Inflation During the Civil War

0:00This book, which is out relatively recently, January of this year, Tariffs, Blockades and Inflation, the Economics of the Civil War, the general theme of the book, although it's not really broadcast hot and heavy throughout the book, But the underlying theme of the book is that economics ultimately determined both the cause of the war as well as its outcome. In contrast to historians of the Civil War who generally see the war as a matter of military strategy and the outcome of battles, the strategy of generals, We see it entirely different. We see a nation divided roughly equally and basically the same types of soldiers, the generals trained at the same West Point Academy, using essentially the same weapons, essentially having similar types of economies.

1:10And most of the battles, especially at the beginning of the war, were toss-ups, stalemates, one side wins one, the next side wins the other. We think the underlying outcome of the war was determined by economics, where the Confederacy generally pursued poor economic policies and the Union Government in the North pursued better economic policies and as a result was able to win. We place a lot of emphasis on blockades but you can't really do a study of the American Civil War which is really a defining moment in American history.

2:02The Civil War is still the war where the most Americans died and it's still really the only war where the destruction of the war was brought home here to the United States. So it's a very important issue. We think the historians have gotten it largely all wrong. They think the South didn't do enough, didn't have enough, the government didn't extract enough resources from the economy to fight the war This chapter three, Inflation North and South, continues that theme and basically the underlying theme of this chapter is inflation is bad, monetary inflation is bad, it's pretty much up front and sort of describes why inflation is bad in the beginning of the chapter.

3:05You know, it's not just rising prices. That's not a problem. And so the beginning of the chapter explains why inflation is bad, why it harms economic calculation, Calculation, why it causes income redistribution and economic chaos. Now both sides used monetary inflation to finance the war and to disguise the costs of the war. So that's going to be one general argument that we lay out. The second one is that the Confederate government used inflation to a greater degree than the Union government in the North. Third, the Southern economy was more adversely affected by this inflation. And fourth, and this is a very important point, the war had a revolutionary effect on money and banking in the United I'm going to start with a little description for you of what existed prior to the war in the United States as far as money and banking goes.

4:22Basically you had two streams of economic thought. One stream of economic thought is sometimes called southern political economy. It's associated with the democratic party of the 19th century with the ideas of politicians such as Thomas Jefferson and Andrew Jackson. The southern political economy, although there were southern and northern proponents of this, was the hard money faction. These are the people who said money should only and everywhere be silver coins and gold Gold Coins. This tradition was anti-banking. They did not like banking. They were very suspicious of it. They thought that it surreptitiously redistributed wealth and was fraudulent.

5:24The school of thought was very much anti-government debt, and I associated it with the Austrian School. The other, this is associated with the Whig Party of the early 19th century which became the Republican Party right before the Civil War of Lincoln up to this day. Their big proponents were Alexander Hamilton and Henry Clay, and of course Lincoln himself. This was the Easy Money Party, the party of paper money, the party of easy credit, pro-bank, pro-government debt.

6:16It's hard for some of you probably to imagine that someone could come up with the idea or and I associate them with the Mercantilist School of Economic Thought. Now prior to the war the southern political tradition, southern political economy had the upper hand and America was a great beneficiary as a result. We had rapid economic growth in the United States from say 1800 or maybe from the founding of the nation in the 1790s to the Civil War was a period of tremendous economic growth particularly in the latter half of that period.

7:05Recall that of course the U.S. Constitution does two very important things economically. It gives the federal government the power to define money and created a monetary union within the United States and it prevented state governments from issuing paper money and defining money and that sort of thing. So it created by default a nation where Americans used silver coins, it was essentially kind of a private monetary system because the federal government had the power but they never did The Constitution also established a free trade zone in the United States. Generally we had free banking laws and during some periods there were bank prohibitions. So states would pass laws that said there's no banking in this state that we, you know, issuing bank notes and that kind of thing. So the only two exceptions to this were the first national Bank of the United States and the Second National Bank of the United States, those were periods of rapid inflation followed by a crash in the economy and depression.

8:15So Americans prior to the Civil War had it relatively good, it was essentially a private money and banking system with very little government intervention. The Civil War is going to change all of that and change it for the worse. Look at here at this time, inflation and public finance. Wars are very expensive. All wars are very expensive and governments have to decide or act in such a way as to fund wars. And there are four general ways in which a government can fund war. They can tax the money from the economy, they can borrow the money by using government debt, they can resort to inflation, or they can resort to confiscation and conscription.

