King Cotton and his Mexican Pesos: The Production and Exports of Mexican Silver Pesos to New Orleans (1821-1861).
During the financial panic of 1857, New Orleans banks could maintain specie payments, unlike most of their peers in the United States. Commercial failures in Louisiana between January 1857 and March 1858 reached 1.94% of existing businesses, higher than the average in Southern states yet well below the Northeastern states’ average. I argue that imports of specie (coins of silver and gold) sourced from ports in the Gulf of Mexico (Brazos Santiago, Veracruz, Tampico, Havana) and New York prevented the suspension of specie payments in New Orleans, playing a stabilizing role amid the turmoil that engulfed other U.S. financial centers during the fall of 1857. Mexican silver pesos (dollars) comprised the largest share of these specie imports. Although the Coinage Act of 1857 removed foreign currencies’ legal tender, New Orleans merchants and banks held Mexican pesos in high regard as an export commodity, high-powered money, reserve asset, and global currency. Specie imports strengthened the balance sheets of New Orleans merchants and banks unevenly, however. Coins of gold and silver were only in high demand during financial panics and economic stagnation periods. Favoring book credits, drafts, and bills of exchange in their relations with suppliers and clients, creditors and debtors in the United States and Great Britain, Anglo-American merchants and financiers (such as private banker James Robb) required less specie than their foreign and Louisianan Creole counterparts (such as financier Edmond J. Forstall), and thus had fewer incentives to engage in international trade and finance operations to source large volumes of specie imports. During the financial panic, however, foreign and Louisianan Creole merchants readily sourced specie from the Gulf of Mexico and could strike opportunistic deals when incumbent U.S. competitors who used primarily fiduciary instruments entered in arrears or declared bankruptcies.
