WEBVTT NOTE Inflation: North and South 1 00:00:00.000 --> 00:00:15.000 Today's topic is inflation during the war. Inflation North and South. Of course inflation is the scourge of society and economy in general. 2 00:00:15.000 --> 00:00:29.000 It's an economic poison, although it is often touted by economists as some kind of panacea that we can just print up money and cure all ills. 3 00:00:29.000 --> 00:00:40.800 From my perspective and that of Austrian economics, inflation is a giant rip-off. 4 00:00:40.800 --> 00:00:49.160 The street view of inflation, so to speak, is that businessmen raise prices for profit 5 00:00:49.160 --> 00:00:57.920 and exploit the consumer, the citizen, but in the Austrian view, inflation has a definitive 6 00:00:57.920 --> 00:01:03.460 of Cause which is government increasing the supply of money, basically you get too much 7 00:01:03.460 --> 00:01:14.460 money chasing too few goods and the consequence of that is that prices rise in the economy. 8 00:01:14.460 --> 00:01:25.280 The quantity theory of money reverses the street view in other words and it shows that 9 00:01:25.280 --> 00:01:34.260 An increase in prices is the effect or the consequence of the action of governments and 10 00:01:34.260 --> 00:01:43.260 central banks. An important thing to note with inflation in general is that the people 11 00:01:43.260 --> 00:01:51.580 who first get their hands on the money benefit from inflation and the people who end up getting 12 00:01:51.580 --> 00:01:58.580 So if you have your wealth or your portfolio in cash, accounts, cds, bonds, fixed income, fixed retirement, fixed annuities, life insurance, things of this nature, you are going to be hurt most. 13 00:02:21.580 --> 00:02:39.780 In the Civil War, we are talking about a lot of inflation, many times faster or more significant 14 00:02:39.780 --> 00:02:43.940 than we are experiencing today. 15 00:02:43.940 --> 00:02:49.740 Under those conditions, we see that some of the functions of money, and money is basically 16 00:02:49.740 --> 00:02:56.740 The medium of exchange. It's the product or good which we use to facilitate exchanges, 17 00:02:58.960 --> 00:03:05.960 but it also does other things for us. It acts as a store of value. So we can store up value 18 00:03:06.020 --> 00:03:13.020 over time in the form of savings, in the form of money itself. And when we see high rates 19 00:03:13.020 --> 00:03:23.020 And when we see high rates of inflation, we see that this function of money, the store of value, being undermined. 20 00:03:23.020 --> 00:03:31.020 In other words, if we're used to storing our wealth in the form of money and inflation is eroding that value, 21 00:03:31.020 --> 00:03:38.860 people start to find other ways of storing value in real tangible assets like their 22 00:03:38.860 --> 00:03:52.820 house. Money also serves as a unit of account. It's what we use to make the terms of contracts. 23 00:03:52.820 --> 00:04:01.540 So that baseball players contracts are written in terms of dollars, businesses, investment, 24 00:04:01.540 --> 00:04:09.700 all of these things are done in terms of dollars and so we do our economic calculations about 25 00:04:09.700 --> 00:04:16.300 profits and loss in terms of dollars and with high rates of inflation that function of money 26 00:04:16.300 --> 00:04:25.580 Money deteriorates. Once both of those functions are completely undermined, it usually entails 27 00:04:25.580 --> 00:04:43.620 a hyperinflation. Now, to set the stage, it's important, I think, for a number of reasons, 28 00:04:43.620 --> 00:04:50.100 To look at money and banking before the war. The U.S. Constitution basically took away 29 00:04:50.100 --> 00:05:00.100 the right of individual states or governments to print money and gave the federal government 30 00:05:00.100 --> 00:05:07.060 in the Constitution the power to coin money and to fix its weight. And so we had a kind 31 00:05:07.060 --> 00:05:14.180 A period of monetary union based on gold and silver coins in the United States prior to 32 00:05:14.180 --> 00:05:16.780 the Civil War. 33 00:05:16.780 --> 00:05:18.180 There were a couple of exceptions. 34 00:05:18.180 --> 00:05:26.260 The first and second national banks of the United States were periods where the federal 35 00:05:26.260 --> 00:05:34.460 government became more active in money and banking, causing two periods of big boom and 36 00:05:34.460 --> 00:05:40.260 and busts or depressions in the economy. 37 00:05:40.260 --> 00:05:51.620 But from 1837 until the war, we had an era called the free banking era. 38 00:05:51.620 --> 00:06:02.160 So what we're going to be talking about here is inflation north and south. 39 00:06:02.160 --> 00:06:16.080 Coming into the Civil War, we had the free banking era, where basically the federal government 40 00:06:16.080 --> 00:06:22.920 didn't have much involvement in money and banking, and most of the states had very little 41 00:06:22.920 --> 00:06:31.240 regulation or control over banking. You know, there's the general dichotomy that I've tried 42 00:06:31.240 --> 00:06:51.240 It's very much a generalization between North and South, where the North tended to be mercantilists, who advocated national banking, who advocated easy money policies, and was more or less pro-government debt. 43 00:06:51.240 --> 00:06:59.060 Where the South tended to be more hard money oriented and they tended to be anti-bank or 44 00:06:59.060 --> 00:07:07.920 anti-paper money and they were against, by and large, a large national debt. 45 00:07:07.920 --> 00:07:14.680 And the South was basically in, had the upper hand in the two decades before the Civil War 46 00:07:14.680 --> 00:07:21.680 in terms of banking, in terms of money, also in terms of trade. The tariff rates were coming 47 00:07:21.680 --> 00:07:29.000 down as we headed into the Civil War. So the South, in other words, had the upper hand 48 00:07:29.000 --> 00:07:40.600 going into the war. There was still some regulation in free banking states. By giving banks charters, 49 00:07:40.600 --> 00:08:10.600 Governments essentially gave banks a seal of approval, and banks could still issue unbacked notes, bank notes that were not fully backed by gold and silver held at the bank, the result was during this period, a period of high economic growth, economic growth and prosperity was fully abundant in the United States, 50 00:08:10.600 --> 00:08:28.600 There were some panics, there were fluctuations, but by and large, with lower tariffs and basically unregulated, no involvement or very little involvement in money and banking, the United States was very prosperous. 51 00:08:28.600 --> 00:08:40.040 There's an interesting case study that I'll point out that's in the book about the Citizens 52 00:08:40.040 --> 00:08:46.880 Bank of Louisiana prior to the war. They had a law which required banks that if they were 53 00:08:46.880 --> 00:08:53.480 going to issue paper banknotes that they had to back up every penny of those banknotes 54 00:08:53.480 --> 00:09:10.960 With one third gold, so if they issued $100 or say $300 worth of bank notes, they had 55 00:09:10.960 --> 00:09:17.440 to have at least $100 of gold inside the bank. The other two thirds had to be backed with 56 00:09:17.440 --> 00:09:25.320 with Short Term Securities. So this bank and Louisiana banks in general were very liquid. 57 00:09:25.320 --> 00:09:30.800 They could always redeem their notes because they had plenty of gold on hand and the rest 58 00:09:30.800 --> 00:09:39.640 of it was readily accessible. These short term securities were basically loans for commodities. 59 00:09:39.640 --> 00:09:45.680 As commodities would come into New Orleans, and here we're talking about of course cotton, 60 00:09:45.680 --> 00:09:55.720 Sugar, Grain from the Midwest, Cattle from the West and so on. These were commodities 61 00:09:55.720 --> 00:10:02.960 which were readily sellable and the debts could be rapidly repaid. So they weren't real 62 00:10:02.960 --> 00:10:11.500 estate loans or longer term loans. These things could be easily gotten hold of. As a result, 63 00:10:11.500 --> 00:10:17.180 The banknotes from Louisiana were very secure. They were, in a sense, as good as gold. Not 64 00:10:17.180 --> 00:10:27.980 quite as good as gold, but pretty good. As a result, the banknotes of Louisiana banks 65 00:10:27.980 --> 00:10:32.740 were widely circulated. You didn't have to worry about whether or not you could redeem 66 00:10:32.740 --> 00:10:39.380 them for gold as much as you would other banks, and as a result, people would be willing to 67 00:10:39.380 --> 00:10:46.440 take these bank notes and hold on to them. And as a consequence, the notes circulated 68 00:10:46.440 --> 00:10:56.340 outside of New Orleans, even here in Alabama, Mississippi, Tennessee, the Ohio Valley, Kentucky, 69 00:10:56.340 --> 00:11:05.340 Arkansas, Texas, and so on. So they were widely circulated. And one of the most prominent 70 00:11:05.340 --> 00:11:17.020 Banks, the Citizens Bank was French owned and of course New Orleans was still a city 71 00:11:17.020 --> 00:11:21.540 where the French were a prominent part of the population, French speaking people and 72 00:11:21.540 --> 00:11:29.500 And so their notes were written in both English and French. 