We all know of our country's early experience with the "continental dollar". Some have even claimed we've "learned" something everlasting from it. I don't think so. My evidence is the southern people share no common memories of even their own currency becoming worthless, again the Yankee has them in bondage to a new paper money of their creation.  It's apparent that g-granddaddies did not weave stories of horrific loss of their wealth to their descendents. If they did, my observations are that those stories never stuck as there's an equal amount of ignorance - even more - in the South about commodity money than in the North. In a community the size of Charleston, easily over 250,000, there is NOT ONE retail coin dealer. While southerners may spin their yarns of Yankee Reconstruction plunder and other atrocities, few have made preparation for the next occasion when the dollars they hold will impoverish them just as their ancestors discovered. Yes, history is to be repeated and southerners are condemned to repeat it. You know their ancestors given another chance would know better, and grab up every double eagle & silver dollar they could find. So, when you run around shouting "Freedom!" realize full well that with freedom comes individual responsibility, and that means caring for yourself and not looking to a nanny state  as your agent to steal the savings of others more responsible than you. 

The Confederate Inflation

Figure 4 plots the Grayback price of a gold dollar during the Civil War. Large movements in Grayback money prices are labeled and associated with important military, fiscal, and political events to determine events important to contemporaries of the Civil War. Grayback prices depreciated following battle defeats at Antietam and Gettysburg/Vicksburg. The gold premium also rose following the passage of the US Conscription/Finance Bill that increased the North's ability to finance the war and draft soldiers. A final breakpoint occurred in late spring 1864 when the Confederate government repudiated one-third of the money supply with a currency reform act. The monetary legislation's positive effect on currency prices was short-lived, however, as the Confederacy cranked up the printing press again in the fall of 1864. Graybacks renewed their depreciation and continued to actively trade until early February 1864. At this point, many Richmond bankers and gold traders packed their wagons and left the besieged capital (Weidenmier, 2002a).

Lerner (1954, 1955, 1956) used the quantity theory of money to analyze the Confederate inflation. The quantity theory of money can be described by the following equation:

M = K*(P*Y), (1)

where P is the price level, Y is real (i.e., inflation-adjusted) output, and M is money. Equation (1) assumes that people hold some fraction, K, of their nominal income, P*Y, in the form of money. For example, if your income was $10,000 per year and K=1/5, then you would hold $2,000 in the form of money. To study inflation, it is useful to express equation (1) in growth rates, using equation (2):

p = m - y - k (2)

Lerner decomposed the influence of changes in money, velocity -- the number of times a dollar bill turns over in a year (mathematically velocity is the inverse of k) -- and real output on the inflation rate -- the rate at which prices rise. Lerner showed that the Confederate money supply increased 11.5 times between January 1861 and October 1864 while commodity prices increased 28 times in the same period (also see Godfrey, 1978). Rising velocity contributed to the runaway price level as people reduced their holdings of money balances and purchased commodities and non-monetary assets. Lerner also inferred from periodic Treasury reports that the South experienced a forty percent fall in real output during the war.

By : Charleston Voice

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