The North's Empty Purse, 1861-1862

Hammond, Bray

doi:10.2307/1846258

Cited by 5 publications

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“…A convincing claim can be made that they were indeed a national currency. Second, we offer an explanation for why the Greenbacks came into being that may be regarded as an alternative or a supplement to that given by Hammond (1961, 1970). Third, we present a simple model of the gold premium in terms of the 1861 Notes after the United States suspended the gold standard that provides quantitative predictions and is at variance with Calomiris (1988a, 1998b).…”

Section: The Demand Notes Of 1861mentioning

confidence: 95%

“…It is a further puzzle that other research has not noticed the heavy cost to the Treasury of maintaining the 1861 Notes and has, for the most part, not listed a change in the seigniorage flow as a primary motivation for the switch from 1861 Notes to Greenbacks. For example, this motivation is not mentioned by Hammond (1961, 1970). Instead, he emphasizes a motivation originating within the banking community.…”

Section: Seigniorage Implications Of the Provisions On The 1861 mentioning

confidence: 99%

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Seigniorage, Legal Tender, and the Demand Notes of 1861

Bomberger

Makinen

2010

Economic Inquiry

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"In the summer of 1861, the United States embarked on its first widespread use of paper money: the Demand Notes of 1861. Although their convertibility into gold ended at the end of that year, they remained acceptable for tariff payment at a par with gold coin while they were gradually replaced with paper money that did not share this provision, the Greenbacks. We present daily observations of exchange rates between the Notes, Greenbacks, and gold for the extended period during which they simultaneously circulated. These exchange rates substantiate our revisionist notion that the Notes were replaced because the tariff provision prevented them from generating sufficient seigniorage for wartime needs. "("JEL "E42, N12, N22) Copyright (c) 2009 Western Economic Association International.

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Section: The Demand Notes Of 1861mentioning

confidence: 95%

Section: Seigniorage Implications Of the Provisions On The 1861 mentioning

confidence: 99%

Seigniorage, Legal Tender, and the Demand Notes of 1861

Bomberger

Makinen

2010

Economic Inquiry

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“…Yet for some thirty years now [Hammond was writing about 1960; it's now been eighty] the United States and other countries have survived in regimes that once would have seemed 'ruinous'; and the cold light thrown off by this fact is less kindly to the scholars than to the Greenbackers whom they scorned. 14 The fundamental mistake of both goldbugs and silverites was to confuse the form of money-that it should be silver or, preferably, gold-with its function: a medium of exchange, a standard and store of value. As the Austrian-American economist, Joseph Schumpeter, wrote:…”

Section: I I W H Y W E R E B O T H S I D E S W R O N G ?mentioning

confidence: 99%

Comments on Wyatt Wells, “Rhetoric of the Standards: The Debate Over Gold and Silver in the 1890s”

Nugent

2014

J. gilded age prog. era

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“…For example, bondholders received full value for their assets after the Revolution, whereas moneyholders received 1 percent of the promised value of their paper assets. Hammond (1961) suggests that some of the original motivation for issuing notes to finance the Civil War was to prevent losses to holders of outstanding bonds. Bankers on the whole supported the issuing of greenbacks, though it is not clear whether they did so as a means to enhance liquidity or to protect the value of their bond holdings.…”

Section: Debt Funding Policy As Newsmentioning

confidence: 99%

Price and Exchange Rate Determination During the Greenback Suspension

Calomiris

1988

Oxford Economic Papers

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By CHARLES W. CALOMIRIS* I. Introduction DURING the suspension of convertibility of greenbacks into gold from 1862 through 1878 the greenback price of the gold dollar ranged from par to 2.5 (see Fig. 1). The monetarist explanation for these exchange rate movements espoused by Friedman and Schwartz (1963) views the supply of greenbacks and the growing real demand for money as the sources of domestic price movements and, through them, the depreciation and subsequent appreciation of the currency. A different explanation provided by Mitchell (1903, 1908) and Studenski and Krooss (1963) argues that expectations regarding government fiscal policy and fiscal shocks (e.g., battle reports), which affected the probability and expected timing of resumption of specie convertibility, caused changes in current exchange rates and prices. Recent theoretical contributions by Sargent and Wallace (1981), among others, have demonstrated the potential importance of fiscal expectations for determining the current level of prices and exchange rates. For example, an expectation of fiscal profligacy may imply future money supply growth and inflation which causes the current level of real money demanded to decline; thus for a given level of current money supplied, the price level rises and the currency depreciates. Assuming the market in which currencies are traded operates efficiently, movements in the exchange rate properly track news of changes in expected government policy. Evidence from currency and securities markets (discussed below) indicates that mid-nineteenth-century American financial markets responded to expectations of government policy changes in a manner consistent with market efficiency. In applying the Sargent-Wallace approach to the history of greenback exchange rate determination, however, one must take account of institutional peculiarities of the period. First, for most of the period of suspension the supply of paper high-powered money was not held fixed by the government; national banks were authorized to supply a perfect substitute for greenbacks in the form of national bank notes. From mid-1870 on bank notes rather than greenbacks were the marginal component of the paper high-powered money supply. Second, the potential for a return to promised gold dollar parity meant that expectations of fiscal * I would like to thank Moses Abramovitz,

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The North's Empty Purse, 1861-1862

Cited by 5 publications

References 0 publications

Seigniorage, Legal Tender, and the Demand Notes of 1861

Seigniorage, Legal Tender, and the Demand Notes of 1861

Comments on Wyatt Wells, “Rhetoric of the Standards: The Debate Over Gold and Silver in the 1890s”

Price and Exchange Rate Determination During the Greenback Suspension

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