73 00:11:29.500 --> 00:11:47.440 And so their ten dollar note, you'd see the word ten and the French version, D-I-X. 74 00:11:47.440 --> 00:11:51.760 As a consequence, the English speaking people who accepted these notes referred to them 75 00:11:51.760 --> 00:12:02.760 as Dixies, and this is widely thought of as the source of the name Dixie, Dixieland, and 76 00:12:02.760 --> 00:12:10.280 of course the basis of the phrase that the south is Dixie and the song Dixieland. So 77 00:12:10.280 --> 00:12:17.360 that money that was merely as good as gold is essentially the basis of the famous song 78 00:12:17.360 --> 00:12:24.960 and the famous designation of the South as Dixieland. 79 00:12:24.960 --> 00:12:34.720 Now getting back to the war itself, there's only so many ways we can finance war. 80 00:12:34.720 --> 00:12:41.160 These ideas apply today as much as they did in the Civil War or going backwards in time 81 00:12:41.160 --> 00:12:42.380 from there. 82 00:12:42.380 --> 00:12:47.080 You can tax the economy or the population to pay for the war. 83 00:12:47.080 --> 00:12:50.340 You can borrow the money to pay for the war. 84 00:12:50.340 --> 00:12:55.540 Or you can print up the money via inflation to pay for the war. 85 00:12:55.540 --> 00:13:00.260 And you can also use direct taking of resources. 86 00:13:00.260 --> 00:13:05.100 And here we would look at things like conscription or the draft, the military draft, as a way 87 00:13:05.100 --> 00:13:30.100 The Key Question in terms of war is what mix of these means are you going to use to pay for the war effort? 88 00:13:30.100 --> 00:13:40.180 All four of these venues of raising resources have negative consequences on the economy. 89 00:13:40.180 --> 00:13:46.820 So there's no perfect way of financing war, there's no panacea of financing war, but some 90 00:13:46.820 --> 00:13:49.820 are worse than others. 91 00:13:49.820 --> 00:13:58.740 Taxes, I usually don't have much good to say about taxes, especially this close to April 92 00:13:58.740 --> 00:14:11.500 15. They do have flaws, but taxes are among the best ways of financing war. One of its 93 00:14:11.500 --> 00:14:19.640 biggest advantages is that the citizens know what the cost of the war is. And because they 94 00:14:19.640 --> 00:14:26.460 feel the burden of the war, it also places constraints on government to not take too 95 00:14:26.460 --> 00:14:52.340 Borrowing is also a preferable way of fighting a war, but it's best only under certain conditions. 96 00:14:52.340 --> 00:15:00.620 The best way that borrowing can be of use to you is to borrow money from foreigners 97 00:15:00.620 --> 00:15:07.980 and to purchase foreign goods and bring them into your economy to fight the war. 98 00:15:07.980 --> 00:15:15.300 That way it doesn't place any immediate drain on your economy and it sort of extends the 99 00:15:15.300 --> 00:15:20.900 pain of the war into the post-war period. 100 00:15:20.900 --> 00:15:27.260 The problem here is, however, that if you're not expected to win or you're losing the war, 101 00:15:27.260 --> 00:15:35.260 it makes it more difficult to con foreigners into giving you their money and their products, 102 00:15:35.260 --> 00:15:39.220 okay, because they want to be paid back. 103 00:15:39.220 --> 00:15:46.380 And in terms of the North and the South, the South not only had a lower probability of 104 00:15:46.380 --> 00:15:52.140 of Winning. I mean the North was not going to go out of existence. The South did not 105 00:15:52.140 --> 00:15:58.120 intend to invade and destroy the North. It was the North that was invading and trying 106 00:15:58.120 --> 00:16:04.720 to destroy the South. So, foreigners wouldn't be concerned about getting paid back by the 107 00:16:04.720 --> 00:16:11.520 North as much as the South. And also, many state governments in the South had defaulted 108 00:16:11.520 --> 00:16:14.520 on Foreign Debts Prior to the War. 109 00:16:14.520 --> 00:16:24.360 So in the panic in the years around 1837, several states defaulted on their state debt. 110 00:16:24.360 --> 00:16:30.520 And as a consequence, foreigners did not look on the South as a good debtor. 111 00:16:30.520 --> 00:16:35.000 As a matter of fact, Mississippi was one of those states. 112 00:16:35.000 --> 00:16:38.040 And Jefferson Davis, of course, was from Mississippi. 113 00:16:38.040 --> 00:16:46.280 So the President of the Confederacy came from a state which defaulted on foreign debt. 114 00:16:46.280 --> 00:16:51.520 Conscription and confiscation are really bad. 115 00:16:51.520 --> 00:16:59.040 That's a system where you make the citizens upset about taking their resources, you're 116 00:16:59.040 --> 00:17:04.120 getting the resources from the local economy rather than the foreign economy, and government 117 00:17:04.120 --> 00:17:10.220 Conscription tends to take if it's got the right to draft as many soldiers or to confiscate 118 00:17:10.220 --> 00:17:16.840 as much assets as it wants, then the tendency is for government to overdo it and to take 119 00:17:16.840 --> 00:17:24.200 too many resources. So conscription and confiscation is really bad. 120 00:17:24.200 --> 00:17:29.480 And then finally, inflation. Inflation is the easiest way of getting resources. You 121 00:17:29.480 --> 00:17:35.840 You print up the money, very little cost to you, and you go about buying resources from 122 00:17:35.840 --> 00:17:37.540 the economy. 123 00:17:37.540 --> 00:17:45.680 So this is easy, but it also tends to be the most damaging form of revenue. 124 00:17:45.680 --> 00:17:53.280 Because inflation is infecting the price system in the economy, it's distorting people's ability 125 00:17:53.280 --> 00:17:59.360 to calculate, people's ability to make future plans, people's ability to establish 126 00:17:59.360 --> 00:18:29.360 enterprises, businesses, to make investments, to calculate, you know, how much labor am I going to need, how much land am I going to need, how much capital am I going to need, putting that all together in order to, say, produce a warship, or to produce a hospital, or whatever that investment is that might be beneficial to the war effort, it makes it very difficult for entrepreneurs to calculate. And there's some stories in the literature about business 127 00:18:29.360 --> 00:18:37.320 This is people north and south finding themselves being deluded by inflation, thinking that 128 00:18:37.320 --> 00:18:43.320 they're making profits, but actually finding out after the fact that they really didn't 129 00:18:43.320 --> 00:18:48.760 make any money, that it was all an illusion of prosperity. 130 00:18:48.760 --> 00:18:57.220 So it distorts the private economy and it also, because it's easy to obtain resources 131 00:18:57.220 --> 00:19:17.020 In the North, they started out with a hard money policy. They were going to pay for government 132 00:19:17.020 --> 00:19:24.300 with taxes and they were going to borrow money from abroad to pay for the war and they were 133 00:19:24.300 --> 00:19:31.220 were going to stay on the gold standard, even though they were mercantilist in philosophy, 134 00:19:31.220 --> 00:19:38.220 they started out with a very hard money perspective on the war. They very soon found out, however, 135 00:19:38.220 --> 00:19:43.300 that they couldn't borrow as much money as they needed, so they went to the greenbacks, 136 00:19:43.300 --> 00:19:50.500 which is essentially the forefather of what we have today. The greenbacks, paper money, 137 00:19:50.500 --> 00:19:58.060 Very quickly Gresham's Law went into effect and the paper money stayed in circulation and 138 00:19:58.060 --> 00:20:05.780 the gold money came out of circulation. If you had a choice between, say as a business 139 00:20:05.780 --> 00:20:12.500 you were getting some gold and some paper money into your store and then you had to 140 00:20:12.500 --> 00:20:18.440 spend some of that money, chances are you'd spend the paper and hold on to the gold because 141 00:20:18.440 --> 00:20:22.440 The Paper Money Losing Value 142 00:20:22.440 --> 00:20:25.440 Sure enough, that was what happened on a massive scale. 