In an episode of the Andy Griffith Show, an evicted townie has a 100 year old bond from the Town of Mayberry, payable at 8.5% yearly.
When the bank does the math, it turns out Mayberry owes this guy $349,119.27.
The punchline of the episode is that the bond was issued in 1861, therefore, the money would have been confederate. The bond’s worthless.
This wasn’t a CSA bond, though - it was a town borrowing money from an individual.
Is that accurate? Were all contracts expressed in confederate dollars just null and void at the end of the Civil War? Extrapolating on that, did people’s bank holdings suddenly become $0 in every bank south of the Potomac?
Yes, Confederate money become wastepaper after the war, and the United States refused to recognize any debts owed by the Confederate governments. Anyone who lent money to the Confederacy lost everything.
Of course this lead to all kinds of economic dislocation, but so did years of war and destruction. If your plantation got burned down by General Sherman the Union wasn’t going to compensate you, nor for your slaves, nor for your Confederate bonds.
But also note that by the end of the war Confederate money was nearly worthless anyway. It wasn’t like you had a fortune in Confederate dollars in the bank and it was suddenly wiped away at the stroke of a pen. Even if you had thousands of dollars even before the end of the war it was worth only a few pennies in hard currency.
When the AGS was made, 3% would have been a helluva good interest rate. I wonder where 8.5% came from? Loan shark?
Of course, CSA currency IIRC went through the classic “print more instead of raising taxes” routine, so the money was effecttively worthless anyway by the end of the war. During that phase I would ahve expected 8.5% per month.
The key question would be what did the bond say was the repayment form? If it said CSA dollars, then it’s worthless. If it said US dollars or a set amount of gold, then further checking into would be required. State and Federal law might have limited how long the bond would have accrued interest, whether it was considered unclaimed after a certain period and therefore void, etc.
American courts had to assess the legitimacy of any number of acts performed by Confederate-era state and local governments, and bond issues were certainly one of them. The general principle, enunciated by Salmon Chase in Texas v. White, was:
This was buttressed, with respect to bonds, by the Fourteenth Amendment:
(Keep in mind that “state”, in this context, includes bodies such as municipal governments created under the authority of a state.)
So, as for Mayberry . . . if they were borrowing money in 1861, it probably had something to do with “supporting the rebellion”. Cities didn’t borrow money in those days to build a library. So yeah, the bonds are probably junk.
After the Civil War, the southern economy pretty much fell apart. People had been using confederate dollars, which were now worthless. There weren’t many U.S. dollars around either, since those had been abandoned in favor of Confederate dollars during the war. With money in short supply, many people had to resort to old fashioned bartering to get what they needed.
Reconstruction didn’t exactly go smoothly, either. Money that was supposed to go south to help people put their lives back together often ended up in the wrong hands. Southern whites tried to retain power over the blacks politically, in many cases passing laws that made blacks slaves in everything except name. Those attempts at a basic continuation of slavery didn’t go well. Southern politics descended into chaos. The southern economy, which had been built around slavery and agriculture, pretty well collapsed, and in some ways hasn’t fully recovered even today, 150 years later.
Read up on the Reconstruction era for more details. It was a mess.
regardless of the CSA dollar issue, there are two other problems with the scenario.
First, bonds are usually for a set number of years. Once that term is reached, interest normally stops accruing.
Second, there are normally statutes of limitations on debts. If the creditor fails to take steps to enforce its debt, at some point the limitation normally applies and the debt cannot be enforced - and that’s what a bond is - a debt owing from the issuer of the bond to the bond-holder.
How did Southern banks denominate their accounts? Like if you had a regular, ordinary USD bank account at a bank in Richmond, could you keep it in USD after the war broke out or did the bank forcibly convert it? Did it differ by bank? Could you choose which currency you wanted your money in?
Going with the legal hypothetical, I wonder if the bondholder could have demanded payment in physical Confederate cash. It may not be legal tender anymore, but quite a bit of it exists. Many antiques stores in the South can hook you up with some.
One thought I had with this was that the “legal tender” laws related to USD might allow the town to decline to pay in Confederate dollars but substitute an “equivalent” amount of now legal-tender USD. It would be interesting to see how the rate would get legally set considering that Confederate money is no longer used as a currency, but as a physical antique. It would be like someone legally owing another person 100 Victorian petticoats and having to call antique shops to try to find the going rate in order to pay in USD. Then the other party would object and say that Victorian petticoats cost more than that, my sister saw one on sale in Memphis for $500, stop lowballing please. Then it would go before a court.
