that investors should be able to take physical possession of the cotton which underpinned the bonds if the South failed to make its interest payments. Collateral is, after all, only good if a creditor can get his hands on it. And that is why the fall of New Orleans in April 1862 was the real turning point in the American Civil War. With the South's main port in Union hands, any investor who wanted to get hold of Southern cotton had to run the Union's naval blockade not once but twice, in and out.
In Niall Ferguson's book "The Ascent of Money: A Financial History of the World," he emphasizes that investors needed the tangible ability to acquire the cotton backing their bonds in the event that the South defaulted on interest payments. This necessity underscores the importance of collateral; it must be accessible to credibly support financial agreements. Without the ability to physically obtain the cotton, the value of the investments diminished significantly.
The pivotal moment in the American Civil War occurred with the fall of New Orleans in April 1862. This shift allowed the Union forces to control the South's primary port, creating significant challenges for investors hoping to secure Southern cotton. They were now faced with the daunting task of navigating the Union’s naval blockade, complicating their efforts to retrieve the collateral needed to enforce their financial interests.