143 00:20:25.440 --> 00:20:34.440 The gold left, the paper stayed, and it lost, over the course of the war, almost two-thirds of its value. 144 00:20:34.440 --> 00:20:42.440 Northern money, greenbacks lost at its peak two-thirds of its value. 145 00:20:42.440 --> 00:20:51.680 Even though there was a promise to pay after the war, pay it all back in gold. 146 00:20:51.680 --> 00:20:58.800 The general story, the impression that people had during the war that the rising prices, 147 00:20:58.800 --> 00:21:04.840 the greenback is falling in value, means that prices are rising and so food, clothing and 148 00:21:04.840 --> 00:21:29.840 In addition to higher prices, inflation in the North caused other effects. For example, 149 00:21:29.840 --> 00:21:34.820 there was more extravagant spending, there was more spending on luxury goods by people 150 00:21:34.820 --> 00:21:37.860 People who were making a lot of money during the war. 151 00:21:37.860 --> 00:21:46.000 So there was a tendency towards extravagance and luxury in northern cities. 152 00:21:46.000 --> 00:21:49.180 Property values went up, which is typical during inflation. 153 00:21:49.180 --> 00:21:55.860 People wanted to invest in land, housing, things of that nature. 154 00:21:55.860 --> 00:22:00.060 Workers or the labor force was the most hardest hit. 155 00:22:00.060 --> 00:22:07.020 So if you were a teacher or a minister, well not necessarily a factory worker, but farmers, 156 00:22:07.020 --> 00:22:15.060 people in the labor force were hurt the most because the prices were rising but their wages 157 00:22:15.060 --> 00:22:17.460 didn't keep up with inflation. 158 00:22:17.460 --> 00:22:25.580 So this is typically the case that workers are hurt by inflation. 159 00:22:25.580 --> 00:22:33.140 There was the illusion of prosperity. Everybody's money income was going up every year. This 160 00:22:33.140 --> 00:22:51.420 course feeds into the luxury spending as well. Let me see here. I want to just briefly explain 161 00:22:51.420 --> 00:23:06.820 A section in the book that looks at how different schools of thought view the inflationary process 162 00:23:06.820 --> 00:23:15.580 and then the book brings to bear the evidence of the Civil War to show how each of these 163 00:23:15.580 --> 00:23:29.260 groups can be interpreted. There's the Keynesian economists, there's the monetarists of the 164 00:23:29.260 --> 00:23:45.500 Chicago School, and then there's the Austrians. And these are sort of the extreme views of 165 00:23:45.500 --> 00:23:52.180 of these three schools, particularly the Keynesians and the monetarists, when trying to explain 166 00:23:52.180 --> 00:24:03.180 rising prices, the Keynesians emphasize real factors, in the extreme they say it's all 167 00:24:04.900 --> 00:24:11.900 just real factors. So the Keynesian view, it was the war that was driving higher prices. 168 00:24:15.500 --> 00:24:21.060 Prices, the war effort on top of the regular economy, increased aggregate demand and drove 169 00:24:21.060 --> 00:24:35.420 up prices. 170 00:24:35.420 --> 00:24:43.500 The monetarist of the Chicago School not surprisingly emphasized monetary factors in the economy, 171 00:24:43.500 --> 00:25:00.940 The printing press was responsible for inflation. In the extreme version, monetary factors account 172 00:25:00.940 --> 00:25:09.820 for all of the rise in prices in the economy. The Austrians define inflation not as rising 173 00:25:09.820 --> 00:25:21.100 and Prices, but as changes in the money supply or increases in the money supply. The mainstream 174 00:25:21.100 --> 00:25:26.140 of Keynesians, monetarists and other schools of thought that have developed off of these 175 00:25:26.140 --> 00:25:51.540 These two main branches look at inflation in terms of its effect, or the price increases, 176 00:25:51.540 --> 00:26:04.900 Whereas the Austrians look at inflation in terms of the cause or increases in the money 177 00:26:04.900 --> 00:26:10.260 supply. 178 00:26:10.260 --> 00:26:18.060 So when it comes to explaining higher prices, when it comes to explaining the effect, the 179 00:26:18.060 --> 00:26:33.060 The Austrians would view the Civil War both in terms of the real factors plus the monetary factors. 180 00:26:33.060 --> 00:26:48.560 So that inflation during a wartime, when the war is sucking out resources and destroying 181 00:26:48.560 --> 00:26:57.180 resources in battle, plus you've got the printing press going, when you want to look at what's 182 00:26:57.180 --> 00:27:03.500 What's causing the higher prices, you want to look at both of those aspects, more money 183 00:27:03.500 --> 00:27:06.380 and fewer goods. 184 00:27:06.380 --> 00:27:11.860 So in terms of understanding the evidence that's presented there, in terms of the price 185 00:27:11.860 --> 00:27:20.060 levels that are calculated, in terms of the impact of battles and that sort of thing, 186 00:27:20.060 --> 00:27:27.140 sometimes called the psychological factors or the event factors, we want to include everything 187 00:27:27.140 --> 00:27:37.140 to explain those higher prices. Now, inflation in the South was much more severe than in the North. 188 00:27:37.140 --> 00:27:51.140 And I think that this goes a long ways to explaining the growing weaknesses in the Southern economy. 189 00:27:51.140 --> 00:27:55.140 I mean, we've already looked at the blockade and that sort of thing, 190 00:27:55.140 --> 00:28:07.140 But in terms of inflation, this poison that's injected into the economy by government was at a much lower rate in the north than it was in the south. 191 00:28:07.140 --> 00:28:13.140 The bulk of resources that the Confederate government used, it paid for with paper money. 192 00:28:13.140 --> 00:28:20.140 And so the southern economy was totally disoriented by the effects of inflation. 193 00:28:20.140 --> 00:28:50.140 and they not only just pumped the money in but they pumped it in at an erratic pace and later in the war they actually had a revaluation of the currency so that southerners didn't know what to do in terms of bonds and cash and investment and building projects it was just a massive confusion the amount of inflation 194 00:28:50.140 --> 00:28:57.940 was in terms of the increase in the money supply, the money supply went up by over a 195 00:28:57.940 --> 00:29:06.380 thousand percent. In the north, it was much less severe, their currency depreciated by 196 00:29:06.380 --> 00:29:17.460 two-thirds. Of course, ultimately in the south, the confederate currency depreciated to zero. 197 00:29:17.460 --> 00:29:34.540 For those of you who are up in the reading, I just couldn't resist this quote from John 198 00:29:34.540 --> 00:29:43.560 Shelton Reed, a sort of sociologist of the South, that leads in this chapter. I'll read 199 00:29:43.560 --> 00:29:50.000 to you here. It's from, it was actually originally from an article that he published, but it's 200 00:29:50.000 --> 00:29:58.580 in the book Whistling Dixie Dispatches from the South, published in 1990 by the University 201 00:29:58.580 --> 00:30:07.680 of Missouri Press. In 1865, the Confederate dollar was a mere scrap of paper, but today 202 00:30:07.680 --> 00:30:19.360 A Confederate $1 bill cost $8 of U.S. dollars. What accounts for the Confederate miracle? 203 00:30:19.360 --> 00:30:25.400 How can currency backed by a government defunct now for over a century be sounder than one 204 00:30:25.400 --> 00:30:32.520 backed by the government in Washington D.C.? Confederate officials aren't sane, but they 205 00:30:32.520 --> 00:30:40.580 They seem to have learned a lesson from the severe inflation of 1862 to 1865. Strict controls 206 00:30:40.580 --> 00:30:45.040 on the growth of the Confederate money supply, coupled with a fiscal policy that produces 207 00:30:45.040 --> 00:30:57.200 a balanced budget in every year. It's funny, but it contains a lot of wisdom. Actually, 208 00:30:57.200 --> 00:31:00.880 That quote contains all the wisdom governments need. 209 00:31:00.880 --> 00:31:07.020 If they have a balanced budget at an extremely low level in this case, and they have strict 210 00:31:07.020 --> 00:31:10.880 controls on the supply of money, in other words, there's no way they can increase the 211 00:31:10.880 --> 00:31:13.320 money supply. 