9:16And Austrians have analyzed all the ways in which government can raise money and find Taxation is one of the best ways to raise money to fight a war. It makes the cost of the war explicit and upfront so everybody knows what it's costing. And it also prevents politicians from over-consuming resources from the economy so that they have to be allocators of scarce resources in the sense of using taxes Borrowing is also seen as a good way of fighting a war. If wars have to be fought, the best way to do it is to borrow money outside of the country and buy goods from foreign countries with those proceeds.

10:11Basically the idea here would be to go to Europe, sell bonds to Europeans, and then use the proceeds to buy European goods in order to fight the war. And this somewhat disguises the cost of war, but it makes it easier to fight the war and puts the cost of paying for the war off into the future. Conscription and confiscation, not surprisingly those turn out to be very poor ways of fighting a war. They make the cost of the war almost too explicit. It falls unevenly on those who get their assets confiscated. It creates opposition to the war, and of course it discourages the private sector even worse than taxes.

10:58Because say, if you're a farmer or a manufacturer, and you're trying to produce for a profit, What Incentive Do You Have to Produce into the Future?

11:34So if you can conscript soldiers at will, very often governments will acquire too many soldiers, waste them, i.e. kill them in battle, unnecessarily, and of course you're taking them out of the economy, so you're not producing goods, so that's a really bad way. And then we come to inflation. Inflation is the easiest way to pay for war. Governments have gotten very used to the idea of using inflation, but it's the most damaging way to finance war. It's the most damaging in terms of the economy. So politically it's very good, economically it's very, very bad. Politically, you get fewer problems and less opposition.

12:20So in the economic analysis of it, when you look at political interests, what you find is politicians love this because it disguises the cost of the war. It makes it very easy to raise large funds to spend. It creates very little opposition to the war. People see the money being spent, businesses getting more business. and so they love it and in this way governments disguise the cost of war and Joseph Salerno has a great article on how war finance through inflation disguises war and its cost. Of course inflation does a lot of economic things, distorts Inflation impairs prices in the economy and impairs economic calculation and this was a tremendous problem both north and south during the war and of course because inflation is an easy way to finance war, usually government will take too many resources from the economy and end up wasting them.

13:32So whereas historians said that the governments never had enough resources, they failed to tax the economy, they failed to use inflation, they failed to raise enough resources to conscript enough soldiers, our analysis shows that they really, especially in the South, took too many resources out of the economy.

14:02In the North, when the Union government sat down to figure out how they were going to pay for the war, they said okay, we're going to stick to the gold standard, we're going to tax to pay for the war, to pay for government, we're going to use bonds to pay for the war. So they were, they set out on a pretty good course. That lasted about a day. And the next day they said, well, we're going to raise $450 million of greenbacks. We're going to issue a new fiat currency, which will eventually redeem. and so their resolve to stick to the good ways of financing the war didn't last at all and of course we ended up in the north with the fiat currency and Gresham's Law, all the gold disappeared from the economy and they were on a paper standard very quickly.

14:58The value of the greenback versus gold depreciated by two-thirds during the war, so it lost 65% of its value over a four-year period. In contrast, the value of the U.S. dollar has only fallen about the same amount since we left the gold standard over 30 years ago. So we've had, you know, a pretty good clip of inflation over the last 30 odd years here in the United States. They had that much inflation in four years. People felt, politicians argued, that the reason prices were going up, price inflation, was speculators.

15:43that businessmen were creating unnecessary profits and driving up prices through devious means.

15:59In the northern economy, not surprisingly, there was a lot of chaos with respect to economic calculation And a lot of things noted by historians were common throughout the United States, especially in the eastern seaboard cities where a lot of the manufacturing and trade occurred. There was the illusion of prosperity. All this new money going into the economy, all these new war contracts created the illusion of prosperity in the north. Property values increased with the monetary inflation and there were widespread observations of extravagant living and luxury spending.

16:46So even though the economy was at war, the monetary injections were able to create the illusion of prosperity and even extravagance of luxury. All the while, in the rest of the population, real wages were declining. So prices were increasing faster than wages, and the vast majority of the population, even though their wages were going up, their real income in terms of the purchasing power that they were able to exert in the economy was falling much faster. are faster and as the war progressed entrepreneurs started to realize that all the profits that they thought that they were going to make on these contracts and so forth were disappearing so they would start projects with the idea that profits were going to be great but by the end of the war they realized that they actually were worse off as a result.

