American Economics 1860’s

Modern day finance and economics began in America during and after the Civil War around 1868. Each state operated as its own central bank until the National Currency Act of 1864 passed to create national banks and the position of Comptroller of the Currency to supervise banks. City and County banks then formed.


Banks then began trade in money as in Southern and State Bank Bills, stocks and state bonds for states in the Southern United States. Banks were exempt from taxes.


Money markets were the primary market vehicle to price money and currency, particularly the Southern Confederate currency backed by Treasury Notes and the Northern Greenback Currency. Today’s Greenback term for USD originated in 1860’s America.


Money market rates were quoted in Fractions and New York markets and rates dominated the United States as is the operation today. For example, Interest bearing Bankers Bills for a 60 day duration traded on the New York Money Market at 109 3/8 – 109 1 /2. Bank loans were then priced based on Money market rates.


Headline and Discount Interest rates per nation were quoted in Fractions until the 1990’s. Today, interest rates are traded and quoted by an actual number rather than a fraction.


Note today’s price for Gold in any currency is higher than actual exchange rates. No difference in 1860’s America. The question then was the premium to Gold in relation to the currency. No difference today.


America in 1860’s concerns were purchases to state bonds in currency then paid in interest from the currency or paid in Gold. The answer was found in the convertibility price from currency to Gold and Gold was the primary payout to bonds. The operation ensured banks and government would turn profits and government would never go broke.


Currency prices free floated yet backed by money market rates. Same scenario today since 1972. While the masses operated on a depreciated currency value, banks and governments turned constant profits and dealt on a higher standard.


The overall headline interest rate recommended at 5% and was key to what governments and banks receive in issued bonds. If the rate of interest was to high then banks and governments receive less than what was originally issued.


Current DXY at 0.9097 vs 1781.55 Gold trades at 0.05% and Gold trades at 195 % to DXY. DXY as a percent to 1781.55 factors to 1620.67.


Current US


1860’s economics factored: as 2019 Currency in Circulation in billions $1759.8


minus


Gold bullion $10,920, 429, 099.23


Minus


GDP in Constant Dollars $21.48 trillion


Minus


Total debt $28 trillion


The next question is to payout in bond interest then the relationship to imports to exports by a Gold valuation. Tariffs were recommended by the price of Gold to reduce the currency.
The result is surplus or deficit.


The contrast to 1860’s to today is Andrew Johnson in his 1868 State of the Union address sought to align GDP to Currency in circulation. Today, the difference is massive.


Overall disparity to today is the extraordinary brilliance of the 1860’s to all aspects of life in the written and spoken word, dress, respect and mannerisms, economics and politics and brilliance to thoughts, processes and analysis. Today’s society lost a great deal of the 1860’s thought and may never return.

Brian Twomey

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