212 00:31:13.320 --> 00:31:21.200 What you see is not an inflation system in terms of depreciating money, but something 213 00:31:21.200 --> 00:31:49.320 Well, George, the best advice I can give you in terms of Alan Greenspan comes from an article 214 00:31:49.320 --> 00:31:59.080 that I wrote about his testimony before Congress, and what we should think about it. I'll give 215 00:31:59.080 --> 00:32:10.120 you the title of the article, it's called Green Spam. Last year, green spam, and like 216 00:32:10.120 --> 00:32:19.120 email spam, you should not open it, but you should delete it. Unless you're particularly 217 00:32:19.120 --> 00:32:47.320 So what would you call him, a liar, a cheat, or incompetent? 218 00:32:47.320 --> 00:32:51.320 A Republican bureaucrat, which sort of encompasses all those things. 219 00:32:51.320 --> 00:33:11.320 I'm not trying to be one side or the other here, but he is a Republican. 220 00:33:11.320 --> 00:33:22.120 Republican. And Republicans tend to be mercantilists, support faster money growth, national debt. 221 00:33:22.120 --> 00:33:25.860 Now of course Greenspan has written that he thinks the gold standard is the way to go 222 00:33:25.860 --> 00:33:39.860 back in the 1960s. But, you know, that's when he was, you know, wasn't involved in politics. 223 00:33:39.860 --> 00:33:41.860 Great essay, I remember now reading it. 224 00:34:09.860 --> 00:34:18.860 Inflating less than the other side. Or not at all. Politicians might find that very difficult to do. 225 00:34:18.860 --> 00:34:33.860 But let's take a look at the evidence presented on page 75 in table 3.4, where we compare the mix of resources from the, let's see, the Confederacy, 226 00:34:33.860 --> 00:34:51.360 the Union Government, the American Revolution, and the War of 1812 and we 227 00:34:51.360 --> 00:35:08.520 We break down the financing in terms of loans, taxes, currency, paper money, and other forms 228 00:35:08.520 --> 00:35:10.760 of revenue. 229 00:35:10.760 --> 00:35:19.720 And what we find is that in Confederacy about 21% was in terms of loans, about 10.5% in 230 00:35:19.720 --> 00:35:31.200 in terms of taxes, currency 61.7% and other was 6.5%. 231 00:35:31.200 --> 00:35:46.360 The Union on the other hand took in almost 65% of its revenues in terms of loans, 16.5% 232 00:35:46.360 --> 00:36:01.160 in terms of taxes, 16.5% in terms of currency and 2.5% by other means. 233 00:36:01.160 --> 00:36:11.560 The American side during the war of the American Revolution, the U.S. took in, America took 234 00:36:11.560 --> 00:36:26.440 Look in 29.5% in terms of loans, 8.8% in terms of taxes, 57.4% in terms of currency 235 00:36:26.440 --> 00:36:34.040 and 4.3% in terms of other means of raising revenue. 236 00:36:34.040 --> 00:36:42.920 This doesn't include the draft, you know, the issue of drafting labor. 237 00:36:42.920 --> 00:37:05.920 1812, the U.S., 49% loans, 28.5% taxes, 16.3% paper money, and 6.2% other, those would be... 238 00:37:05.920 --> 00:37:15.920 Did the same thing happen with currency in the war of 17th century? 239 00:37:35.920 --> 00:37:53.640 And the value of the currency issued by the Continental Congress depreciated very rapidly, went into hyperinflation and became almost worthless during the later stages of the war. 240 00:37:53.640 --> 00:38:23.640 So yes, I mean that definitely goes into effect and one of the things that really stands out here is that the Confederacy got the smallest percentage and of course these three are victories and this is a loss and we see that the Confederates had the lowest percentage of any of the four cases 241 00:38:23.640 --> 00:38:31.640 in terms of loans followed by the American Revolution. 242 00:38:31.640 --> 00:38:38.400 Currency they had the highest percentage, again with second place being the American 243 00:38:38.400 --> 00:38:40.280 Revolution. 244 00:38:40.280 --> 00:38:52.340 So that the recipe as dictated by economic theory of relying on taxes and loans and avoiding 245 00:38:52.340 --> 00:38:57.300 inflation and confiscation and those sorts of avenues 246 00:38:57.300 --> 00:39:02.540 really plays out in the American historical experience 247 00:39:02.540 --> 00:39:06.220 and even if we were to look at 1776 248 00:39:06.220 --> 00:39:09.420 you know with 249 00:39:09.420 --> 00:39:12.860 Continental Congress raising just a little bit more in terms of loans 250 00:39:12.860 --> 00:39:16.660 and inflating just a little bit less, you have to remember that 251 00:39:16.660 --> 00:39:21.460 you know America did win that war 252 00:39:21.460 --> 00:39:47.460 But they didn't win by much. The British were basically, in a sense, in control, in a similar way that we're in control of Iraq, and what basically happened was that the British were feeling the pinch from elsewhere around the globe, and the French intervened on our behalf. 253 00:39:47.460 --> 00:40:01.580 So, yes, that sounds about right. And of course the fleet was very important, but you know, 254 00:40:01.580 --> 00:40:08.940 so you have to recognize that 1776, you know, we needed French intervention, which if you 255 00:40:08.940 --> 00:40:13.940 You need French military intervention, it's a sign of desperation, right? 256 00:40:13.940 --> 00:40:24.940 Something that confirms this, the French Revolution is based, or many people are based on the 257 00:40:24.940 --> 00:40:33.940 fact that in helping us, the Revolution, they ran up such a debt, such inflation, that the 258 00:40:33.940 --> 00:41:02.740 The French situation throughout, going way back into the 17th century even, the financial 259 00:41:02.740 --> 00:41:08.420 situation of the French Monarchy is not all that good. I mean, that's why they sold us 260 00:41:08.420 --> 00:41:16.300 Louisiana for the money. That's why they had the Mississippi bubble in France because 261 00:41:16.300 --> 00:41:26.180 it was, you know, John Law was trying to somehow pay off the debts of the French Monarchy and, 262 00:41:26.180 --> 00:41:37.060 You know, the French situation in terms of their fiscal policy and their public finance 263 00:41:37.060 --> 00:41:46.020 was desperate all the way through this period and, of course, what comes out of it is, you 264 00:41:46.020 --> 00:41:54.620 know, it was so bad that people started thinking about these issues to such a great extent. 265 00:41:54.620 --> 00:42:02.300 In one case, the person that I'm doing research on, Richard Cantillon, in the aftermath of 266 00:42:02.300 --> 00:42:07.780 the Mississippi bubble, sat down and tried to figure out economic theory and ultimately 267 00:42:07.780 --> 00:42:15.060 produced a theory of the business cycle and a theory of the market economy. 268 00:42:15.060 --> 00:42:24.120 And later on in France, again, you have the physiocrats dealing with these questions and 269 00:42:24.120 --> 00:42:31.480 and Adam Smith developing his response and David Hume developing his response. 270 00:42:31.480 --> 00:42:32.920 Basically they were all good responses. 271 00:42:32.920 --> 00:42:39.240 They were telling people like the British Parliament and the French monarch what to 272 00:42:39.240 --> 00:42:49.460 do and it's just that the French monarch in particular refused the advice. 273 00:42:49.460 --> 00:42:59.740 They ended up canning Turgot as finance minister, and because they failed to reform themselves, 274 00:42:59.740 --> 00:43:03.380 they end up with a French Revolution. 275 00:43:03.380 --> 00:43:11.500 So you know, these are, so European governments have barred for a long time, a lot of war for 276 00:43:11.500 --> 00:43:15.340 a long time, and they had to get that money somewhere, and a lot of them got it from the 277 00:43:15.340 --> 00:43:45.180 One after another, and there are extravagant expenses in addition to the war expenses. 