IIRC, too, wasn’t “bank goes bankrupt” a common theme in the USA up until the depression? So what if they owed you $10,000 in USA currency, if they couldn’t afford to pay? Sucks to be you. A bank in Richmond, with a lot of its asset base loaned to plantation owners or invsted in Richmond real estate, loaned to people who then went off to fight on the losing side? Whether they owe you in USA or CSA dollars would be immaterial in late 1865, and I doubt the Confederacy courts would be sympathetic to your argument before that.
Also, it was revealed that Thelma Lou was a man. And Andy found a half-buried Statue of Liberty on the outskirts of town. It was earth all along!
Yes - another excellent question.
In the show, the bond just said dollars - it didn’t specify confederate or union (just as most bonds now in the US wouldn’t specify US dollars to clarify it wasn’t Canadian dollars or something).
And, however unrealistic, the bond apparently paid 8.5% in perpetuity. However stupid, I imagine such a bond would be legal, and almost believable if the government of Mayberry was as incompetent in 1861 as they were in 1961 (excepting ol’ Andj, natch).
The Confederacy never changed the dollar as a unit of account. Your bank deposit was denominated in dollars and cents before the war, and during, and afterward. (Contrast this with the infant American revolutionary government, which consciously and deliberately abandoned pounds, shillings, and pence as a unit of account and converted to dollars and cents.)
What changed, with respect to a bank deposit, was that by the end of 1861 all banks, north and south, has suspended “specie convertibility”. That is to say, you could no longer withdraw your money and get gold and silver coin, as you could before the war. The reason banks did this was that they had to–otherwise they would have been victims of runs, and gone insolvent.
Instead, if you wanted to withdraw your money, you would have to settle for “bank notes”–denominated in dollars and cents, and hopefully convertible back into gold at some distant time when the war was over. Your creditors and merchants might or might not accept these bank notes as payment, either at face value or at a discount. They didn’t have to–private bank notes were not legal tender. But on the other hand, if they refused and held out for silver or gold, well good luck with that because most people didn’t have silver or gold. You can’t get blood from a turnip.
The other thing that changed was that governments, north and south, began printing money and using it to pay soldiers and contractors. The north made its paper money legal tender; the south didn’t. It circulated anyway in the south, albeit at an increasing discount, because again if that was all your customers had it made sense to accept it–it was better than nothing.
Southern states, cities, and even private businesses also began printing their own money, because they were broke. So if you were a merchant in the south your customers might offer gold or silver (you wish!), but more likely private bank notes, or Confederate paper money, or state or municipal paper money, or even paper money printed by a rival business and redeemable for goods at that business. It would be up to you to decide which types of money to accept, and at what premium or discount.
So as you can see it wasn’t as simple as just denominating money this way or that way.
Wild. The implicit consequence is that confederate dollars and union dollars are are at a 1:1 exchange rate, in theory.
So a bank like Burke and Herbert in Virginia would have issued bank notes during the war, but honored them somehow afterward. They seamlessly went from accounts being in US dollars to confederate dollars to US dollars again, in their books.
Even if the bond was good in perpetuity, there’s still the limitations issue. A creditor can’t sit on their rights. If they don’t take prompt steps to claim interest owing, they may be barred from collecting all interest which accrued outside of the limitation period.
One thing about Confederate money is that a huge quantity of it was printed in Philadelphia by an entrepeneur who sold it as a “novelty.” He used slightly oversized paper that had a phrase like, “this is a novelty, not real money” along the bottom edge. If you trimmed that off, the bills were the right size. This was one of the things driving the CSA money downhill and was therefore OK with the US government.
Before the Civil War, banks throughout the country were the only source of paper money. There were coins minted by the US Mint, but the US govt did not print bills or notes. If you lived in Raleigh, you got money from a bank in Raleigh that (in theory) had it’s own gold reserve to back it up. This was fine as long as you stayed near Raleigh, as anyone you paid the bill to could go the bank and exchange it for gold. This was not so good if you were trying to use a Bank of Raleigh note in Richmond. They’d take it, but at a discount.
It’s sort of surprising that the CSA issued a national level paper currency, since states-rights folks were generally against national level banking by govts. Men like Andrew Jackson dissolved the first bank of the United States. In fact, it was the departure of the southern members of congress that finally allowed the federal govt to recreate the US bank and start issuing United States paper currency.
ETA, I see that Freddy answers some of my questions.
Does the limitations issue exist without it being written into the bond? It just ‘exists’? There’s a standard limitation on how long a bond can be held without redeeming it?
Just want to add that a good book for some of the antebellum banking situations is A Nation of Counterfeiters by Stephen Mihm 2007. Really good at showing just how difficult personal finances could be at that time regarding money.
