Foreign Currencies

As established by an act of Congress of 17 July 1842, the official parity value between the British sterling pound and the US dollar was 4.84 dollars per pound. The nominal exchange rate of sterling pounds versus dollars was effectively superior to the official parity value established by the United States Treasury between August 1856 and September 1857, reflecting first the drainage of specie from Europe to China in October 1856, then the war between China and England in May 1857, and finally, the uncertainty about the cotton production in India. After May 1857, and until June 1859, sterling pounds lost value against dollars in New Orleans. Between June and September 1859, sterling pounds were sold with a premium in the Crescent City currency market, coinciding with the end of military conflict in Europe. Between September 1859 and April 1860, sterling pounds depreciated against New Orleans dollars. By

May 1860, sterling pounds were exchanged at a higher value than their official parity, compared to the beginning of the period, reflecting the impact of political uncertainty in Europe.

The appearance of French francs in the Price-Current is indicative of the changing geography of cotton exports, as continental Europe became an important market for Southern cotton, and a textile-manufacturing sector in France took off in the third quarter of the nineteenth century. Two types of French francs reached New Orleans: the silver five French-franc pieces (also known as ecus) and the gold twenty French- franc pieces (also known as napoleons). A comparison of the behavior of both denominations of francs exhibits a very interesting pattern: the gold twenty French-franc pieces ran at a premium between August 1856 and October 1857, December 1857 and May 1858, and briefly, between July and September 1859. For most of the period of study (1856-1860), then, the New Orleans currency market preferred low denomination money, as it placed a premium on silver five French-franc pieces.

The case of Mexican pesos (also known as dollars) in New Orleans and the United States deserves deeper study. Mexican pesos were obtained in payment of British and American merchandise introduced via legal trade or smuggling. The most important export product of Mexico since colonial times, silver, paid for these imports. Both British and American merchants were eager to accept silver as they required it to conduct trade with China and India. From 1856 to 1860, Mexican pesos were worth 2 % to 10 % more than dollars in New Orleans. The nominal exchange rate oscillated markedly between longer periods of high volatility and shorter periods of stability. The behavior of the Mexican pesos’ exchange rate can be better understood if we partition the series into three cycles: the first, of normality, which lasted from August 1856 to September 1857; the second, of contagion, which reflected the consequences of the panic of 1857, lasting from September 1857 to January 1859, with pesos reaching a minimum of 1.0225 dollars; the third, of recovery and rally, ranging from January 1859 to August 1860, when pesos reached their highest value at 1.0925 dollars.

Currency holders in New Orleans held Mexican silver pesos in higher esteem than American silver dollar coins. The difference between the value of Mexican silver dollar coins and US old silver coins was significantly high between August 1856 and September 1857. During the financial crisis, the value of Mexican pesos and old American silver coins converged. However, during November 1857, when New Orleans received substantial amounts of specie, both types of American coins lost value, whilst the Mexican silver peso sustained its value. The spread between Mexican pesos and old American silver coins was relatively constant from June 1858 until March 1859, after which the difference between the two grew substantially. US new silver coins went from being traded above par to below parity in October 1857. Old American silver coins would be valued in slightly more than one New Orleans dollar from then on. If an investor wanted to invest his currency holdings in the market with a positive appreciation through the entire period of study (1856-1860), he would have done well with Mexican dollar coins: this sheds light on the role of Mexican pesos as a reserve currency with its value almost entirely set by currency markets.

Spanish doubloons were obtained through the commercial traffic between New Orleans and Havana. Spanish American doubloons were gold coins of similar denomination to the Spanish doubloons but with a lower intrinsic content of precious metal. The Price-Current named them “patriot” since they came from the independent Latin American republics. The average exchange rates of the Spanish and Spanish American doubloons exhibit roughly the same trends: a declining tendency, from October 1856 to December 1857, and diverging trends from May 1858 to the end of the period. In the first period, the Spanish doubloons reached a maximum value of 17.60 dollars, surpassing the average market value of a gold ounce from California between August 1856 and March 1857; in the second period, their value fluctuated around 16.155 dollars. On their part, the maximum value of Spanish American doubloons was 16.60, in November 1856, and their minimum value was 15.13 in October 1858. As New Orleans not only attracted Mexican silver but also Mexican gold, it is not surprising to see Mexican doubloons listed in the Price-Current from October 1859. These Mexican doubloons ended the period with a slightly higher valuation than the Spanish American counterparts, at 15.70 dollars the piece.

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