278 00:43:45.180 --> 00:43:53.820 So these are general lessons, but in terms of the war, I think the evidence does point 279 00:43:53.820 --> 00:44:00.300 in the direction of what Ludwig von Mises has written about in terms of how to finance 280 00:44:00.300 --> 00:44:06.620 a war and what's written in this text about how to finance war. 281 00:44:06.620 --> 00:44:18.280 Professor Joseph Salerno has an excellent article about war finance. It's referenced 282 00:44:18.280 --> 00:44:26.540 in the book, and I believe it came out in the journal Libertarian Studies, about financing 283 00:44:26.540 --> 00:44:34.860 war and how inflation is a way of concealing the cost of war, a way of concealing the cost 284 00:44:34.860 --> 00:44:43.420 Cost of War from the Citizens, but by concealing the cost of the war, it makes it too easy 285 00:44:43.420 --> 00:44:48.740 for government to extract resources and therefore they extract too many. 286 00:44:48.740 --> 00:44:55.320 And so that really gets back to one of the main points that we try to get across in the 287 00:44:55.320 --> 00:45:03.020 book that in terms of North and South, the North took a more moderate approach, a more 288 00:45:03.020 --> 00:45:09.980 more traditional approach to financing war and that was a big advantage over the Confederate 289 00:45:09.980 --> 00:45:15.460 process which historians are constantly clamoring that the South would have won if they only 290 00:45:15.460 --> 00:45:24.100 had this, if they only had that, if we only did more of this, more inflation, more soldiers, 291 00:45:24.100 --> 00:45:31.880 more confiscation, more all this stuff and basically we're arguing no, they really needed 292 00:45:31.880 --> 00:45:39.200 to do less of that, and they needed to take a more traditional approach, curb their appetite, 293 00:45:39.200 --> 00:45:45.440 in other words, find another way, a better way of getting the job done. There's more 294 00:45:45.440 --> 00:45:54.240 than one way to skin a cat, and inflation allowed the Confederate government to think 295 00:45:54.240 --> 00:46:01.000 it was doing the right thing, when I would argue in fact it wasn't. And after the break, 296 00:46:01.000 --> 00:46:08.120 When we come back, I'm going to talk a little bit more about how I would have approached 297 00:46:08.120 --> 00:46:15.640 it, how I think the Confederate government could have approached it, and so then we can 298 00:46:15.640 --> 00:46:16.640 discuss that. 299 00:46:16.640 --> 00:46:29.800 But before we go to break, I want to give a little bit, well actually we're just now 300 00:46:29.800 --> 00:46:51.200 Yeah, I would say that by and large, World War II, for example, the U.S. relied on taxation 301 00:46:51.200 --> 00:46:52.200 and borrowing. 302 00:46:52.200 --> 00:46:58.800 That would be the case in World War I as well. 303 00:46:58.800 --> 00:47:05.800 Although the amount of inflation was probably higher than you would have expected given 304 00:47:05.800 --> 00:47:16.560 U.S. involvement in World War I. The Korean War and the Vietnam War, we were on the Brenton 305 00:47:16.560 --> 00:47:27.180 Woods system, so we were on the gold standard and we were pledged to redeem our currency 306 00:47:27.180 --> 00:47:35.720 and Gold, and so we were under the table inflating, putting out too many dollars, and ultimately 307 00:47:35.720 --> 00:47:41.220 that did cost us. Eventually that did cost us. Fighting the Korean War, the Cold War, 308 00:47:41.220 --> 00:47:51.460 the Vietnam War, the war on poverty is essentially what undermined the gold standard, and Nixon 309 00:47:51.460 --> 00:47:55.460 takes us off the gold standard in 1971. 310 00:47:55.460 --> 00:47:56.460 And... 311 00:47:56.460 --> 00:48:11.460 Mark, when you look at the percentages there, some of them aren't too far from Green's 312 00:48:11.460 --> 00:48:39.260 Yeah, there's been a lot of inflation, a lot of borrowing, but the level of taxation is 313 00:48:39.260 --> 00:48:53.060 is also very high and ultimately the total burden also matters in terms of the mix matters 314 00:48:53.060 --> 00:49:03.780 but the total burden on an economy of government, whether it's a war or not, also matters and 315 00:49:03.780 --> 00:49:12.780 Over time, the fact that you have inflation freely available to you means you have a tendency 316 00:49:12.780 --> 00:49:21.820 to increase the size of government and because you have inflation as an ongoing tool, your 317 00:49:21.820 --> 00:49:28.740 ability to issue debt is also easier because everybody knows that, well, the bonds may 318 00:49:28.740 --> 00:49:34.580 Inflation may depreciate in value because of inflation, but they'll always pay them back. 319 00:49:34.580 --> 00:49:43.660 And so, when you have, instead of just taxes and borrowing because you're a good risk, 320 00:49:43.660 --> 00:49:50.740 with inflation, you seemingly open the floodgates and the burden of government becomes bigger 321 00:49:50.740 --> 00:49:53.740 and bigger and bigger over time. 322 00:49:53.740 --> 00:50:20.740 So, you know, that's the wartime example, but as we've seen in the case of France, as we've talked before the break, you know, that you can run into trouble outside of a wartime issue, so, you know, it's definitely a problem. Yes? 323 00:50:20.740 --> 00:50:27.500 You were talking about progress at the time, the generation, the creation, the harvest. 324 00:50:27.500 --> 00:50:35.620 As a crowd committee takes a war to the north, is that from an economic standpoint? 325 00:50:35.620 --> 00:50:41.460 I mean, obviously, we want building banks, or at-lamps, to build the wall, 326 00:50:41.460 --> 00:50:44.780 but perhaps they will build a long-term solution. 327 00:50:44.780 --> 00:50:51.780 Would we have been able to take the actual start of the war, or would that help? 328 00:51:14.780 --> 00:51:29.060 That's very bad for your economy, in a number of ways, but I don't think the South could 329 00:51:29.060 --> 00:51:39.960 effectively take the war up into the North to any great degree, except on the basis of 330 00:51:39.960 --> 00:51:48.360 guerrilla-like tactics, where you'd send small bands of guerrilla fighters into the 331 00:51:48.360 --> 00:52:02.440 north who would go there in order to destroy infrastructure. So, you know, I think sending 332 00:52:02.440 --> 00:52:15.140 The Confederate armies to Gettysburg and Antietam were big mistakes, but I think if 333 00:52:15.140 --> 00:52:23.960 you sent small bands of Confederate soldiers slash guerrilla fighters into the north in 334 00:52:23.960 --> 00:52:34.240 In order to, say, blow up railroad bridges, moving supplies and troops from east to west, 335 00:52:34.240 --> 00:52:45.600 that would have been very advantageous because in the north there was a choke point in the 336 00:52:45.600 --> 00:52:51.740 area of, say, West Virginia, Pennsylvania, Ohio, and, you know, resources and men moving 337 00:52:51.740 --> 00:52:56.620 Back and forth, had to go through there and there were only a couple of railroad lines 338 00:52:56.620 --> 00:53:04.780 and if those lines had been constantly disrupted, that is a small tactic that could have placed 339 00:53:04.780 --> 00:53:12.500 a large burden on the northern war effort and so, you know, if you're the smaller force, 340 00:53:12.500 --> 00:53:17.860 if you're the defending force, you always have to look in terms of what gives you the 341 00:53:17.860 --> 00:53:29.860 The Biggest Bang for the Smallest Buck. The idea of bringing together 150,000 troops and 342 00:53:29.860 --> 00:53:34.540 clothing them, provisioning them, getting them weapons, getting them horses, getting 343 00:53:34.540 --> 00:53:42.620 them all the food necessary and all the backup supplies and all that kind of stuff necessary 344 00:53:42.620 --> 00:53:49.380 for an Invasion is very, very expensive, and I'm not sure what it would really accomplish. 345 00:53:49.380 --> 00:53:54.780 I mean, there was the thought that if you could invade Washington, D.C., get the capital, 346 00:53:54.780 --> 00:54:03.620 you know, capture Lincoln or something like that, you know, was an old European tactic. 347 00:54:03.620 --> 00:54:08.100 You capture the capital, you capture the king, you win the war. 348 00:54:08.100 --> 00:54:16.000 But other than that, yeah, chess. Other than that, I'm not sure what the advantage would 349 00:54:16.000 --> 00:54:32.220 be for the South unless it was planning on burning down a city, right, right, exactly. 350 00:54:32.220 --> 00:54:38.400 Well now that we're on that particular topic, and this is something that isn't really in 351 00:54:38.400 --> 00:54:46.900 the book, but the book implies all along that the Confederate government was too big, it 352 00:54:46.900 --> 00:54:51.140 was too interventionist, it was using the wrong policies, it was trying to raise big 353 00:54:51.140 --> 00:54:56.700 armies, it was doing all the wrong things. 