Mark R. Swieszcz
Angeline E. Hutton
FI 360 Financial Management
6 March 2012
“The Ascent of Money”
Confederate Money Backed by Cotton, What went wrong? In 1861 the American Civil War had begun. The North held most of the industrialized states and the South almost all the agrarian ones. More importantly the North had under its control all of the original gold supply which backed its form of currency at that time. So what did the South have? They had cotton. The South controlled almost all of the cotton produced in the United States. It was Americas leading export before the war and England’s and several other countries primary import. The American South had “accounted for 77 percent of 800 million pounds of cotton used in Great Britain.”(Dattel) It was essential to the European economy that they have cotton. The South decided to back their money and there by their war effort with cotton. It was a great plan which if it had been executed properly might have meant a different country all together then we have today. The South believed that since they controlled most of the world’s cotton supply they could drive up the price of it by imposing an embargo on themselves which would drive up the price of cotton all over the world. The Confederacy also believed that this would force Great Britain, who had declared themselves to be neutral, to side with the South in the war since cotton was the basis for their large textile industry. They were correct in some of their speculation the price of cotton began to soar at the beginning of the Civil War. King Cotton Diplomacy had begun.
Where did the South go wrong you might ask? Well it was a multitude of things that made the South’s plan go…south. First their embargo was based off of the idea that if slowing down the production of cotton made the price of it jump as high as it did then cutting off the