Thomas Tooke

Analysis of the commodities price during the 1860-1880 period.

In Commodities on June 9, 2012 at 4:06 pm

While Mitchell identifies events which impacted the desire to hoard Gold in connection to war developments, Mitchell links the developments in Gold and Commodities in general. However the development in commodities prices follows somewhat a different path.

Mitchell writes:

“Price were fairly constant throughout 1860, but fell sharply in the spring and summer of 1861, apparently because of the unsettled business conditions due to the secession of the Southern States and the prospect of civil war. Towards autumn a reaction began, probably initiated by large government purchases of supplies. The upward movement continued through 1862, save for a slight backset in April, and through the first quarter of 1863, the chief cause probably being the advance in the premium on gold – itself due to the decline in the community´s valuation of the irredeemable paper dollars in which prices were quoted.  It will be noticed that the median did not rise above 100 until October, 1862, though the other declines indicate a strong forward movement as early as January. The financial successes of the spring of 1863 and the military successes of July caused a great appreciation in the value attributed to the government´s notes and produced a slight fall in prices; but this improvement was only temporary. Prices started upward again late in 1863, rose rapidly throughout 1864 and reached their maximum in January, 1865, when 59 out of 90 commodities – almost two thirds — were quoted at double or more than double the prices of five years before. Even during this period of most rapid advance, however was not without exceptions:– the 8th decile shows a decline from July to October, 1864, and the 9th from October, 1864, to January, 1865. ”

“The end of war brought a fall of prices almost without a parallel in violence and generality. The median declined from 216 in January, 1865, to 158 in July, and all the other declines went down with it, the smallest decline being 48 points (the 2nd decile). This fall was followed by a reaction in the second half of the year which carried prices in January, 1866, back about to the level of April, 1864. From this time on until the autumn of 1871 the general trend of pries was strongly downward, though the fall was by no means uniform and was interrupted by several temporary reactions. The lively speculative movement of the early 70´s, which caused so sharp a rise in English and German prices, interrupted this fall in the United States, though the advances scored in 1872 and the first part of 1873 were irregular. ”

“After the great crisis of the autumn of  1873, prices began to fall again – slowly at first, more rapidly after 1874. In January, 1878, the medium dipped below 100 for the first time since 1861, and the fall continued until the middle of 1879. The lowest point touched by the median was 84 in April, but comparisons of the other declines show that the range of prices was on the whole somewhat lower in the following July. ”

“This great fall of price between January, 1865, and July, 1879, was coincident with irregular appreciation in the specie value of the paper dollar- an appreciation which reached its limit with the resumption of specie payments, January 1st, 1879. During these 14 years all the gain in prices made during the four years of war was lost, and something more. The final movement of the price-level which the table shows, was due to a cause quite unconnected with the currency — namely, the European crop failures of 1879 — . “

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