354 00:54:56.700 --> 00:55:02.580 We never really say in the book what should they have done and you know frankly we're 355 00:55:02.580 --> 00:55:12.260 not here in the book to start another war or be on any particular side. I'm from New 356 00:55:12.260 --> 00:55:18.260 York so I mean it's not like I have, as a matter of fact I probably had ancestors in 357 00:55:18.260 --> 00:55:27.900 in the Union Army, so that's not the purpose here, but it is somewhat incumbent for the 358 00:55:27.900 --> 00:55:32.540 argument's sake, although not necessarily for the book's sake, because the book is about 359 00:55:32.540 --> 00:55:41.860 what happened, but what if, what would happen, what could have been the result, and these 360 00:55:41.860 --> 00:55:48.740 These are some of my thoughts with respect in terms of what Confederate policy should 361 00:55:48.740 --> 00:55:54.260 have been. 362 00:55:54.260 --> 00:56:03.580 First of all, instead of a large federal army, when I say federal, I should say confederate 363 00:56:03.580 --> 00:56:23.000 or national army. The national army would only be large enough basically to defend Richmond 364 00:56:23.000 --> 00:56:31.520 and the capital of the Confederacy and by that I imply that it would be defending the 365 00:56:31.520 --> 00:56:37.600 city of Richmond and a different capital of the Confederacy. 366 00:56:37.600 --> 00:56:46.640 It probably would have been better to maintain the capital in Montgomery. 367 00:56:46.640 --> 00:56:56.480 Keep it out of the way, keep it further away from federal troops, and of course, for most 368 00:56:56.480 --> 00:57:13.040 of the war, not much would have been necessary to defend Montgomery, and then each state 369 00:57:13.040 --> 00:57:43.040 would have its own army. They really needed to defend Richmond because of its iron works. It was the only substantial domestic iron works in the south capable of providing large-scale 370 00:57:43.040 --> 00:57:53.040 Iron work, armor, cannons, things of that nature. There was no city of Birmingham. You mentioned Birmingham. There was no Birmingham. 371 00:57:53.040 --> 00:58:01.040 I've got a map in my office from 1860 and Birmingham's not on it. And as a matter of fact, I don't even think Atlanta is on it. 372 00:58:01.040 --> 00:58:09.040 When did it begin? It was the beginning. Iron, center of the south, after the war. Much after the war, that's right. 373 00:58:09.040 --> 00:58:39.040 Could be because, you know, with the Union winning, of course, all those protection of tariffs were placed on the entire United States, so that it became, there was an incentive, instead of importing cheap European iron goods, you could, you had the incentive to find iron because if you could produce iron goods, you could sell them 374 00:58:39.040 --> 00:58:54.620 huge prices. So, you know, they were trying to find iron anywhere. And you'd have small 375 00:58:54.620 --> 00:59:02.720 state armies sufficient to defend the state capital and the major seaport. Just about 376 00:59:02.720 --> 00:59:09.280 Not every state in the south, if you think about it, has a capital and the capital tends 377 00:59:09.280 --> 00:59:15.760 to be centrally located and has a seaport which tends to be on the coast. 378 00:59:15.760 --> 00:59:23.080 So that most states in the south would have a primary seaport and a capital and the state 379 00:59:23.080 --> 00:59:36.680 armies would be there to supervise the defense of those two facilities, so that each state 380 00:59:36.680 --> 00:59:43.280 would remain an independent actor, in other words. This would not be a unified war effort. 381 00:59:43.280 --> 00:59:50.520 The Federal Army would have a limited goal of protecting Richmond and the capital, and 382 00:59:50.520 --> 01:00:03.160 The States would have their own defense, their own seaport maintenance as their primary idea here. 383 01:00:03.160 --> 01:00:15.460 The third thing, maybe the first thing, is free the slaves. 384 01:00:15.460 --> 01:00:39.580 One of the biggest detriments to the South's war effort, of course, was the fact that anytime the Union did invade a certain area, they took the slaves, very often put them into the Union army, or put them to work harvesting cotton or rice for the Union government. 385 01:00:39.580 --> 01:01:08.580 So, if they were free, I don't know what the exact legislation would be, that they would have to work on the plantation that they were living on until the end of the war, or that they could be placed into Confederate armies, or that they could become volunteers to build forts and defensive works. 386 01:01:08.580 --> 01:01:15.580 But whatever it was, I mean, give all the slaves their freedom so they're fighting for your side. 387 01:01:15.580 --> 01:01:16.580 Yes? 388 01:01:16.580 --> 01:01:20.580 It sounds like a great idea. I'm wondering if it was ever considered. 389 01:01:20.580 --> 01:01:25.580 You know, that's a good question. I think it was considered at the end of the war. 390 01:01:25.580 --> 01:01:34.580 I think even Davis, that was one of, you know, the emergency thoughts that he had at the end of the war that... 391 01:01:34.580 --> 01:01:37.580 There were really few slaves in the war. 392 01:01:37.580 --> 01:01:47.580 Well, no, see, because we're making the case that early on, of course, that the war was not fought primarily over slavery, but over economic policy. 393 01:01:47.580 --> 01:01:59.580 Of course, slavery was part of economic policy, but the existence of a large slave population was a big detriment to the South, 394 01:02:29.580 --> 01:02:45.580 or you can fight or you can help build defensive works, all of a sudden you effectively increase your pro workforce by just a tremendous amount. 395 01:02:45.580 --> 01:02:59.780 Yeah, and the abolitionists, you know, that was a small group of supporters in the North, 396 01:02:59.780 --> 01:03:05.380 but it was, they were very vocal. 397 01:03:05.380 --> 01:03:20.380 A big part of the defensive work would be the militia. In the northern states of the 398 01:03:20.380 --> 01:03:43.380 You know, Mark, your item one and two, I worked with a retired Marine Colonel. He said you should never plan an attack with less than five times the force of your attack. 399 01:03:43.380 --> 01:03:57.020 The general idea here is to fight a completely defensive battle. 400 01:03:57.020 --> 01:04:05.660 You always want to have your guys behind huge defensive words or out in a guerrilla type 401 01:04:05.660 --> 01:04:10.380 situation where they're attacking people behind them and, you know, behind 402 01:04:10.380 --> 01:04:18.740 obstructions, things of that nature. So you really put a disability, you really 403 01:04:18.740 --> 01:04:27.140 make the large armies of the Union a disability on their ability to fight and 404 01:04:27.140 --> 01:04:31.420 the militia would also be used for siege warfare. In other words, if the Union did 405 01:04:31.420 --> 01:04:40.420 They would come down. They would essentially be allowed to advance. They would advance typically to a city and lay siege to that city. 406 01:04:40.420 --> 01:04:48.420 Well the militia would have to be in the city to help the state army hold off the siege. 407 01:04:48.420 --> 01:04:57.420 So the militia would be activated whenever the Union came into an area and it would be activated in southern cities 408 01:04:57.420 --> 01:05:15.280 to fill in the defensive works that had already been pre-established. 409 01:05:15.280 --> 01:05:22.620 Something I'm not really too familiar with, but I do know that the southern states had 410 01:05:22.620 --> 01:05:30.780 And lots of land that they owned, that they could sell or use for public works. And I 411 01:05:30.780 --> 01:05:34.860 would just suggest that one of the things they could have done was to sell that land, 412 01:05:34.860 --> 01:05:45.180 if possible, to Europeans in order to raise funds from outside the borders or to back 413 01:05:45.180 --> 01:05:53.140 Bank Loans from Europe. I'm not sure how successful that would be, but it would be 414 01:05:53.140 --> 01:06:00.740 something in the right direction to use resources that were available to help pay for the war, 415 01:06:00.740 --> 01:06:04.780 to get rid of, in other words, government property is, any kind of government property 416 01:06:04.780 --> 01:06:11.340 you can get rid of and sell for cash or in terms of backing loans would be a good thing. 