Confederate $100,000 Bond

LovinHistory

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Jul 17, 2021
Here's my favorite piece in my collection

16266171386604183026873486080566.jpg
 

DaveBrt

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Mar 6, 2010
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Charlotte, NC
The bond is "payable on demand" to the Southwestern RR ---- if the government has the cash. Without converting these bonds to currency, it was impossible for the railroads to pay their operating expenses and there are abundant records to show the failure of railroads to pay even their employees at this point of the war.
 

LovinHistory

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Jul 17, 2021
The bond is "payable on demand" to the Southwestern RR ---- if the government has the cash. Without converting these bonds to currency, it was impossible for the railroads to pay their operating expenses and there are abundant records to show the failure of railroads to pay even their employees at this point of the war.
Thanks for the info,I like these old bonds,besides the handwriting on the other side is incredible

16266272274356089806677148885471.jpg
 

LetUsHavePeace

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"Payable on demand" does not mean what you all think it does. The promise is not to pay coin; it is to carry out a swap of the "old" debt for the new that will be payable in the new Confederate currency when due. The details are explained in the issue of the Richmond Daily Dispatch at this link. They are fairly technical; the best comparison I can offer is DeGaulle's exchange of the "old" franc for the "new" franc in 1960. That was, on the surface, nothing more than an exchange of coins; but it was actually a complete restructuring of the French national debt in an attempt to cope with the drain from the Algerian War. (Two years later France would accept defeat.) The Confederate Congress and the Treasury were trying to do much the same thing in early 1864 by resetting the value of the Confederate dollar through calling in all the old paper and, at the same time, restructuring all the outstanding obligations of the Treasury. The new currency, unlike the old notes, sets a two-year duration; the old ones had promised payment only when the war was over. (That had been expected to be a much shorter duration; like Grant in 1861 the Confederate Congress did not expect the war to last more than a few months.)

https://tinyurl.com/yaxr4ph3
 

Lubliner

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Chattanooga, Tennessee
"Payable on demand" does not mean what you all think it does. The promise is not to pay coin; it is to carry out a swap of the "old" debt for the new that will be payable in the new Confederate currency when due. The details are explained in the issue of the Richmond Daily Dispatch at this link. They are fairly technical; the best comparison I can offer is DeGaulle's exchange of the "old" franc for the "new" franc in 1960. That was, on the surface, nothing more than an exchange of coins; but it was actually a complete restructuring of the French national debt in an attempt to cope with the drain from the Algerian War. (Two years later France would accept defeat.) The Confederate Congress and the Treasury were trying to do much the same thing in early 1864 by resetting the value of the Confederate dollar through calling in all the old paper and, at the same time, restructuring all the outstanding obligations of the Treasury. The new currency, unlike the old notes, sets a two-year duration; the old ones had promised payment only when the war was over. (That had been expected to be a much shorter duration; like Grant in 1861 the Confederate Congress did not expect the war to last more than a few months.)

https://tinyurl.com/yaxr4ph3
Does this show the Southwestern Railroad Bank has turned in $100,000 of some form of collateral to a loan agreement with the Confederate Government, and that the 'pay on demand' means it cannot be reclaimed again until the new money is printed?
Thanks for the explanation.
Lubliner.
 

DaveBrt

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Mar 6, 2010
Location
Charlotte, NC
Does this show the Southwestern Railroad Bank has turned in $100,000 of some form of collateral to a loan agreement with the Confederate Government, and that the 'pay on demand' means it cannot be reclaimed again until the new money is printed?
Thanks for the explanation.
Lubliner.
This is payment for $100,000 of services rendered -- ie goods and troops carried for the CS government. Each soldier or item carried was documented with the signature of an army officer and, monthly, the consolidated bills were turned in by the railroads to the government for payment. Payment was not prompt, being months behind at times. The result was huge debts to the busy railroads, paid partly with these monster bonds; other payment was made in currency at the same time. So, the debt for service was changed from an immediate one to a bond, due some day. The intent of the bond was to reduce the amount of currency the government had to produce and to reduce the amount of currency in circulation in a vain attempt to control inflation.
 

