Seigniorage in the Civil War South

50 Pages Posted: 22 Mar 2018 Last revised: 22 Apr 2019

See all articles by Bryan Cutsinger

Bryan Cutsinger

Angelo State University - Accounting, Economics and Finance Department; Texas Tech University - Free Market Institute

Joshua Ingber

George Mason University, Department of Economics; Government of the United States of America - Bureau of Economic Analysis (BEA)

Date Written: March 15, 2018

Abstract

During the U.S. Civil War, the Confederate Congress adopted three currency reforms that were intended to reduce the quantity of Treasury notes in circulation by inducing the money-holding public to exchange their notes for long-term bonds. In this paper, we examine the political factors that influenced the adoption of the reforms and their effect on the flow of seigniorage - revenue that the government derived by using the newly-printed Treasury notes to purchase the goods and services it required. We argue that the bifurcation of the Confederate Congress into two groups – those legislators that represented the Confederacy’s interior and those from areas no longer under Confederate control – contributed to the adoption of the reforms. Our findings indicate that representing an area outside of the rebel government’s control increased the likelihood that a legislator would support efforts to reform the currency by over 90 percent. In addition, our results indicate that the rate of monetary expansion in the South was below that which would have maximized the revenue from seigniorage. We find that the reforms reduced the flow of seigniorage by approximately 57 percent, depriving the Confederate government of much-needed revenue.

Keywords: U.S. Civil War, Seigniorage, Confederacy, Inflationary Finance

JEL Classification: E31, E41, E65, N11, N41

Suggested Citation

Cutsinger, Bryan and Ingber, Joshua, Seigniorage in the Civil War South (March 15, 2018). Explorations in Economic History, Vol. 72, 2019. Available at SSRN: https://ssrn.com/abstract=3141272 or http://dx.doi.org/10.2139/ssrn.3141272

Bryan Cutsinger (Contact Author)

Angelo State University - Accounting, Economics and Finance Department

San Angelo, TX 76909
United States

Texas Tech University - Free Market Institute

Box 45059
Lubbock, TX 79409-5059
United States

Joshua Ingber

George Mason University, Department of Economics ( email )

Fairfax, VA
United States

Government of the United States of America - Bureau of Economic Analysis (BEA) ( email )

1441 L Street NW
Washington, DC 20910
United States

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