17:44There's an interesting debate in the economics profession about what causes higher prices. What causes price inflation? And we sort of stumbled through this debate in preparing this chapter and I think it provides an interesting contrast. For the monetarists, what causes higher prices in the economy? They think it's always and everywhere a monetary phenomenon. So all changes in prices are the result of monetary factors. The Keynesians believe that changes in prices are always the result of real factors.

18:34So prices went up for the Keynesians because of real factors in the economy, destroying production, things of that nature, the war effort and so on. When we looked at that, we think, well, you know, that's just kind of a strange debate. I think for Austrians, of course, we make the distinction between monetary inflation as the cause and price inflation or higher prices, lower purchasing power of the dollar as the effect. What actually causes changes in prices, price levels, purchasing powers, is actually both factors, that you have both the monetary factors and the real factors so that you can look at both the change in the quantity of money as well as the real impact of the war, the destruction of capital, the destruction of labor, the diversion of resources from private Economy to the Army, as well as anticipations about redemption of paper money.

19:46We concluded that the Civil War demonstrates that neither one of the extreme views is really very helpful. Inflation in the South. Well, if you're from the South, you no doubt know that there was a big inflation during in the Civil War in the South. Prices of commodities in the South have been estimated to have risen by more than 1000 percent, whereas in the North they went up an estimated 250 percent. The increase in prices in the South was much greater than the change in the quantity of Money. There were some quote-unquote real factors in the South such as the diversion of resources to the military and the blockade. The blockade, which we discussed early in the book, was a major disadvantage, but the South did, the Confederate government did There was nothing really to stop, but the South was an economy that was highly dependent upon exports and imports, it thrived as a result, and the Union put a ship blockade around the coast of the Confederacy, and the Confederate government did little or nothing to stop it, so trade in the South came to almost to an end.

21:23And then of course you have subjective factors determining the value of the confederate currency such as military defeats and people's expectations regarding ultimately losing the war and the confederate currency having no value whatsoever. Like in the North, the higher prices were blamed on the speculators and the blockade runners. This is an age-old problem where government inflates the monetary, the money supply, grabs a bunch of resources. Ultimately, prices rise and somehow the burden or the blame for that activity is pointed in the direction of business people, speculators, middlemen, blockade runners in this case.

22:25Of course, the labor force in the South also experiences declines in real income during the Civil War to a greater extent than in the North. And then there's a massive disruption of economic calculation, far worse than the North. Business people basically can't make any sustainable contracts, develop any large-scale Business Operations, because they can't really determine what their wages are going to have to pay, the prices of materials, and what the ultimate value of their products are going to be, because the monetary disruption is so significant that they can't possibly make reliable estimates of future prices, or reliable estimates for the purchasing power of the and Confederate Currency. So very often, in order to overcome that problem, the Confederate government actually gets into the business of manufacturing weapons, clothing, all sorts of things. So we see, if we look both in North and South, that they're both using paper money that they're both taking massive amounts of resources out of the economy and into the military but the South does it to a much greater degree than the North and we think that this is a contributing factor, probably the most important factor in why the Confederate government lost.

24:19We see the fall in real incomes, disruption of economic calculation, the consumption of capital in both north or south, but the evidence that we found was that all of those things occur to a far greater degree in the southern economy than in the northern economy. And I want to go back to the points that I mentioned at the beginning of the lecture with respect to how does a government finance a war. Well, I've got some numbers on the board here, and these represent percentages of how various governments finance the war. So if we want to look at the total cost of government during these four governments at war, basically we're talking about 100% of the cost of the war, and that's going to be divided up into loans or borrowing the money to pay for the war, Taxes on the Economy to Pay for the War, Inflation, and Other Ways.

25:44And this basically looks at things like confiscation of property, not conscription, but confiscation, and other revenue means. Now, the four episodes here, the first one is the Confederate government, the second one is the Union government, the third column is going to be the United States during the American Revolution, and the fourth column is the United States during the War of 1812. Now, notice that in terms of the Confederate government, they have the lowest amount of loans.

