Board of Trade Daily Reporter 1861

click to enlarge

Early traders at the CBOT had an enormous amount of external factors to deal with and some of the difficulties were reflected in the above Board of Trade Daily Reporter from May 23rd, 1861 in my collection.  To begin it states, "Business is brought to a dead halt on account of the want of funds wherewith to operate."  Not exactly an indication of market confidence!  Liquidity events are a common occurrence in commodity markets but this end of day quote sheet indicates the severity of how the burgeoning American Civil War affected trading.  Just over a month prior was the Battle of Fort Sumter and as one would expect, it created tremendous upheaval in money markets. 

Many Illinois banks had their capital base backed with securities issued by what would eventually become Confederate states.  The value of such Confederate securities were in decline since the election of Abraham Lincoln but due to the first skirmish of the war, liquidity became severely impacted as different premiums differentiated into the method by which payment would be made.  The issues weren't limited to Illinois banks (of which over 80% eventually failed) as the quote sheet indicates that a couple larger banks "threw out eleven of the Union list, and holders refuse to sell for anything but gold or eastern exchange."  Drawing a check upon certain solvent banks could also demand a 10-12% premium which indicates the level of panic.  The CBOT decided to take drastic measures in maintaining benchmark pricing and passed the following resolution on this day:

"WHEREAS, The recent events in the monied affairs of Chicago have culminated in a return to a standard of Gold and Silver.  Therefore
Resolved, That in the opinion of the Board of Trade of Chicago, all sales of property, and daily quotations thereof should hereafter be made in funds equal to specie."

While this was a disaster for the nation and almost everyone, it's a goldbugs dream.  Let me veer off for a little editorial comment that modern day goldbugs envision a similar wish because they're some of the most miserable people imaginable.  The best summation of what I've generally observed w/goldbugs is that they've failed in how the world is so they wish for the destruction of it so they can finally come out on top as that's the only way for them to succeed. 

Back on topic, if you look at the transaction list on the quote sheet you can see it not only indicates price but also method of payment which includes preferred check, union currency, stump-tail check, sight exchange, and gold.  It's apparent that gold receives the largest premium followed by preferred check and then union currency.  For anyone with a further interest in grain trading during the Civil War and early CBOT history, I highly suggest William Ferris' excellent book The Grain Traders.

Just over a year after that day, the CBOT raised $15,000 and 180 volunteers to create the CBOT Battery which served as a horse artillery battery for the Union.  Following the war, the CBOT also established centralized clearing to ensure market efficiency and eliminate the problems which this quotation sheet described.