Was there a market bubble in slave prices and what would have happened if it 'burst'

jgoodguy

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Based on the chart above, I'm not sure that I'd call that a bubble. The chart in the original post looks like a bubble, but that chart is the total value of ALL slaves, so it's influenced both by the price of slaves and the number of slaves. But a bubble is defined by inflated prices, not the total aggregate value. So I think the chart above is probably more relevant to the definition.

That chart shows that the price of a slave did climb substantially from about 1843 to 1860, increasing from about $600 to about $1500 per slave. But that's not really the type of dramatic price increase you usually see with a bubble. We're talking an increase of 150% over 17 years. Contrast that to the dot.com bubble chart above where the Nasdaq rose from 1000 to 5000, a 400% increase, in just 4 years.


In the 1840s cotton prices had been in a slump and slave prices were at a low.

[QUOTE]As cotton prices fell in the 1840s, Southern slave prices also fell. But, as the demand for cotton and tobacco grew after about 1850, the prices of slaves increased as well.[/QUOTE]

The CPI was flat. So inflation was not a factor.
 

jgoodguy

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In addition, time and location greatly affected the price of a slave in America.

The proverbial "prime field hand" sold for $500 in Delaware. As you went south and west from there, they increased in value. The premier markets were New Orleans, Charleston, and Savannah. The same "prime field hand" who sold for $500 in Delaware might fetch $1000 in North Carolina, more than that in Charleston and Savannah, and possibly $1600 in New Orleans in the right time of year.

The time of year is important because 1) planters were generally land-and-slave-rich, cash-poor but 2) they would be flush with cash and credit after the harvest was sold. In addition, the planter and his family were all likely to come to New Orleans/Savannah/Charleston/etc. when their crop was sold -- so there would be a large crowd of bidders at the auction.

ADDED LATER: the price of the slave in Delaware was low because DE had a law against selling a slave out of state and slavery was essentially a low-profit deal in DE. Slavery on the Eastern Shore of MD and in DE was a different beast than in other places.

Tim

One other consideration was that slaves in border states were less expensive because they were relativity near free states and thus the chance of runaway increased.
 

brass napoleon

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In the 1840s cotton prices had been in a slump and slave prices were at a low.

]As cotton prices fell in the 1840s, Southern slave prices also fell. But, as the demand for cotton and tobacco grew after about 1850, the prices of slaves increased as well.

The CPI was flat. So inflation was not a factor.

Yeah, looking at the graphs, there's a definite positive correlation between the price of slaves and the price of cotton. (If I was feeling more ambitious, I'd superimpose one on top of the other. Maybe later...) While I'm beginning to come to the conclusion that neither one of them was in a bubble by itself, both had been rising fairly rapidly from the mid-1840s up to 1860. The combined effect, in a zero-inflation environment, had to dramatically increase the wealth of the cotton planters, both in terms of assets and income.
 

jgoodguy

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Yeah, looking at the graphs, there's a definite positive correlation between the price of slaves and the price of cotton. (If I was feeling more ambitious, I'd superimpose one on top of the other. Maybe later...) While I'm beginning to come to the conclusion that neither one of them was in a bubble by itself, both had been rising fairly rapidly from the mid-1840s up to 1860. The combined effect, in a zero-inflation environment, had to dramatically increase the wealth of the cotton planters, both in terms of assets and income.

A slave had productive value even to a small farmer because he can produce more. OTOH If a slave goes from being a easily disposed liquid asset, to an asset that is illiquid then the value crashes just as in a bubble. Think of something that everyone wants until everyone has one and then the price collapses.

I am wondering if a bubble can occur even if individual elements of a market are 'rationally' priced but more and more folks want them Also there is the small matter of a gold based economy which cannot easily expand the monetary base. So while the price may appear rational, it is at the expense of other purchases, and the economy is actually deflating as purchases in other items are defered for investments in slaves.

Lots of random thoughts to follow up on.

