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Davis vs. Bigelow Revisited: Antebellum American Interest Rates

Published online by Cambridge University Press:  11 May 2010

Alan L. Olmstead
Alan L. Olmstead
Affiliation:
University of California, Davis
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Abstract

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The Journal of Economic History , Volume 34 , Issue 2 , June 1974 , pp. 483 - 491
Copyright
Copyright © The Economic History Association 1974

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References

I would like to thank Victor Goldberg and C. Daniel Vencill for their suggestions. Glenn Pettengill and James Yerkes did much of the leg work. Any remaining errors are my own.

1 Bigelow, Erastus A., Tariff Questions in the United States (1862), p. 204Google Scholar. Bigelow's estimates are summarized in Cole, Arthur H. and Smith, Walter B., Fluctuations in American Business, 1790–1860 (Cambridge, Mass.: Harvard University Press, 1935), p. 126Google Scholar; and reproduced in Davis, Lance E., “The New England Textile Mills and the Capital Market: A Study of Industrial Borrowing, 1840–1960,” Journal of Economic History, XX (March 1960), 27–28.Google Scholar

2 See Davis, fn. 18, p. 11, for a comment on what market the series represents. The series most likely represents discount rates for the New York and (or) the Boston markets.

3 Davis, “New England Textile Mills,” pp. 1–30.

4 Ibid., p. 21. By “general agreement” Davis evidently means that they tend to move in the same direction. Davis attributes the spread between the two series primarily to risk differentials between the markets they represent, and to the effect of the 6 percent usury law found in Massachusetts. Davis constructed his series from the loan records of eight Massachusetts cotton textile mills. Included in his series are both long and short-term loans made by both institutional and private lenders.

5 Ibid., p. 15.

6 Ibid., pp. 15, 25.

7 Ibid., pp. 15–16.

8 Ibid., p. 21.

9 The Economist, Vol. VI (January 1, 1848), p. 18Google Scholar. By the end of the month the Economist was reporting rates of 15 to 18 percent. Ibid., January 22, p. 102.

10 Hunt's, XVIII (January 1848), p. 81.Google Scholar

11 Ibid., p. 79.

12 Ibid., February 1848, p. 196

13 For example, Debow's Commercial Review, published in New Orleans, notes “severe pressure” and cites first class-paper sold at 24 percent per annum. Debow's Commercial Review of the South and West, V (January 1848, p. 79; February 1848, p. 197). Niles' National Register, published in, Baltimore, reports that Boston, New York, Philadelphia, and Baltimore capitalists only extended very short term credit on the best securities and that interest on commercial paper ranged between 18 and 24 percent per year. See Niles' National Register, LXXIII (January 15, 1848), p. 336Google Scholar. Bankers' Magazine, published in Baltimore, reports that interest rates on commercial paper had soared in November 1847. By the end of January the rate on “undoubted business paper” was still 18 percent in Boston and 15 percent in New York, Philadelphia, and Baltimore. Bankers' Magazine and State Financial Register, 11 October 1847, p. 204; November 1847, p. 327; December 1847, p. 399; January 1848, p. 453; February 1848, p. 511).

14 A partial listing includes: Hunt's, XVIII (March 1848), pp. 299–300Google Scholar; (May 1848), p. 526; (June 1848), pp. 632–36; Vol. XIX (July 1848), pp. 81–82; September 1848), pp. 301–304; (October 1848), pp. 405–410; (November 1848), pp. 536–43; The New York Tribune, 1848; Bankers' Magazine, II (May 1848), p. 704Google Scholar; (June 1848), p. 708; Vol. III (July 1848), p. 72; (November 1848), p. 292; and the New Orleans Price Current, “Annual Statement,” September 1, 1848.

15 Hunt's, XIX (September 1848), p. 301 (not p. 201 as cited in Davis).Google Scholar

16 Ibid., p. 304.

17 Davis, Lance E. and Hughes, J. R. T., “A Dollar-Sterling Exchange, 1803–1895,” Economic History Review, 2nd series, XIII (August 1960), 75–76.Google Scholar

18 Davis, p. 15, fn. 34.

19 Hunt's, XVIII (March 1848), p. 300.Google Scholar

20 For example, see Bankers' Magazine, “Notes on the Money Market for April 26, 1848,” II (May 1848), p. 704Google Scholar; Hunt's, XX (May 1849), pp. 526–27.Google Scholar

21 Hunt's, XVIII (June 1848), pp. 633–36;Google Scholar XIX (July 1848), p. 82; (October 1848), p. 406.

22 Hughes, J. R. T., Fluctuations in Trade, Industry and Finance, 1850–1860 (Oxford: The Clarendon Press, 1960), p. 28Google Scholar; Gayer, Arthuret al., The Growth and Fluctuation of the British Economy, 1790–1850, Vol. I (Oxford: The Clarendon Press, 1958), pp. 304–41.Google Scholar

23 For example see Hunt's, XIX (October 1848), p. 406.Google Scholar

24 Gayer et al, Growth, pp. 267, 296, 329.

25 U.S. Bureau of the Census, Historical Statistics of the United States, Colonial Times to 1957 (Washington, D.C.: U.S.G.P.O., 1960), p. 538Google Scholar; Hunt's, XX (February 1849), p. 195.Google Scholar

26 For example, in November 1847 the New York Tribune reported that “The banks have been tightening the screws today, calling in loans and restricting discounts in order to guard against the specie drain.” New York Tribune, November 18, 1847, p. 3.

27 Myers, Margret, The New York Money Market (New York: Columbia University Press, 1931), p. 76Google Scholar; Kindleberger, Charles, International Economics, 3rd edition (Homewood, Ill.: Richard D. Irwin, Inc., 1963), p. 53.Google Scholar

28 Hunt's, XVIII (January 1848), p. 8.Google Scholar

29 Bankers', II (May 1848), p. 704Google Scholar; also see (November 1847), p. 327.

30 Hunt's, XIX, (October 1848), pp. 407–408.Google Scholar

31 For example see the Economist, VI (January 22, 1848), p. 102Google Scholar; (February 12, 1848, p. 185; the New York Tribune, July 15, 1848, p. 3Google Scholar; Hunt's, XIX (November 1848), pp. 537–38; (December 1848), p. 633.Google Scholar

32 Hunt's, XIX (November 1848), p. 536.Google Scholar

33 New York Tribune, 1846–1851. Although 7 percent was by far the most frequently cited rate, between May and October rates of 6 percent or 6 to 7 percent also appeared.

34 For example in April, Bankers' Magazine reported “Money is now easier in this city [New York] and may be quoted at 6 @ 8 on prime securities, at call.” In September the Tribune noted short term loans secured by Treasury notes were made at 10 percent. During November at a time when the Tribune was reporting call rates of 7 percent, Hunt's noted that “loans on stocks were called in rigorously.” Banker's Magazine, II (May 1848), p. 704Google Scholar; New York Tribune, September 29, p. 2; October 2, p. 2; Hunt's, XIX (December 1848), p. 633.Google Scholar

35 Davis, Lance E., “The Investment Market, 1870–1914: The Evolution of a National Capital Market,” The Journal of Economic History, XXV (September 1965), 355–393.CrossRefGoogle Scholar

36 Vatter, Barbara, “Industrial Borrowing by the New England Textile Mills, 1840–1860: A Comment,” The Journal of Economic History, XXI (June 1961), 216–221Google Scholar. I examine the question Vatter raises in another paper, Olmstead, Alan L., “Mutual Savings Bank Trustees: Philanthropists or Fmanglers?” Department of Economics, University of California, Davis, Working Paper No. 26, May 1973.Google Scholar