- Jan 3, 2019
The main thing I noticed is that you pointed out hyperinflation peaks, and neglected to notice that stagflation was there in 1861. Subsequently, hyperinflation crept in February of 1862 and baselined and had peaks and troughs until the war ended. From February of 1862 to the end of the war hyperinflation was the new homeostasis, which is why the Confederate monetary policy was so ineffective. I don't know how you are reading that graph? And don't know how you can state "inflation took off" in 1863? It took off in 1861 with 21% by November of that year, which I hope you don't think 21% is not "high" inflation??Notice that the inflation rate took of in July 1863 -- loss of confidence in achieving independence. The fall in the rate in early 1864 was caused by an anti-inflation measure -- replacing old issue notes with new ones, at a reduced rate. Inflation took off again in December of 1864 with the loss of Savannah. It really took off in March as Columbia fell and Sherman moved toward Richmond unhindered.
The amount of currency in circulation was less a factor than the los of confidence. Much of the currency was in large notes and was held by the banks and major industries, not circulated much in the market.
Our money today is not backed by anything but confidence, and even though we have issued vast amounts of digital and paper currency, our inflation rate is very low -- because of the confidence of the holders of the money.
The Confederate monetary system at that juncture was in a major contraction, so they decided to print money that further devalued their currency. You pointed out two major setbacks that both caused a peak in already hyperinflated monetary system. All those two major events did was culminate hyperinflation and further devalued the greyback, neither one caused hyperinflation initially because it already set in and the greyback was already devalued. After the first major defeat the hyperinflation troughed back down to baseline, so why did that happen? I agree with your statements somewhat, but why was the Confederate currency hyperinflated at the beginning of 1862 before those two major events occurred and when the Confederates were still winning battles?
I'll reiterate: inflation set in around the end of 1861, then hyperinflation set in at the beginning of 1862, which it baselined until the end of the war and it did peak to unprecedented levels during the times you stated.