Money in occupied New Orleans, 1862–1868: A test of Selgin’s “salvaging” of Gresham’s Law

Money in occupied New Orleans, 1862–1868: A test of Selgin’s “salvaging” of Gresham’s Law We examine the monetary experience of New Orleans when it was occupied during and immediately following the Civil War, using newly assembled data regarding the quantity and market value of the city’s municipal notes and the city’s fiscal position. Municipal notes, acceptable for taxes, circulated at face value in retail transactions (and at only a small discount in broker transactions) as long as their supply was sufficiently limited, and they fell out of circulation and were priced at a discount relative to interest-bearing municipal bonds, when concern arose about their overissue. The spontaneous rejection of New Orleans municipal notes exemplifies how choice in currency works when insufficiently backed money is not supported by legal tender laws. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Review of Austrian Economics Springer Journals

Money in occupied New Orleans, 1862–1868: A test of Selgin’s “salvaging” of Gresham’s Law

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Publisher
Springer US
Copyright
Copyright © 2009 by Springer Science+Business Media, LLC
Subject
Economics; Public Finance; Political Science; History of Economic Thought/Methodology
ISSN
0889-3047
eISSN
1573-7128
D.O.I.
10.1007/s11138-009-0090-8
Publisher site
See Article on Publisher Site

Abstract

We examine the monetary experience of New Orleans when it was occupied during and immediately following the Civil War, using newly assembled data regarding the quantity and market value of the city’s municipal notes and the city’s fiscal position. Municipal notes, acceptable for taxes, circulated at face value in retail transactions (and at only a small discount in broker transactions) as long as their supply was sufficiently limited, and they fell out of circulation and were priced at a discount relative to interest-bearing municipal bonds, when concern arose about their overissue. The spontaneous rejection of New Orleans municipal notes exemplifies how choice in currency works when insufficiently backed money is not supported by legal tender laws.

Journal

The Review of Austrian EconomicsSpringer Journals

Published: Jul 8, 2009

References

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