Discussion Planter debt caused the war

atlantis

Sergeant Major
Joined
Nov 12, 2016
Cash crop planters were often in debt, fearing their position and way of life as semi feudal lords was going to end they pushed for secession and having the confederate gov't assume responsibility for debts owed to northerners.
Is this the true cause of war-debt and extreme measures to get out of it by the elite class?
The US gov't assumed debt owed to British merchants post war for independence so was this the inspiration for southern planters.
 

NH Civil War Gal

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I certainly think it is partially true. The US gov’t assumed debt some debt post war for independence but France assumed the most, over a billion, that led to the French Revolution, since they couldn’t get their books to balance - in the simplest version of the story.

The planters feared their position was going to be lost. Here is a history lesson. In West Africa at least, wealth and position was tied up in people (slaves) and had been for centuries - not land. In Europe and in America, wealth and position is tied up in land, not people (slaves).

But with the “peculiar institution” it got well, pretty peculiar and got tied up in both which historically is NOT an Anglo-Saxon way of doing business in any part of Europe. The planter class had painted themselves into a very tight “peculiar” corner and frankly were not going to give it up.

While most of the planter class was educated and some very well educated, they weren’t educated in the way we think of today. It is very hard to put our heads into their mindsets. They were NOT thinking of how the rest of the world was changing mechanically and they were becoming obsolete in a few short decades with or without the war.
 

mobile_96

First Sergeant
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Feb 20, 2005
Location
Ill.
Cash crop planters were often in debt, fearing their position and way of life as semi feudal lords was going to end they pushed for secession and having the confederate gov't assume responsibility for debts owed to northerners
Could I have some sources for the "confederate gov't assume responsibility for debts owed to northerners."?? I do remember that the owners of debt were told by the gov't that they were to pay that debt to the confederate treasury instead of it going north, or being defaulted. And this topic was discussed here some years ago.
 

Drew

Major
Joined
Oct 22, 2012
Well, OK. I've a little book on my shelf worth reading if anyone's interested in this subject. Richard Kilbourne Jr.'s Debt, Investment, Slaves was published by the University of Alabama press around 25 years ago.

A few takeaways from Kilbourne. Yes, it's true the Southern economy was fueled by debt. It's also true that Antebellum planters were the richest people in America at that time and yes, they were in fact very well educated, just like many of us today - no difference here.

Credit was extended to them by Northern banks and their European counterparts in large amounts. Why? Because they were producing the most important and valuable commodity fueling the industrial revolution, cotton fiber.

We have seen nations go to war over access to crude oil in the 20th century. Oil was refined in the 19th to fuel living room lamps, that's it. Everything else was all about cotton.

Southern planters were not worried about debt in the Antebellum, as long as they could produce and deliver the cotton that paid it off. Northerners and Europeans would lend to them to expand production, no problem.

Here is the dirty little secret: Northern and European banks accepted slaves as loan collateral. Why? Because real estate was illiquid and in the terms of the day, "immovable property."

A creditor could seize, transport and sell slaves anywhere, to liquidate a debt if need be.

Guess what happened in 1865? The debt collateral simply walked away on its own two feet. Mr. Jones owes you a lot of money and you've got a lien on his slaves? Great, go and chase after them, with no other recourse against Mr. Jones.

The banks were stuck, some were bailed out (no modern politics here), but there was no "debt problem" in the Antebellum. No one voted to secede from the Union over debt, it worked just fine for them.
 

Lubliner

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I remember reading early on in the war, when Davis sent emissaries to England to negotiate trade settlements and acquire monies for the war, England responded Mississippi was in debt already and would need to absolve that debt before a loan could be finalized. It is in the Official Records, series 2 I think.
Lubliner.
 