Then there is the aspect that has not been addressed: how would a collapse in slave prices affect the desire of the South to secede.
 

brass napoleon

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A slave had productive value even to a small farmer because he can produce more. OTOH If a slave goes from being a easily disposed liquid asset, to an asset that is illiquid then the value crashes just as in a bubble. Think of something that everyone wants until everyone has one and then the price collapses.

I am wondering if a bubble can occur even if individual elements of a market are 'rationally' priced but more and more folks want them Also there is the small matter of a gold based economy which cannot easily expand the monetary base. So while the price may appear rational, it is at the expense of other purchases, and the economy is actually deflating as purchases in other items are defered for investments in slaves.

Lots of random thoughts to follow up on.

Bubble or not, I think this was a BIG concern among the big slaveholders of the South. The Republican policy was to confine slavery to where it already existed, but this would have the immediate effect of reducing the liquidity of the slave trade. Much of the increased wealth in slaves over the previous decades was a result of the expanding slave population. But confined to a specific area, an expanding slave population became a detriment, rather than an asset. Not only did it reduce the liquidity of the slave trade, but it created a potential slave uprising problem as well. Here's what Georgia Senator Robert Toombs said about it in November, 1860:

In 1790 we had less than 800,000 slaves. Under our mild and humane administration of the system, they have increased above 4 million. The country has expanded to meet this growing want; and Florida, Alabama, Mississippi, Louisiana, Texas, Arkansas, Kentucky, Tennessee, and Missouri have received this increasing tide of African labor; before the end of this century, at precisely the same rate of increase, the Africans among us in a subordinate condition will amount to 11 million persons. What shall be done with them?

We must expand or perish. We are constrained by an inexorable necessity to accept expansion or extermination. Those who tell you that the territorial question is an abstraction, that you can never colonize another territory without the African slave trade are both deaf and blind to the history of the last sixty years. All just reasoning, all past history condemn the fallacy. The North understand it better - they have told us for twenty years that their object was to pen up slavery within its present limits - surround it with a border of free states, and, like the scorpion surrounded with fire, they will make it sting itself to death. One thing at least is certain, that whatever may be the effect of your exclusion from the territories, there is no dispute but that the North mean it, and adopt it as a measure hostile to slavery upon this point.


Source: http://civilwarcauses.org/toombs.htm

Although Toombs doesn't directly address the economics of the situation in this quote, Jefferson Davis did in the quote I posted previously, and it's obvious it was a major concern.
 

brass napoleon

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Then there is the aspect that has not been addressed: how would a collapse in slave prices affect the desire of the South to secede.

OK, I'll address it. I don't think a collapse in slave prices would have had too much effect on the desire to secede, if it happened by itself. But in all likelihood a collapse in slave prices would be accompanied by a collapse in cotton prices, and that could be a completely different story. If prices of cotton and slaves dropped to a level where slavery was no longer profitable, then the main impetus for secession would be gone.

That doesn't mean there'd be an immediate rush to emancipation, however. There was still the major question of what to do with all the freed slaves. There were many reasons that Southerners (and Northerners) didn't want them integrated in to society, including racism, fear of job competition, and fear of retribution.

So overall, I'd say that a major collapse in slave and cotton prices would squash the desire to secede and possibly open a dialog between Southern and Northern leaders as to how to handle the problem of emancipated slaves. Whether anything would come out of that dialog, though, I have no clue...
 

jgoodguy

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OK, I'll address it. I don't think a collapse in slave prices would have had too much effect on the desire to secede, if it happened by itself. But in all likelihood a collapse in slave prices would be accompanied by a collapse in cotton prices, and that could be a completely different story. If prices of cotton and slaves dropped to a level where slavery was no longer profitable, then the main impetus for secession would be gone.

That doesn't mean there'd be an immediate rush to emancipation, however. There was still the major question of what to do with all the freed slaves. There were many reasons that Southerners (and Northerners) didn't want them integrated in to society, including racism, fear of job competition, and fear of retribution.

