TY  - JOUR
AU  - Weidenmier,Marc
TI  - Gunboats, Reputation, and Sovereign Repayment: Lessons from the Southern Confederacy
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 10960
PY  - 2004
Y2  - December 2004
UR  - http://www.nber.org/papers/w10960
L1  - http://www.nber.org/papers/w10960.pdf
N1  - Author contact info:
Marc D. Weidenmier
Robert Day School of Economics and Finance
Claremont McKenna College
500 East Ninth Street
Claremont, CA 91711
Tel: 909/607-8497
Fax: 909/621-8249
E-Mail: marc_weidenmier@claremontmckenna.edu
AB  - Many states that formed the Southern Confederacy defaulted on sovereign debt sold in international capital markets during the 1840s. The Confederacy also elected President Jefferson Davis, who openly advocated the repudiation of U.S. states' debts while a member of Congress. Despite its poor credit record, the Confederate government managed to float cotton bonds in England that constituted under two percent of its expenditures. The bonds were largely issued to settle overdue debts with gun contractors who had cut off trade credit. The South serviced the bonds as late as March 1865, a time of domestic hyperinflation and weeks before the fall of Richmond. Although the Confederate experience shows that trade sanctions can promote debt repayment, the gunboat model can only account for a small amount of lending. A reputation or another type of sanction would be necessary to support higher levels of lending in international capital markets.
ER  -