417 01:06:11.340 --> 01:06:40.340 Question? Yes, Ozzie. What about this? If you have each state, more or less, having its own autonomy in defense and offense and everything, what if the Union Army, you get a big Union Army, and you have expertise in moving troops and everything in your railroads, you can use this huge board to attack the small board and knock this one off. 418 01:06:40.340 --> 01:06:56.360 Well actually I mean we're still talking about the same number of people so that if the Union 419 01:06:56.360 --> 01:07:02.540 Army did enter into your state and tried to attack your large city or your state capital, 420 01:07:02.540 --> 01:07:09.020 what you would do is not offer resistance or much resistance, you would offer a guerrilla 421 01:07:09.020 --> 01:07:19.860 Warfare, so as to delay and hamper, disrupt the supply routes of the Union force and basically 422 01:07:19.860 --> 01:07:27.140 make it very difficult to supply and slow its pace and then once you got to whatever 423 01:07:27.140 --> 01:07:34.260 the Confederate town was, you would have already pre-established defensive works and you would 424 01:07:34.260 --> 01:07:51.260 The Union Army comes down to confront you, it can't get in or can't get in right away and it still faces all of these harrying tactics. 425 01:08:21.260 --> 01:08:51.260 that would work. Now a lot of that depends of course. Remember from a previous class we talked about Vicksburg running out of food because they didn't have enough food in storehouse but yet Sherman was able to get all sorts of food off of farms in Mississippi. So you'd have to have a policy that was conducive to bringing that produce 426 01:08:51.260 --> 01:08:58.880 in the fortified cities so you can't steal people's food you can't steal 427 01:08:58.880 --> 01:09:03.140 people's products you can't heavily tax them in a way that discourages that kind 428 01:09:03.140 --> 01:09:09.680 of thing but if you have set up a nice protective area then people would have 429 01:09:09.680 --> 01:09:17.580 the incentive to introduce food into general warehouses in those capital 430 01:09:17.580 --> 01:09:26.580 in the absence of price controls, and that kind of thing, like we're actually doing in the course of this year. 431 01:09:47.580 --> 01:09:59.580 Any kind of attack is going to result in, as George said, five times the losses of the attacking force compared to the losses of the defending force. 432 01:09:59.580 --> 01:10:01.580 So every time... 433 01:10:01.580 --> 01:10:09.580 If every one is made big enough to crack, pretty soon the other side will just give up. 434 01:10:09.580 --> 01:10:28.060 You know, forts, even by this time, were not all that useful militarily, but what I'm talking about here is large, earthen barriers that were still defensive enough against cannons. 435 01:10:28.060 --> 01:10:35.660 And I'll talk a little bit more about that in my sort of pop military approach. 436 01:10:35.660 --> 01:10:40.740 And then also something I mentioned previous was to offer bounties or prizes for destroying 437 01:10:40.740 --> 01:10:50.100 or capturing blockade vessels. So you would offer a prize for a particular vessel. They 438 01:10:50.100 --> 01:10:57.780 knew who was blockading them. They knew the vessels, even their names, and they were tracked 439 01:10:57.780 --> 01:11:03.820 within distance. And so the Confederate government or the state governments would offer prizes 440 01:11:03.820 --> 01:11:12.620 is for whoever could find a way of destroying, capturing or whatever those particular blockade 441 01:11:12.620 --> 01:11:19.580 vessels to weaken the blockade, to make it less effective and to make exports and blockade 442 01:11:19.580 --> 01:11:26.780 running more viable. I would also, in terms of bounties and prizes 443 01:11:26.780 --> 01:11:33.780 as incentives, they also needed to offer prices for needed arms and munitions that were in 444 01:11:33.820 --> 01:11:40.300 In other words, the good was actually in their port, delivered. 445 01:11:40.300 --> 01:11:45.340 Very often what they would do is buy stuff in Europe and try to bring it back themselves. 446 01:11:45.340 --> 01:11:47.580 A good deal of it never made it back. 447 01:11:47.580 --> 01:11:51.440 It was sunk, it was captured, and so on. 448 01:11:51.440 --> 01:12:00.080 So they needed to pay very lucrative prices, but for things that were actually delivered. 449 01:12:00.080 --> 01:12:05.520 So that blockaders had a really big incentive to bring cannons in, for example, or really 450 01:12:05.520 --> 01:12:14.240 big incentives to bring repeating rifles in, things of that nature. Enhance the profit 451 01:12:14.240 --> 01:12:24.780 opportunities of blockade runners. Don't stifle the profit opportunities of blockade runners. 452 01:12:24.780 --> 01:12:36.420 And we also might even consider taxing cotton. There was a tax on cotton, and I'm a little 453 01:12:36.420 --> 01:12:42.780 uncomfortable with any kind of tax really. I'm sure there's something wrong with this, 454 01:12:42.780 --> 01:12:48.340 and I know I'm either going to get spanked right here in class or get some emails from 455 01:12:48.340 --> 01:12:56.700 People out on the web, the idea of taxing cotton in storage, not food, because we wanted 456 01:12:56.700 --> 01:13:06.380 the food put in storage in the cities, but if there was a tax on cotton, say that every 457 01:13:06.380 --> 01:13:17.540 Christmas there would be a 30% tax on all your cotton, so we went to your farm on Christmas 458 01:13:17.540 --> 01:13:33.540 That's really cruel. Just pretend I'm from the government. So I'm going to show up every Christmas at your farm, or your warehouse, or your barn, and I'm going to take 30% of your cotton from it. 459 01:13:33.540 --> 01:13:43.540 Now you are all knowledgeable, intelligent taxpayers. What are you going to do? 460 01:13:43.540 --> 01:13:50.980 You'd sell it before Christmas, right? Yeah. You'd sell it before Christmas, but who's 461 01:13:50.980 --> 01:13:53.940 going to buy it if they have to pay taxes on it? 462 01:13:53.940 --> 01:13:58.940 The wholesale price would go down, but that would be that price. 463 01:13:58.940 --> 01:14:05.940 Okay, so the price goes down. So what do people do? How do you avoid the tax? 464 01:14:05.940 --> 01:14:08.940 You buy it. 465 01:14:08.940 --> 01:14:11.940 Well, that's true. 466 01:14:11.940 --> 01:14:19.340 You ship it out. So, in other words, the tax is there to encourage exporting it out. 467 01:14:19.340 --> 01:14:26.340 Because what happens? Well, I sell my cotton at a reduced price. You sell your cotton at a reduced price. 468 01:14:26.340 --> 01:14:31.340 But George, he's a little smarter than the rest of us. He sees prices of cotton falling. 469 01:14:31.340 --> 01:14:38.840 And so he can buy it. If he can get it out of the country, he buys it at a really low price. 470 01:14:38.840 --> 01:14:47.240 He avoids the 30% tax, he gets it to England, and it's worth 10 times that amount. 471 01:14:47.240 --> 01:14:50.840 So it encourages the export of cotton. 472 01:14:50.840 --> 01:14:56.600 So again, we're trying to run down that blockade force, we're trying to get goods into the 473 01:14:56.600 --> 01:15:01.640 country by offering good prices, and we're trying to get goods out of the country, or 474 01:15:01.640 --> 01:15:07.240 maybe even get people to start switching over to the production of food products rather 475 01:15:07.240 --> 01:15:16.240 rather than cotton, but all of those would produce more resources for that particular war effort. 476 01:15:21.240 --> 01:15:30.240 So I mean that's the general outline, smaller army, larger militia, freeing the slaves, 477 01:15:30.240 --> 01:15:36.640 coming up with some innovative tactics to overcome the blockade by using 478 01:15:36.640 --> 01:15:41.280 incentives. We're giving incentives to destroy the blockade fleet. We're giving 479 01:15:41.280 --> 01:15:46.960 incentives to run things in that we need by offering superior prices and we're 480 01:15:46.960 --> 01:15:52.280 encouraging people to export. We're getting ourselves back into our 481 01:15:52.280 --> 01:15:57.240 Our Comparative Advantage. 