26:41And this is something that, for example, von Mises and I think Schumpeter both say that The war is bad, obviously, but the best way to fight it is to try to get loans from foreign countries or in foreign economies, buy their resources and ultimately pay the war off later on. So they were very unsuccessful in terms of getting loans. They also had the lowest amount of, or almost the lowest amount of taxes, except for the American Revolution, basically a very low level relying on taxes, which is also considered a good way to pay for war, and they relied the highest in the two worst categories.

27:42So in terms of their overall public finance strategy, the economic analysis that Austrians have offered suggests that their public finance, their mix of financing was the worst possible way of going about it, providing additional evidence for the fact that economics is the determining factor, not military strategy or who's got the biggest barrel, cannon, and that kind of thing. So essentially we're trying to, this is a book for historians and a book for students of History and Graduate Students in History, and the idea here is to, you know, it's fine to study battles, it's fine to study the lives of generals in specific battles but in terms of understanding the war and in this case its outcome, you have to remember that economic factors are paramount.

28:59One of the most important things, I think, for us, is the monetary legacy of the Civil War. It really creates a sea change in monetary policy, or revolutionary change in monetary policy. As I laid out earlier, the situation in the United States prior to the war was one where where the hard money advocates had the upper hand, where they had demonstrated and defeated the idea of a national bank, of paper currencies, where they had extinguished on a couple of occasions the national debt, where states had enacted bank prohibition laws against the use of unbacked paper banknotes, where gold and silver coins from around the world circulated as mediums of exchange.

30:00Most states in the United States had free banking laws which kept the government from heavily regulating banks or backing them up. And what we saw was banks not with 100% reserve requirements but banks with high capital ratios and High Reserve Ratios. They knew that they didn't have any support from the state or federal governments and as a result they were following prudent conservative banking policies. Now after the war everything changes. We no longer have private currencies, gold and silver For coins, we have the greenback era with a national currency.

30:55We no longer have state regulation or reduced state regulation. We have federal control of banking through the National Banking Act, which was enacted during the war as part of the issuing of greenback currencies. After the war, and there were certainly bank panics and business cycles before the war, but after the war there was a series of banking panics, business cycles and economic depressions. The contagion within the system actually increased. The national banking law was supposed to reduce was supposed to reduce this contagion effect amongst banks through federal regulation.

31:46What it actually did was to increase it. After the war, there was a lot of organized opposition to federal tyranny in money and banking. There was a free silver movement which sought to have the federal government start coining silver coins again. There was a shortage of gold coins and money after the Civil War as part of the process There was a process of organized deflation on the part of the federal government in terms of redeeming the Greenbacks without replacing them in any way.

32:43There was the Greenback political party, which was organized around monetary issues. The Democratic Party, which was so strong, hard money before the war, fell into the hands more of populists and progressives, ultimately progressives, William Jennings Bryant and so on, that started to change the character of the Democratic Party and its position on money. As a matter of fact, they became sort of so pro-money in the sense of increasing the money supply and they had some reason for that, that the Republicans who were the easy money policy actually became known as the advocates for sound money and the gold standard.

33:37I want to give you a quote with respect to the National Banking Act, what it was supposed to do and what it actually ultimately ended up doing in the United States and the after-effect of the war. We've got three reputable mainstream monetary economists, Michael Bordeaux, Peter Rappaport and Anna Schwartz, who studied the National Banking Act, who studied the money and banking system in the United States in the 19th century after the Civil War, and they found that any Any rationale for this system based on the public interest just could not be sustained, that there must have been private interests that supported and had the act put into place.

34:40And I quote on their conclusion that this system was a colossal failure. The provisions of the Acts of 1863 and 1865 that established the national banking system System were designed to remedy two perceived defects of the antebellum state banking system. One was the circulation of a wide variety of state bank notes, often at a discount, which made for an inefficient payment system. The second defect was instability of the note issue, marked by overissue bank runs and failures and Periodic Suspension of Convertibility into Species. To remedy the first defect, national bank issues of U.S. bond-secured currency replaced state bank notes.

35:35To remedy the second defect, stringent reserve and capital requirements, oversight and regulation by the Comptroller of the Currency were conditions for national bank charters. Unfortunately, the remedies did not work as intended by the architects of the national banking system. Instead, the system was characterized by monetary and cyclical instability, poor bank panics, frequent stock market crashes, and other financial disturbances. In other words, this revolutionary impact of the Civil War on American money and banking that was supposed to cure the defects of the antebellum money and banking system actually made things much worse.

