Gunboats, Reputation, and Sovereign Repayment: Lessons from the Southern Confederacy / Marc Weidenmier.

Format:

Book

Author/Creator:

Weidenmier, Marc.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w10960.

NBER working paper series no. w10960

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Gunboats, Reputation, and Sovereign Repayment

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2004.

Summary:

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.

Notes:

Print version record

December 2004.