DaveBrt

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Joined
Mar 6, 2010
Location
Charlotte, NC
"Payable on demand" does not mean what you all think it does. The promise is not to pay coin; it is to carry out a swap of the "old" debt for the new that will be payable in the new Confederate currency when due. The details are explained in the issue of the Richmond Daily Dispatch at this link. They are fairly technical; the best comparison I can offer is DeGaulle's exchange of the "old" franc for the "new" franc in 1960. That was, on the surface, nothing more than an exchange of coins; but it was actually a complete restructuring of the French national debt in an attempt to cope with the drain from the Algerian War. (Two years later France would accept defeat.) The Confederate Congress and the Treasury were trying to do much the same thing in early 1864 by resetting the value of the Confederate dollar through calling in all the old paper and, at the same time, restructuring all the outstanding obligations of the Treasury. The new currency, unlike the old notes, sets a two-year duration; the old ones had promised payment only when the war was over. (That had been expected to be a much shorter duration; like Grant in 1861 the Confederate Congress did not expect the war to last more than a few months.)

https://tinyurl.com/yaxr4ph3
This bond had nothing to do with the currency change. The railroads had been accepting bonds in partial payment since early 1862.
 

LetUsHavePeace

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This bond had nothing to do with the currency change. The railroads had been accepting bonds in partial payment since early 1862.
Agreed about the partial payment. All the railroads and other suppliers to the Confederacy, on both sides of the Mississippi, had been accepting bonds as "payment" for services rendered. I put the word "payment" in quotes because the bonds were not the final discharge of the obligation; they were the collateral being offered by the Confederate Treasury against the promise of eventual payment in currency.
I have to disagree - slightly - with your comment that the bond had nothing to do with the currency change. The indenture makes it clear that any payments made will be in the new currency, not the old one.
 

LetUsHavePeace

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Joined
Dec 1, 2018
This is payment for $100,000 of services rendered -- ie goods and troops carried for the CS government. Each soldier or item carried was documented with the signature of an army officer and, monthly, the consolidated bills were turned in by the railroads to the government for payment. Payment was not prompt, being months behind at times. The result was huge debts to the busy railroads, paid partly with these monster bonds; other payment was made in currency at the same time. So, the debt for service was changed from an immediate one to a bond, due some day. The intent of the bond was to reduce the amount of currency the government had to produce and to reduce the amount of currency in circulation in a vain attempt to control inflation.
"Does this show the Southwestern Railroad Bank has turned in $100,000 of some form of collateral to a loan agreement with the Confederate Government, and that the 'pay on demand' means it cannot be reclaimed again until the new money is printed?
Thanks for the explanation.
Lubliner."

Sorry to nitpik but the bond is not the payment. The bond is the collateral being offered to the railroad for its forbearance in demanding immediate payment. By accepting the bond the Bank agrees to do the same kind of swap that is done every second during trading hours right now when the Federal Reserve "borrows" cash in exchange for the delivery to the counter-party of a Treasury bill to be held as collateral. The cash being borrowed is not actual currency; it is a ledger entry on the books of the Fed in favor of an increase to the lender's reserve account.
I assume that the Confederate Treasury worked with the State and private banks under a similar arrangement. The fatal difference was that the State and private banks were not under the same type of sovereign authority that is the foundation of our current central bank system. The State and private banks were free to refuse the Confederate Treasury's offer of collateral; members of the Federal Reserve system - effectively every bank in the country - have no similar right to tell the Fed -"thanks, but we don't want your T-bills as collateral".
The "inflation" that came in the last year of the war (up until spring 1864 Confederate and Union paper currency tracked each other fairly closely in their discounts to coin) did not come from a massive printing of currency (there was not enough paper and ink to do the job, anyway) but from the collapse of these kinds of swaps. Because the local and State banks no longer saw Confederate Treasury's bonds as adequate collateral for their continuing loans, Confederate currency also became effectively worthless compared to the notes of the surviving local and State banks. The collapse of that exchange relationship was the "inflation".
In discussing this question, we all take the short-cut of comparing the prices of paper to gold; but that distorts what actually happened. The Union was dealing in even greater volumes of swaps of paper - not just Greenbacks but U.S. Notes. The difference was that the local and State banks in the North had to accept Federal bonds as collateral because they could only issue their own notes if they held Federal bonds as a reserve (the same system we live under now).
Why the Confederacy did not impose the same rules remains a complete mystery to me. Before the war Southerners were the very people who protested the failure to renew the charter for the (second) Bank of the United States; yet the Confederacy never put in place the very system of central banking that they had clamored for.
 
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James N.

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Thanks for the info,I like these old bonds,besides the handwriting on the other side is incredible
How's THIS on a document dated September 1, 1826 I found last week at a local antiques mall:

Image (3).jpg

I believe it's a promissory note; it shows payments made annually from 1826 through 1832 by one Jean-Antoine Guy.
 

Red Raider

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Lost in Books
Beautiful penmanship on both pieces.

So, those notes held no cash value late in the war because their funds were appropriated for other necessities? I would think it would be virtually impossible for anyone to cash those in during the war. Talk about signing bad checks.
 
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