36:28The only other thing that I think is, there's a couple of interesting points I guess I'll bring up here that you need to look for if you actually get a copy of the book and read the chapter There's some discussion about where the term Dixieland came from. This is Dixie, especially for you foreigners, the land of Dixie, and it was a popular song before the Civil War, but nobody knows where it came from. And my research indicates, and other people have indicated this as well, that the origin of this was a $10 banknote issued by the Citizens Bank of Louisiana.

37:20The states around Louisiana were no banking states where banking was prohibited. So, New Orleans was the only source of banking. It was a major source of commerce and international trade before the war. So that Louisiana banknotes circulated in Alabama, Mississippi, Texas, Arkansas and on up the Ohio River. And one of the banknotes that circulated was this $10 French banknote from New Orleans. and of course the word 10 in French is D-I-X and so these banknotes were referred to Dixie as Dixies and so that's the we think that the origin of the term and the origin of the song was based on this particular banknote which is widely circulated now why would it be widely circulated when most banknotes Banknotes were not trusted all that much. Well in Louisiana they passed a law that required all banknotes to be backed by 33% reserves in gold and the rest were to be backed by

38:39short term securities. In other words commercial paper that could only be for 90 days. So basically could only be for 90 days. So basically, it was loan contracts or loan agreements for the exchange of commodities, cotton and sugar, which had relatively stable value, instead of property. You couldn't use this money to give mortgages on farms and things like that, which could possibly go bankrupt and not pay off the loans. But those short-term securities were almost as good as gold. The other thing that has sort of a social tinge to it is the movie The Wizard of Oz.

39:29You all have seen the movie The Wizard of Oz. It's a very famous movie by Walt Disney based on a very famous book written in 1900 by Frank Baum. Historians have come to realize that this book and this movie were actually written about the monetary disruptions and and the monetary political opposition in the aftermath of the Civil War. So if you've seen the movie or read the book, they talk about the Emerald City, which is sort of the city on the hill, and that refers to greenbacks from Washington D.C.

40:17The yellow brick road, follow the yellow brick road, follow the yellow brick road and you'll The Cure-all for everything in society, the cure for what the actors are trying to achieve turns out to be the silver shoes, which is the silver movement, the free silver movement, and each of the characters in the movie, the tin man, the scarecrow, the cowardly lion, all represent interest groups in society, farmers, manufacturers,

40:51and so on and even there's even four characters there's two good witches and two bad witches in the movie and that turns out to be the the wicked witch of the West and the wicked witch of the East those are the bad regions controlled by the federal government and the big city banks and the good witch of the north and the good witch of the south those are the areas that are being are being taken advantage of under the National Banking Act where they don't have banks and they have shortages of money and so it's kind of interesting how the monetary problems in the aftermath as well as the monetary successes in the antebellum economy get sort of surreptitiously integrated into society's culture and I just thought I'd bring those up as well.

41:49How would the distribution between loans, taxes and invoices matter? How is that being done today with our directorial work? There are no special taxes. There are no special bonds. They haven't resorted to conscription of American soldiers yet, although they are preparing for that.

42:36They seem to me to be preparing for fairly long engagement over there, so all of this is subject to change. and whether or not they're actually confiscating Iraqi assets is something I can't really speak to. So basically I would say that they're financing the war through paper and probably to a lesser degree on borrowing. To what extent the national debt is increasing or the deficit is increasing It's kind of hard to say because we were already in a deficit and it was growing and the war made that much worse, so it's, we can't even really tell at this point what the breakdown is, but it's definitely in terms of inflation and borrowing.

43:44Yes? Can you sort of avoid having to pay the piper, so to speak, by the fact that a lot of those greenbacks were circulating in the war, and wasn't there a bust in, what, 1875 in that item? Yeah, 1873? Yeah, 1873, when all the greenbacks started coming back in and they had to default on all the lines, isn't that right? Well, both currencies, North and South, were going to be redeemable at some point in the future, a certain number of years after the war ended. So you could almost look at the currencies in terms of a loan.

44:33The Southern currency, of course, is worthless at the end of the war, although we point out in the beginning with a quote from another author that the Confederate currency has actually been appreciating since the Civil War and is now worth eight times the value of the Greenback. But after the war to 1873, they're in the process of redemption, they're in the process of trying to finance a return to the gold standard. And so as you move closer and closer to 1873, they're in a sense taking currency out of circulation and the economy is experiencing price deflation along with monetary deflation. As a result, a lot of the plans that had developed over that period, you know, the stringency, especially at the ultimate date of redemption, is what helps bring on the Panic of 1873. That whole period was kind of speckled with bank panics.

