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

Authors

  • Richard C. K. Burdekin,

    1. Jonathon B. Lovelace Professor of Economics, Claremont McKenna College, 500 E. Ninth Street, Claremont, CA 91711. Phone 1–909–607–2884, Fax 1–909–621–8249, E-mail richard.burdekin@claremontmckenna.edu
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  • Marc D. Weidenmier

    1. Assistant Professor, Department of Economics, Claremont McKenna College, 500 E. Ninth Street, Claremont, CA 91711, and NBER Faculty Research Fellow. Phone 1–909–607–8497, Fax 1–909–621–8249, E-mail marc.weidenmier@claremontmckenna.edu
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    • *

      We thank Bill Brown, Kelly Bedard, Art Denzau, Manfred Keil, Janet Smith, Tom Willett, Karyn Williams, and two anonymous referees for helpful comments and discussion and are grateful to Douglas Ball for assisting us in locating the data on sterling bills of exchange.


Abstract

Confederate asset price stabilization policies appear to have increased the velocity of circulation and counterproductively channeled inflationary pressures into other areas of the economy. Three successive monetary reforms encouraged holders of Treasury notes to exchange these notes for bonds by imposing deadlines on their convertibility. We show that Confederate funding acts aimed at precipitating the conversion of currency into bonds did temporarily suppress currency depreciation. These acts also triggered upsurges in commodity prices, however, because note holders rushed to spend the currency before their exchange rights were reduced.

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