So overall, I'd say that a major collapse in slave and cotton prices would squash the desire to secede and possibly open a dialog between Southern and Northern leaders as to how to handle the problem of emancipated slaves. Whether anything would come out of that dialog, though, I have no clue...

If cotton prices collapsed, then the market price of slaves, would significantly decline. Any part of the price related to speculation would be gone. The aftermath would be a 'panic' with bankruptcies, bank failures and plantation repros, Possibly slave slave repros if slaves were financed or otherwise used for collateral. The reason is both cotton and slave price declines and the loss of profits from both.

I would speculate that most of the effort that went into secession and war preparation in the real time line, would flow into trying to handle the situation.

In the real world post Civil War, 1870 through the end of the 1900s, cotton prices fell and the result was to grow more cotton. The price might fall, but the demand for cheap labor would increase to try to make up for the price decline by increasing volume. Perversely you might have an increase in demand for slaves. Based on the experience of the Old Soviet Union and collectivism, some genus might figure out that freed slaves might work harder growing cotton as sharecroppers.

In the long run, a collapse in the price of cotton might put slavery on the path to extinction. I expect that slaves would be freed simply because it was too expensive to keep them with an ad hoc approach with little planning. Think of it as a form of industrial pollution.

As slavery became less and less profitable, then the slave culture would change and the culture provided the passion and impulse to secede. There would be a lot social upheaval, but no secession.
 
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Hi,
I came here because I was wondering if there was a bubble in the making in the late 1850's and 1860's and found this fascinating discussion. I arrived at my pondering through a review of micro data, not macro data, as the differences in a close reading of the changes between the 1850 and 1860 censuses for just a few small communities in Texas and Louisiana seems to indicate that there was a substancial rise in the number of slaves owned that is far greated than that found between the 1840 census and the 1850 census for those communities without a corresponding need for labor. (Perhaps in one of the Texas communities, maybe, but. . .hmm. No. Farming was subsistence. The money was made in cattle and taking them to see the elephant and sech.)

In addition, especially in the community that has large plantation holders, I also seem to see the beginnings of a new industry - a woman having many infant and child slaves with just enough caretakers and one male - which to me seems to indicate someone who wants to buy cheap and sell pricey. So on a purely psychological note, I get the "smell" of people are doing the kind of risky behavior that usually occurs when a bubble is beginning to form. People had more slaves because slave values were consistently high. Slave values were high because cotton prices were good. (I'm seeing more men with, ahem, a slave lady on the side <blushes> or with household servants that aren't necessary.) How long before someone pulled a leg out from under the stool?

Anyway, this was an interesting discussion that answered a LOT of my questions, but I'm curious why no one has brought in the panic of 1857, which the South was pretty immune to in the short term, due to market conditions in slavery and cotton. I would still think that the after effects of this were not being done being felt in England (I'm no expert, maybe that's a silly assumption?) and thus had not yet travelled entirely down the pike to the sellers of England's cotton just yet? I only know the barest minimum - I'm new to all this and just beginning and mostly just read census records and social history, so forgive my ignorance.
 

Diana9

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This is a very interesting discussion.

Unless I missed something, no one seems to have mentioned the impact of the cotton gin. I've wondered if this could have fueled a bubble and created a debt crisis much like the one we have seen in the last few years.

Any thoughts?
 

James B White

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Well, there had been a bubble in slaves and land in the 1830s, peaking and crashing around 1837. It shows up in both the charts posted earlier, total value and per-slave value. It really hurt when both one's land and one's slaves suddenly crashed in value. Was recently reading the letters of a slave-trader who wrote in 1841, " I will not trouble you with a tedious account of my individual matters further than to say that I must in some manner or other make up the last five years which I regard as even worse than so many blanks in the lottery of my life." Aw, don't we all feel so bad for him. :frown:

But seriously, it shook up the market but things recovered in 15 years or so, and slave prices just before the war were still riding the wave of recovery. I don't know that another crash would have had more or less long-term effect.
 