mobile_96

First Sergeant
Joined
Feb 20, 2005
Location
Ill.
England responded Mississippi was in debt already and would need to absolve that debt before a loan could be finalized. It is in the Official Records, series 2 I think.
Thank you.
7 LOTHBURY, EAST CHELSEA, LONDON, March 27, 1861.
JEFFERSON DAVIS, President of the Southern Confederacy.
SIR: On Saturday last I forwarded a few lines to you on the subject of the future credit of the Southern Confederacy and how far it would be injured by the course heretofore pursued by Mississippi with regard to her bonds. Outside of that letter I did not put any superscription beyond your name and address because I felt that it might become the ground for detention of the same by any of the postmasters of the Northern States who might wish to embarrass your movements.
Annexed to this letter you will find a copy(*) of the law of the London Stock Exchange which will hopelessly exclude any new loan until Mississippi shall make satisfactory arrangements with her creditors, and it is of no use to try the Continent because it is a standing rule with them never to take any loan which has been openly refused here. I am a member of the London Stock Exchange. I know perfectly the workings of the rule. I also know how futile your hopes will be of raising any money here except upon the conditions I mentioned, that the Mississippi debt must be acknowledged and settled. Moreover, I am one of the committee for settling the debts of Spanish America and have made arrangements for the debts of Peru, Chili, Buenos Ayres, Venezuela, New Grenada and Central America and in a future letter I will give you the benefits of my experience and show to you the nature of the compromises of other nations in the settlement of their debts. I am also the secretary of the committee appointed by the Mississippi bondholders having special reference to that class issued through the Planters' Bank, though I do not now address you in my official capacity.
I am well aware of the difficulties of the question for raising money for the South, but I do not regard them as insurmountable provided <ar115_5> that the two debts of Mississippi are arranged for. Hopeless without it and among the difficulties are the non-recognition of the Southern Confederacy by the United States and by European nations, the probabilities of war between the North and South, the fact that the entire income of the South depends almost upon one staple; that the condition of their exchanges is such that any money advanced would take the form of a direct shipment of gold coin thus reducing the bullion in the Bank of England and prolonging the rate of discount at 7 per cent. per annum.
Slavery.--There are armies of annuitants who would not lend a sixpence on the slaves on principle; anyhow the rate would have to be very high because at all times the Southern sixes were only equal to Northern fives under the best circumstances. But the greatest difficulty is repudiation. Apparently it would seem to be unfortunate that you, the principal exponent and defender of repudiation, should have been chosen as the head of the Southern Confederacy. I regard it in quite another light. One word from you showing the necessity for retracing the steps of Mississippi would have more effect than a volume from any other man. Remember there is more joy over one error repaired than over myriads to ------. If you have not the courage to do this then your position is a mistake. To-morrow I will send you much valuable information foreshadowing a solution to your difficulties.
I remain, yours, very truly,
EDWARD HASLENWOOD.
 

lurid

First Sergeant
Joined
Jan 3, 2019
Well, OK. I've a little book on my shelf worth reading if anyone's interested in this subject. Richard Kilbourne Jr.'s Debt, Investment, Slaves was published by the University of Alabama press around 25 years ago.

A few takeaways from Kilbourne. Yes, it's true the Southern economy was fueled by debt. It's also true that Antebellum planters were the richest people in America at that time and yes, they were in fact very well educated, just like many of us today - no difference here.

Credit was extended to them by Northern banks and their European counterparts in large amounts. Why? Because they were producing the most important and valuable commodity fueling the industrial revolution, cotton fiber.

We have seen nations go to war over access to crude oil in the 20th century. Oil was refined in the 19th to fuel living room lamps, that's it. Everything else was all about cotton.

Southern planters were not worried about debt in the Antebellum, as long as they could produce and deliver the cotton that paid it off. Northerners and Europeans would lend to them to expand production, no problem.

Here is the dirty little secret: Northern and European banks accepted slaves as loan collateral. Why? Because real estate was illiquid and in the terms of the day, "immovable property."

A creditor could seize, transport and sell slaves anywhere, to liquidate a debt if need be.

Guess what happened in 1865? The debt collateral simply walked away on its own two feet. Mr. Jones owes you a lot of money and you've got a lien on his slaves? Great, go and chase after them, with no other recourse against Mr. Jones.

The banks were stuck, some were bailed out (no modern politics here), but there was no "debt problem" in the Antebellum.



The author you are citing is not correct, or you misread it.

First, your assertion of cotton being the most important and valuable commodity fueling the Industrial Revolution is false. Cotton production was only 5% of the entire GDP, so your assertion you parroted is false. Can you explain how 5% of a vast GDP is the most valuable? So you are saying 5% of the GDP was more valuable than 95% of the GDP combined? Before you come in here and confuse export percentages with GDP percentages I'll help the board out: 50% of cotton exports equated to 5% of the National GDP. A very little sum. Cotton exports were valuable to a certain sect, which is why it is considered a microeconomic slice on a vast macroeconomic pie chart. Northerners and Europeans who had invested in southern cotton production were a small sum of people, but you make it sound like the entire north and Europe invested in cotton production. Can you give a percentage of northern and Europeans banks who invested in cotton production? That would make or break your argument. I say it was under it was under 2%. What do you say? I'll wait for you to give a number then I'll post the accurate data. Cotton was the most important and valuable commodity to the south, that's because it was their lone cash crop.

Second, I don't think the planters were that educated because all their investments were in non-liquid commodities, not just land slaves as well. Once the war was over they were relegated to dirt farmers, which you would think someone with so-called well intelligence would have not put all their eggs in one basket? Nope, they invested everything in slaves, land, cotton production and that's because they were well educated.