482 01:15:57.240 --> 01:16:11.760 Just a minute or two on my pop military strategy here. I've had a course in the Civil War and 483 01:16:11.760 --> 01:16:18.920 I've had courses in military history which involve military strategy, but I'm certainly 484 01:16:18.920 --> 01:16:48.920 I'm probably not any kind of expert in this area, but basically what I'm talking about in terms of a city that you're trying to defend and of course there's a lot of complications, a lot of cities are on rivers and things of that nature, so there's all sorts of transport routes like roads that are coming in and out of your city, the defensive perimeter and this would be 485 01:16:48.920 --> 01:17:18.920 built with, of course you need a lot of labor, so you'd have to get the freed slaves or the actual slaves as well as possibly the militia to work at least part-time in terms of building this perimeter, which would be earthen works with observation decks, covered areas where troops could go in case of 486 01:17:18.920 --> 01:17:28.200 Bad weather or cannons firing and so forth, so that your defensive works produce a barrier 487 01:17:28.200 --> 01:17:35.040 between the limits of the city in black and the limits here. And then, you know, one of 488 01:17:35.040 --> 01:17:46.540 the things I said was they needed to bring in some better weapons, specifically long-range 489 01:17:46.540 --> 01:17:53.420 Rifle Cannons would fire large shells long distances but they would be stationary heavy 490 01:17:53.420 --> 01:17:58.780 basically heavy cannons and if these are placed close to the perimeter 491 01:18:07.500 --> 01:18:14.380 basically if these are larger heavier cannons then can be moved by the opposing side which 492 01:18:14.380 --> 01:18:20.540 which is traveling by land or things of that nature. They couldn't move larger cannons 493 01:18:20.540 --> 01:18:29.540 compared to your stationary cannons. So these cannons can fire a longer distance than can 494 01:18:29.540 --> 01:18:41.820 the other side. Right? And so, in order to get into range, your opponent, to get into 495 01:18:41.820 --> 01:18:52.820 To get to range of the actual city, they would have to be somewhere, let's put the opponent in red, 496 01:18:52.820 --> 01:19:01.820 they would have to get in to some area like that, or that, or that. 497 01:19:01.820 --> 01:19:05.820 So they would be in range of your cannons long before. 498 01:19:05.820 --> 01:19:07.820 You wouldn't need many of these things. 499 01:19:07.820 --> 01:19:27.820 You could have the smaller cannons on your side as well, so as to prevent any rapidly moving force from overcoming your defensive works. 500 01:19:27.820 --> 01:19:42.820 You could have the smaller cannons like they have to stop troop, you know, what do they call them? Charges. 501 01:19:42.820 --> 01:19:55.820 And then of course what you have here is you have the regular military supervising and the militia basically manning these defensive works. 502 01:19:55.820 --> 01:20:10.700 So that a small force with the advantage of these long, large, rifled cannons would inflict 503 01:20:10.700 --> 01:20:20.060 tremendous injuries and losses on any opposing side that tried to overwhelm this fortified 504 01:20:20.060 --> 01:20:21.060 city. 505 01:20:21.060 --> 01:20:38.060 So, if you had the right preparation, the right distribution of labor, which is basically a small number of regulars supplemented with a large part-time militia, 506 01:20:38.060 --> 01:20:48.140 You could induce an effective or you could produce an effective support in defensive 507 01:20:48.140 --> 01:20:56.540 works and even if you lost, you would still inflict many more losses on the other side 508 01:20:56.540 --> 01:20:59.780 than you yourself would sustain. 509 01:20:59.780 --> 01:21:05.780 When George said you need five times the number of troops, that's because you lose five times 510 01:21:05.780 --> 01:21:07.980 the number. 511 01:21:07.980 --> 01:21:12.820 And of course you can make it more complex as armies have done in the past, you can have 512 01:21:12.820 --> 01:21:26.220 a second level of defenses in addition to the outer perimeter. And also of course the 513 01:21:26.220 --> 01:21:36.700 smaller weapons can be moved around the town, mobile cannons, the horse drawn versions 514 01:21:36.700 --> 01:21:43.700 of the Guns, which were so prominent in the war itself. 515 01:21:43.700 --> 01:22:12.900 Yes, they did use that at Richmond and they did use that at Petersburg and basically you 516 01:22:12.900 --> 01:22:20.940 You know you have a big pile of dirt for most of it, you have observation decks, you have 517 01:22:20.940 --> 01:22:26.260 cannon emplacements which are protected, so you'd have to have an actual direct hit to 518 01:22:26.260 --> 01:22:34.300 do any damage, and they were very effective, and it requires only a few soldiers to really 519 01:22:34.300 --> 01:22:38.440 be on the lookout, and anytime they come, well you just start shooting at the other side 520 01:22:38.440 --> 01:22:45.280 and your buddies come to help you. And in Richmond and Petersburg, it was very effective, 521 01:22:45.280 --> 01:22:51.140 worked very well, Grant kept sort of pushing the limit of it and they kept extending their 522 01:22:51.140 --> 01:23:02.480 lines and eventually Grant ran around those defenses. And because they weren't circular, 523 01:23:02.480 --> 01:23:07.920 they were able to do that in that casing and that ultimately brought the war to a conclusion 524 01:23:07.920 --> 01:23:18.920 It shows that Richmond was never really successfully invaded and that's basically what they did. 525 01:23:18.920 --> 01:23:31.920 I think that that would have worked and I think that it would have been used in more places had the Confederacy taken a more decentralized approach 526 01:23:31.920 --> 01:23:41.920 where each state was more or less fending for itself as well as contributing some soldiers to the national effort as well. 527 01:23:41.920 --> 01:24:11.720 Well, I mean, Mississippi would have had to defend Vicksburg and Jackson, and you know, 528 01:24:11.720 --> 01:24:18.920 If you go down the list, most of the southern states basically turn out that way where they've 529 01:24:18.920 --> 01:24:28.400 got a capital city in the center of the state, they've got a seaport, we had Mobile, Montgomery, 530 01:24:28.400 --> 01:24:38.720 Georgia had Savannah, and was it Macon, you know you were, Milledgeville, and then of 531 01:24:38.720 --> 01:24:43.040 And of course, you know, they would also have Atlanta, which was not much of a town at that 532 01:24:43.040 --> 01:24:46.720 point, it was a railroad junction. 533 01:24:46.720 --> 01:24:51.600 And certainly some states would have been disadvantaged, and I think you could have 534 01:24:51.600 --> 01:24:59.560 redistributed some troops, you know, say for example, you know, in Alabama we were 535 01:24:59.560 --> 01:25:06.520 away from the battle, and people in Alabama tend not to like that, so they may have volunteered 536 01:25:06.520 --> 01:25:13.400 for a federal force that was helping to protect Memphis or Nashville or something like that. 537 01:25:13.400 --> 01:25:17.920 Chattanooga. Chattanooga would have been, you know, that would have been one that could 538 01:25:17.920 --> 01:25:25.720 have used better defense. But in any case, those are some suggestions. I mean, that's 539 01:25:25.720 --> 01:25:33.240 not a well-developed military strategy. That's just some suggestions of the types of things 540 01:25:33.240 --> 01:25:40.000 that I think that they should have considered and that they would have better represented 541 01:25:40.000 --> 01:25:42.760 the type of approach that I'm suggesting here. 542 01:25:42.760 --> 01:26:02.760 That would have brought on war of weariness in the North, and then they would have had the two foot feats that they had done right, like you say, every state held up their end of the, they would have, that probably would have brought on the fact that we can't, you know, we're just killing each other, we might as well sit down. 543 01:26:12.760 --> 01:26:19.760 They weren't going to invade the North. What they needed was, and there was plenty of war weariness in the North. 544 01:26:19.760 --> 01:26:49.680 Well, there was a lot of sediment in Ohio before the war. 545 01:26:49.680 --> 01:27:04.680 There was, in Ohio and elsewhere in the Northwest, the Northwest, you know, didn't really support the war as strongly as some Northeastern states. 546 01:27:04.680 --> 01:27:17.680 And so, the Northwest, the Midwest, those states were particularly vulnerable and certainly in the Electoral College was a matter of dispute.