46:22The Mining System, so the also start of the... That's correct. ...the mining crisis. That's correct. The crime of 1873, that's when they stopped minting silver coins and they moved completely to the gold standard. Well, you were telling Chase, as Secretary of Treasury, issued these things, and later as the Supreme Court noticed this, he says we were wrong, and in fact, he makes the decision to issue your videos, what he had himself done earlier, but the details don't come out to mind, do you have any comment on that?

47:19The gold standard, he was a hard money man. We're sticking with the gold standard. The current taxes that we have will pay for the government that we already have, and the war effort will be paid through borrowing. and you know that basically didn't work and the bonds that he was trying to float could not be sold or at least sold in sufficient amounts and so he had to back down he was never he was he was a pro gold guy and a hard money man and I I don't remember exactly what he said as a Supreme Court justice, but he was always against the idea of resorting to the greenbacks.

48:12He was very much opposed to that. I'm not surprised because it wasn't his idea. He was forced into it. Now, two critical questions about this. I've been also intrigued about this question for quite a while, and I looked at it in the case of World War I, when the German government, The German government was much more conservative of the Austrian government than of the other government, even from the Austrian people, one or more. Also, if we look back in history, the English were usually much more ruthless in facing the money supply for war crimes, starting from the 18th century onwards, also late 17th century, than the French, for example, and they usually won on the wars.

49:08Now, I mean, there's certainly one thing that we do know from the theory of inflation is that it benefits the inflation, so certainly a government, at least in the short run, can benefit its position, neither the other competing governments, especially in the war situation. The long run, the opening where it's on, for what it takes 10 years, 20 years for the final inflation, well then of course the long run damages might be there and it's just undermining the position, but if they sort of say they can win, quickly enough, quickly enough, these I put on the tab, it could be one year, or four years, or five years, then inflation might actually give them the competitive edge.

49:54So I mean, that would just be the one technical difficulty here, and the other one, the other three issues. Our southern economy was heavily based on slave labor, so here the division of labor was not based on monetary exchanges. So doesn't this undermine your views that, I mean, that's not all of your views, right? But I think the other point is, of course, that's a crucial one, that is that they get actually resources from outside to find the oil, that seems to be, I think that's a major consideration, not quite control on inflation, because also in the southern economy, how could it have hurt them so much, since it wasn't based on slavery, they thought quite essentially?

50:49The issue just as much as any other form of labor, slaves were bought and sold at market prices, at auction prices, and they were rented out or leased out to all manner of work, including to the government for fortifications, but also to railroads, manufacturing plants, and all that had to be based on, you know, you could hire for the day, you could hire for the week, How important was that money? I mean, as a percentage of all states?

51:49industrial occupations and then as the agricultural economy got hot they would move back to the plantation and there so there were cycles of that and there were also cycles throughout the year where slaves would work on the plantation during the growing season and be leased out to the government for road building, railroad companies for laying track and repairing, you know things of that nature during the war there was a pretty sizable movement of slaves from the plantation working on agriculture into manufacturing so it was all the value of slave labor was all market determined and there was a pretty good flow of the slave labor into and out of agriculture and manufacturing, government, private sector or even the military, they work for the military too.

53:00So the manufacturing people still had the problem of whether they hired free labor or slave labor as to how the wagers or lease contracts would fit into their economic calculation. Now, the issue of inflation in war finance, you bring up a good point because you could, in many instances, I think you probably could win a war in the short run following any kind of financial arrangement.

53:51And it's been tried before. Of course the Germans tried that. That was their whole idea in World War I. and I suppose World War II was that they were going to strike quickly and effectively what otherwise was a formidable opponent and it usually doesn't work that sort of quick strike tactic ultimately doesn't work very well, although I would say that if the Germans did pursue a good financial package during World War I, I think that that would hold up in the analysis because I think they proved to be a very formidable army during that war with fairly weak allies against a much larger opponent with more advanced economies.