Third, you said this: Here is the dirty little secret: Northern and European banks accepted slaves as loan collateral. Why? Because real estate was illiquid and in the terms of the day, "immovable property." Were not slaves "immovable" outside the south or some other country that had slavery? So as long as slavery existed in the south then northern banks could use them as collateral? We know slaves held no value in the free states? You have to be insinuating that northern banks and European banks were selling slaves in the south, Cuba or Brazil? They could not sell sales anywhere else, because they didn't have any value outside of slavery.


Fourth, you said this: Guess what happened in 1865? The debt collateral simply walked away on its own two feet. Mr. Jones owes you a lot of money and you've got a lien on his slaves? If what you are saying is even true then both parties walked away bankrupt. The banks lost money because slavery ended in 1865, and the slave only held value when it was enslaved, which outside of slavery made it a non-liquid commodity. The planter was even worse off because they lost everything in 1865. However, the banks in the north probably survived because they were too smart just to loan money to planters. Bottom line: planters lost everything and northern banks survived.


Last, you said this: No one voted to secede from the Union over debt, it worked just fine for them. I agree nobody voted to secede over debt, but over slavery because that's where they made their money. What worked out fine? The war and in conjunction of emancipation crippled the south financially, for 100 years to be exact.
 

Rhea Cole

1st Lieutenant
Joined
Nov 2, 2019
Location
Murfreesboro, Tennessee
The essential economic problem faced by seceding states was that their wealth was locked up in the value of their slaves. In 1860 slaves were worth more than all the rail roads & industrial plants in the country put together.

Of course financial institutions loaned money secured by the value of slaves. Slavery was legal & slaves were very valuable. A child 4’ talll was worth more than a working man’s yearly wage. Why wouldn’t a bank loan money guaranteed by such an asset that was so easily monetized. The largest slave holder in the U.S. went bankrupt. The “Crying Time” slave auction that resulted was a major prewar event.

As any number of studies have shown, the exponential increase in the value of land & slaves that the cotton gin set off was running out of steam. Many individual planters were increasingly unable to meet their obligations to British banks. The slave labor staple goods production model was beginning to fail.

All the Deep South planters had to do was look to the border states. In Kentucky, for example, slave holding outside a few counties in the Bluegrass & the industrial slave iron works in the extreme west was disappearing. The number of slaves surrounding the slaveholding area of Middle Tennessee went down in the 1860 census. In Virginia, plantations either openly or covertly depended on selling “extras” to remain solvent. Deep South slave-holders who were paying attention had good reason to be concerned.

John Jay Hooker, a Tennessee political & business leader of the 1960’s famously said something to the effect of, “If you go broke, go broke big. If you can’t make payments on your house, they will throw you into the street without batting an eye. Go broke owing the bank $2,000,000 & the bank will do everything in their power to make sure you have an opportunity to pay them back.” That was the situation that British banks found themselves in after secession.

There was outright hostility to the slaveocracy of the Confederacy on the part of the British public. Whatever sympathy the aristocracy might have felt for the CSA, they dared not do anything about it. The only English institution openly lobbying for support of the CSA were the banks. Every slave who self liberated was about $1,000 of security the British banks could not liquidate.

It is more than passing strange that the very institutions with the most to loose are often blamed for provoking secession. The truth of the matter is that skipping out on debt was a motivating factor for some failing planters. No surprise there. However, the number of people willing to go to war to cancel out other people’s debt was limited.

White supremacy & the God given right to hold other human beings as property were the driving forces of secession. Everything else, including rescuing planters from their debts, was a footnote.
 

Drew

Major
Joined
Oct 22, 2012
The author you are citing is not correct, or you misread it.

First, your assertion of cotton being the most important and valuable commodity fueling the Industrial Revolution is false. Cotton production was only 5% of the entire GDP, so your assertion you parroted is false. Can you explain how 5% of a vast GDP is the most valuable? So you are saying 5% of the GDP was more valuable than 95% of the GDP combined? Before you come in here and confuse export percentages with GDP percentages I'll help the board out: 50% of cotton exports equated to 5% of the National GDP. A very little sum. Cotton exports were valuable to a certain sect, which is why it is considered a microeconomic slice on a vast macroeconomic pie chart. Northerners and Europeans who had invested in southern cotton production were a small sum of people, but you make it sound like the entire north and Europe invested in cotton production. Can you give a percentage of northern and Europeans banks who invested in cotton production? That would make or break your argument. I say it was under it was under 2%. What do you say? I'll wait for you to give a number then I'll post the accurate data. Cotton was the most important and valuable commodity to the south, that's because it was their lone cash crop.

Second, I don't think the planters were that educated because all their investments were in non-liquid commodities, not just land slaves as well. Once the war was over they were relegated to dirt farmers, which you would think someone with so-called well intelligence would have not put all their eggs in one basket? Nope, they invested everything in slaves, land, cotton production and that's because they were well educated.