Diana9

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I doubt that a bubble in slave prices would have a serious impact on anything except those who dealt in the slave traffic. Although much of a holder's wealth might have been tied up in his property it would be only an issue if he had to sell or borrow against it (assuming some bank would do that). Slaves required the same expense of upkeep no matter what their book value. If a gang's value dropped by half, that would not effect its ability to raise the crops that generated the holder's income.
 

OpnCoronet

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There was no 'market' bubble, but there was a captive market, wherein the price of slaves were kept artificially high.
 

carson_reb

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How many slaves were purchased on credit as opposed to with cash? If on credit, then the property would have foreclosed, assets seized, and the repo men would have been busy.
 

James B White

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How many slaves were purchased on credit as opposed to with cash? If on credit, then the property would have foreclosed, assets seized, and the repo men would have been busy.

A lot, and yes, those would have been the ones hit hardest. If they kept paying, the slaves couldn't be repossessed, but those who were underwater might choose not to pay. Also, a reduction in the value of slaves would mean a reduction in borrowing power, since there were also those who pledged their slaves as collateral for loans and they would have been hit as well, if they were dependent on regular loans to tide them over between crops. Ran into a lawsuit in Louisiana where a man was accused of pledging the same slaves twice, under different names, for two different loans at the same time. It didn't end well when he went bankrupt, since it was fraud, not just a lack of money.
 
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How many slaves were purchased on credit as opposed to with cash? If on credit, then the property would have foreclosed, assets seized, and the repo men would have been busy.

An interesting study would be to see how much of the wealth tied up in slaves was encumbered in some way. I wonder how willing bankers would be to loan against an asset that could die or run away or even be sold. Would a banker today loan against livestock? Only with solid insurance against loss. If a planter was to borrow money I suspect it would be against his land or the next crop rather than slaves.
 

rpkennedy

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This is a very interesting discussion.

Unless I missed something, no one seems to have mentioned the impact of the cotton gin. I've wondered if this could have fueled a bubble and created a debt crisis much like the one we have seen in the last few years.

Any thoughts?

The cotton gin essentially created a boom for the slave market. Cotton farming using slave labor became much more profitable than it had ever been. In many cases, the FFs felt that slavery was on the slow road to extinction because profits just weren't large enough to keep it alive on a large scale. The profitability changed with the introduction of the cotton gin.

R
 

James B White

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An interesting study would be to see how much of the wealth tied up in slaves was encumbered in some way. I wonder how willing bankers would be to loan against an asset that could die or run away or even be sold. Would a banker today loan against livestock? Only with solid insurance against loss. If a planter was to borrow money I suspect it would be against his land or the next crop rather than slaves.

It was fairly common to buy slaves on credit. Here's a news article, just before the previous crash:

Speculation in Slaves.--It is supposed that upwards of ten thousand slaves were sold in the state of Mississippi, from 1st November, 1835, to the same period in 1836, on a credit, that is to say, for the notes and acceptances of merchants and planters. The value of these slaves could not have been less than ten millions of dollars. The planters, then, created a debt for slaves alone, to be paid out of the crop of 1835, equal to ten millions of dollars.--Natchez Courier. Source

For specific examples, go here: http://library.uncg.edu/slavery/ and search the keyword mortgage. I get 828 hits. These are lawsuits concerning slaves. A random example:

State: Alabama Year: 1842
Location: Barbour Location Type: County
Abstract: Thomas Berry claims that Amos J. Persons gave him a promissory note for $3800, secured by a mortgage on ten slaves. Now Berry reports that Mark A. Cooper, a resident of Columbus, Georgia, has successfully obtained a $7000-judgment against Persons, resulting in a levy being placed on the mortgaged slaves. Berry fears that Cooper will disregard his lien on the slaves and sell them beyond the jurisdiction of the court and state. He asks that Cooper be prevented "from all further proceeding upon said judgement & execution as regards said negroes, till said mortgage and note have been paid off & discharged." A related document reveals that the slaves were sold at auction in 1842, for $2826.25, in order to satisfy Thomas Berry's claim.
 
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