Securitized Human Beings: Exotic financial instruments, slavery, and the Recession of 1837

[HiPointDem]

Last edited Fri May 25, 2012, 03:37 PM - Edit history (1)

Yet enslavers had already—by the end of the 1820s—created a highly innovative alternative to the existing financial structure. The Consolidated Association of the Planters of Louisiana (despite its name, the "C.A.P.L." was still a bank) created more leverage for enslavers at less cost, and on longer terms. It did so by securitizing slaves, hedging even more effectively against the individual investors' losses—so long as the financial system itself did not fail...

Using the C.A.P.L. model, slaveowners were now able to monetize their slaves by securitizing them and then leveraging them multiple times on the international financial market. This also allowed a much wider group of people to profit from the opportunities of slavery's expansion... For the investor who bought it from the House of Baring Brothers or some other seller, a bond was really the purchase of a completely commodified slave: not a particular individual, but a tiny percentage of each of thousands of slaves. The investor, of course, escaped the risk inherent in owning an individual slave, who might die, run away, or become rebellious...

Armed with repeated infusions of new cash lent by banks who handed it out with little concern for whether or not mortgaged slaves had already been "hypothecated"—assigned to someone else as a hedge against loans—southwestern enslavers brought tens of thousands of additional slaves into the cotton states.... So migrants and longterm residents alike trooped to the banks, mortgaged property (some of which, later critics would charge, did not even exist) and spent the credit they received. Huge amounts of money were shifted around...

A quarter million people were moved by force, sold, mortgaged, collateralized, securitized, sold again 3,000 miles from where they actually toiled. Each summer they learned how to pick the fields clean faster, at the end of a whip. From 1831 to 1837, cotton production almost doubled... Too much was reaching Liverpool for Manchester to spin and weave, much less to sell to consumers in the form of cloth. Prices per pound at New Orleans, which had begun the boom in 1834 at eighteen cents, slipped to less than ten by late 1836. "Everybody is in debt neck over ears," was the word from Alabama, but slave "traders are not discouraged"—many of their buyers believed that cotton prices would begin to climb again....

http://www.common-place.org/vol-10/no-03/baptist/

[Sanity Claws]

1. Nothing new under the sun

The more things change, the more they stay the same.
Those who don't know history are doomed to repeat it.

These phrases sound hackneyed but reading this article makes one see the basis for them.

I'll bet all those pundits on television who were opining about the economy over the last ten to twenty years are totally unfamiliar with this history.

I know I never heard it before I studied US History.

[bemildred]

2. Not as nice a bubble as tulips.

But the same old don't-give-a-shit let's-grab-the-money attitude.

Hadn't heard of this one, thanks for the post.

[coalition_unwilling]

3. Thanks for posting. Bookmarking for later - n/t

[Ian62]

4. Thank you for posting

I knew thare was a stock market decline after 1835 but couldn't understand why - as this was the time when railways and the industrial revolution started taking off in US.
There was another stock market peak in 1850 at around the same level.

I am currently looking up your other posts, if this is the level of your knowledge.

[HiPointDem]

5. Nah, it's the level of knowledge of the person who wrote it. I ran aross it doing research on

people and issues of the period & thought it was interesting.