55:07In other words, France, England, and the United States were more economically advanced than Austria and Turkey. And so Germany was really carrying the whole war effort for that side, I guess. But I think in that particular case, your argument would still work, right? Because the war, war on traditionally a long time, it exhausted the forces. If they had wreaked the country additionally with emulation, it might have exhausted an extreme force. In that case, I would say that the Germans could have stood longer than they would have been able to with the use of inflation to a higher degree.

55:58But in fact, they find that most of the war effort was a relatively tiny bit of inflation, of course, a major inflation risk, But nothing compared to those two risks that were almost doubled or something, even in the case of France, much more efficient than in Germany. Yes, so they couldn't attract any resources from outside.

56:37We'll pay you back later.

57:07and the possibility of a kind of death is possible. You eat yourself and you have to imagine the short life. And if you manage to finish a war quickly enough, that was it. And one aspect that comes into play or I come to play is that the British actually always try to finish wars quickly. They always avoided long-wearing entanglements. The only major exception was the Bolognese wars. Here one could argue well that the Brits would have stayed out of the mess if the whole area had not kept on fighting back.

58:05I don't think that that's really the case, because they relied so much on the central government, which was so new and disorganized. They already had pre-existing state governments that already had pre-existing militias that were well organized and armed. I think that if they had resorted to using the state government apparatus and military, it would have been and a better, it would have resulted in a better military strategy as well as a better economic strategy because they wouldn't have tried to extract so many resources and to keep so many resources out of the economy.

58:52I think that they should have gone after European resources with bonds, with bonds backed up by land. Well, and then they had to, that's the one thing that they should have done something about, was the blockade, and the initial plan was that they were going to do that with a Navy, a naval fleet, a small naval fleet, and blockade runners, privateers, letters of marquee and reprisal, you know, all the private sorts of things. Well, Stephen is apparently trying to argue that in 1861 the Confederate government should The Federal Government should somehow inquire and make a check of the common crop, issue 7% bonds against it, and get it on boats as fast as they could.

1:00:03But more of the other blockade was effective, and gotten this easy loans order that you're talking about are just simple cash sales, which would have been gone to buying more converse records and so on. So once you got H. Stevens, slightly ahead of the day business of these guys. That would have been the thing to do, but everybody was dead set against it. They wanted to keep the cotton here in the southern economy and try to get the Europeans to come get it and to intervene on behalf of the Confederate government, but they never really gave them an economic rationale to do that.

1:00:51I think Stevens was right. When was the US Navy located before the Civil War? Why didn't the Union have the control of the Navy?

1:01:23Boston, all of those cities had navies, and the Union either controlled or attacked most of the Federal installations in the South. So they always controlled Pensacola, for example. They always controlled Key West, and Jacksonville, yeah, that wasn't much of a... There's something to do with the fact that they got their revenue typically through tariffs, an offer of revenue for the tariffs at the time, so they were loyal agents in these ports.

1:02:21were Navy personnel, but they were paid on the basis of how much they captured. And so they were essentially privateers out there, and they didn't want to sink any of these boats, because they were also profit motivated. But the Union made a very smart move by saying, whatever you capture, you get to keep, including the value of the boats and all the cargo. and whereas the Confederate government was constantly putting regulations and restrictions on these blockade runners. They were taxing the cotton going out. They were requiring the ships to transport materials for the government.

1:03:12They were restricting the types of things that they could bring in. And so, where the Union government was just, you know, get whatever you can, boys. It's, you know, it's whatever you want. The Confederate government was actually hindering the efforts of the blockade runners. And in some places and times they were considered, the blockade runners were considered to be working for the opposition or to be undermining the war effort in what they were doing. So they were like in Gone with the Wind. And of course, Rhett Butler is a blockade runner and he's considered kind of tinged with the sort of the bad influence of being a blockade runner and making speculative profits and all this stuff.

1:04:09So it was the anti-capitalist mentality of the Confederacy which really hurt it in a number of different ways. In a previous video concluding remark about the Wizard of Oz, one great summary of the highlanders is that at the end all figures get what they had from the first place. For example, the girl, she wants to get home to campus, so she had to wear the shoes of the evil witch of Israel, so she couldn't, but she didn't have to get to the green bag, right?

1:04:58And all others also similarly have already what they needed to succeed to a thing that... Yeah, they're given placebo-type cures. Placebo-type of thing? Yeah. So it's exactly what's going on, of course, with the paper money thing, but also placebo. The illusion. Yeah. Good. Okay. Thank you very much. Great. Thank you very much.