Third, you said this: Here is the dirty little secret: Northern and European banks accepted slaves as loan collateral. Why? Because real estate was illiquid and in the terms of the day, "immovable property." Were not slaves "immovable" outside the south or some other country that had slavery? So as long as slavery existed in the south then northern banks could use them as collateral? We know slaves held no value in the free states? You have to be insinuating that northern banks and European banks were selling slaves in the south, Cuba or Brazil? They could not sell sales anywhere else, because they didn't have any value outside of slavery.


Fourth, you said this: Guess what happened in 1865? The debt collateral simply walked away on its own two feet. Mr. Jones owes you a lot of money and you've got a lien on his slaves? If what you are saying is even true then both parties walked away bankrupt. The banks lost money because slavery ended in 1865, and the slave only held value when it was enslaved, which outside of slavery made it a non-liquid commodity. The planter was even worse off because they lost everything in 1865. However, the banks in the north probably survived because they were too smart just to loan money to planters. Bottom line: planters lost everything and northern banks survived.


Last, you said this: No one voted to secede from the Union over debt, it worked just fine for them. I agree nobody voted to secede over debt, but over slavery because that's where they made their money. What worked out fine? The war and in conjunction of emancipation crippled the south financially, for 100 years to be exact.

Well now, I don't appreciate being scolded, "before you come in here." I've been posting here a lot longer than you, sir/madam.

I don't have the time or energy to go point-by-point with you tonight, but I am in the habit of providing sources and not just anonymous claims. You're "GDP claim" needs to be backed up with a credible source and I won't be surprised to see it's accurate.

What it ignores is that the North did not export very much in the mid 19th century. Over half of "hard currency" export income came from the South, over 50% being from cotton alone. The British Pound at that time was the "reserve currency" of the world, not the U.S. dollar, which was a bloody joke 170 years ago. You think the banksters didn't recognize this?

Here is a credible source for 19th century U.S. export income:

http://www.davidrumsey.com/maps4387.html

Don't even get me started on the dumb, uneducated planters, who rolled Union Armies twice their size for four bloody years before their resources were exhausted.

Did you know, the Civil War Union Army is the only one in U.S. history that gave up twice the casualties as its adversary? That never happened before or since.

Probably had something to do with all those dumb Southerners, who by the way, won Reconstruction in their fight against the clever Yankees. Maybe that's not a good thing, but that's what happened.
 

NedBaldwin

Major
Joined
Feb 19, 2011
Location
California
Cash crop planters were often in debt, fearing their position and way of life as semi feudal lords was going to end they pushed for secession and having the confederate gov't assume responsibility for debts owed to northerners.
Is this the true cause of war-debt and extreme measures to get out of it by the elite class?
The US gov't assumed debt owed to British merchants post war for independence so was this the inspiration for southern planters.
The Asset part of the ledger was the problem for the slave owners. Their debt was based on a balance sheet that reported larger asset holdings in human capital and the rise of the Republicans threatened to eliminate the value of this asset.

Also, the US gov't assumed debt of the States post independence, not debt of inidividuals or businesses.
 

wausaubob

Colonel
Joined
Apr 4, 2017
Location
Denver, CO
Some big operations were leveraged. When the people elected an anti-slavery Republican President, those leveraged businesses were facing a risk premium added to their debt service obligations. A 1/4% change was a very high cost increase for those businesses in MS, LA, and AR, that had been opened with borrowed money. There are a few articles on the web about this change but they are not easy to find.
The people facing the problem posed by a Republican winning the Presidency would most likely be the large organizations on the Atlantic coast, and in Alabama, who were selling slaves westward. The other people at risk were the slave brokers, who livelihood depended on the unregulated slave trade.
As for President elect Lincoln, he made it clear that he did not intend to attempt to abolish slavery where it was legal. But what was not said was that he most likely was going to follow the British example by regulating and limiting the interstate slave trade. This had been done earlier in US history. The federal government could require inspections. It could require documentation that the slave was born in the US and not an illegal involuntary immigrant. Age limits and barriers to family separation would have been proposed and probably passed before being litigated in the Supreme Court.
Most white southerners did not own slaves directly. Most only owned people who were servants or doing non cotton garden and stable work. Only a few southern families owned more than 20 slaves, and among that class, not all were debtors.
When the people elected a Republican President it was highly probable that the Republicans and Free Soil Democrats had enough votes to admit Kansas as a paid labor state. From that point on the ratio would never be worse than 19:15, paid labor states vs. slave labor states. Under those circumstances the props under slavery, particularly the interstate slave trade, and the no due process ability to recover alleged runaways in the northern states, were going to be withdrawn, one by one.
 
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