CSA hyperinflation

[77NY]

On a PBEM thread, Aryaman posted "house rules" that include forbidding printing money. I was intrigued by this, because I know everyone here is very aware of the hyperinflation phenomenon that took place in the Confederacy due to firing up the printing presses and increasing money supply. This is so well documented that I will not bore anyone with the financial history here.

I just ran a spreadsheet for 65 turns making some assumptions based on my observations.

For the Union, baseline 1861 finance events with 0 VP seem to yield about $100,000 (100). As VPs increase, finance events generate extra revenue that seems to be linked to VPs at something like (VERY roughly) VP/2 (in thousands). I say this because I just printed $$ for the first time in Feb 1862 and yielded about 950 with 1600 VP (100 base + 800?). So my formula is just a wild guess.

Using that assumption, I calculated unit $$ cost as a % of extra income from printing money if a player printed EVERY turn -- and assuming an increase of 40 VP per turn. At initial cost of $40 on turn 1, the same unit would cost $473 at turn 65 given a 4% increase per turn. But with about 2500 accumulated VPs by that time, revenue from printing is $1.36 mil (1360). So on turn 1, a $40 unit is 40% of total $$ generated by printing.

Unfortunately, over time this ratio seems to actually decrease rather than increase from the initial 40%. In fact, for turns 11-36 it appears to drop below 20% and then creeps back up to the 30% range. So in other words, a unit would actually get significantly cheaper over time in real terms, which certainly doesn't seem reflective of hyperinflation. Whereas on turn 1 you could buy 14 militia at $7 apiece with your printed money, on turn 65 you could buy 16 militia at $83 apiece.

So I'm thinking maybe the bonus for VP is too great. One solution might be to link finance to current VP rather than cumulative. Or maybe just tweak the ratios a bit.

I am virtually certain that my formula assumption is not correct, but I wonder what the actual relationship is and whether this should be looked at to remove this exploit?

[tagwyn]

Current strategy of many governments. Do a spread-sheet for them. t

[77NY]

The numbers in my original thread post were nonsensical. This edited version should be correct.

[Major Tom]

So, you're saying that the inflation does not keep up with the VP effect which increases amount of money you can print?

I wonder if that's also true of other inflationary actions.

Very interesting, but I do think you're missing an important consideration. The money you get from printing, taxes, and bonds, is not your entire money supply. You generate money every turn from your cities. Unless that money is indexed to inflation, which it probably is not, then it's worth less every time you do something that increases inflation.

[77NY]

So, you're saying that the inflation does not keep up with the VP effect which increases amount of money you can print?

Exactly. But again, I'm not a programmer so I don't know the actual formula(s) being used here.

Very interesting, but I do think you're missing an important consideration. The money you get from printing, taxes, and bonds, is not your entire money supply. You generate money every turn from your cities. Unless that money is indexed to inflation, which it probably is not, then it's worth less every time you do something that increases inflation.

You're quite right that a thorough analysis needs to look at baseline economy as well. And your point is well taken that that income loses value to inflation since it does not seem to be linked to VPs. However, my initial thought is that the baseline income also becomes a smaller and smaller proportion of overall annual income as time goes on and the VP linkage substantially increases benefits of taxation, bonds, and printing money.

[Major Tom]

You're quite right that a thorough analysis needs to look at baseline economy as well. And your point is well taken that that income loses value to inflation since it does not seem to be linked to VPs. However, my initial thought is that the baseline income also becomes a smaller and smaller proportion of overall annual income as time goes on and the VP linkage substantially increases benefits of taxation, bonds, and printing money.

You're undoubtedly right that your baseline income is going to be less and less important as the game goes on, as it gets eaten up by inflation and your finance options (bonds, taxes, money printing) yield bigger and bigger amounts.

My own feleing is that inflation doesn't seem to be a problem at all in the game -- you can max out your finance options and get more money than you can spend, even at inflated prices. So, maybe you're right that there's a problem with the way it works.

This is definitely an area that could use further exploration.

[77NY]

You're undoubtedly right that your baseline income is going to be less and less important as the game goes on, as it gets eaten up by inflation and your finance options (bonds, taxes, money printing) yield bigger and bigger amounts.

Another source is shipping. Playing as Union in Q1 1863 and receiving ~ $38 + 2 wsp/turn through shipping. That is with only minimal transport construction. Not completely subject to inflation b/c transports are purchased with $$ and WS and only nominal CP -- and therefore periodic purchases of transports for the shipping box may be able to offset inflation for that income stream.

For the Wiki on this topic click here.

During the war, the South debased its currency to the point where it was a very weak fiat currency (only 6% backed by gold and redeemable in 2+ years). With international trade pegged to a gold standard, the CSA quickly depleted their gold and silver holdings to pay for foreign arms and goods.

As tagwyn alluded to above, there are some uncomfortable contemporary parallels here, aren't there? Sorry, but this paragraph from the article is too good to pass up:

The policy of the Confederate banks during the war encouraged speculation. The New Orleans banks had been well managed, and remained solvent until September 1861. The banks of the other states suspended specie payments at the end of 1860, and thereafter enlarged their note issue and their loans, thereby adding to the general redundancy of the currency and stimulating the prevalent speculative craze. They did a large business by speculating in cotton, making advances to the planters on the basis of their crops. The state governments also used their note issues for this purpose, the planters urgently demanding relief as their cotton could not reach a market. The Confederate government also made advances on cotton and secured large quantities by purchase, to serve as the basis of cotton bonds. The rise in prices which reflected the redundancy of the currency was no advantage to the producer. Frequent efforts were made by legislation and otherwise to reduce the prices demanded, especially by the agriculturists. As a result, the production of food products fell off, or at least the agriculturists did not bring their products to market for fear of being forced to sell them at a loss. Supplies for the army were obtained by impressment, the price to be paid for them being arbitrarily fixed at a low figure. As a result, the army administration found it almost impossible to induce producers of food willingly to turn over their products, and the army suffered from want. Under these confused industrial circumstances, the sufferings of the debtor class were loudly asserted, and laws were passed to relieve them of their burdens, making the collection of debts difficult or impossible. The debts of Southerners to Northerners contracted before the war were confiscated by the Confederate government, but did not amount to a large figure.

[Over-leveraged banks creating a speculative "bubble" economy? Hmmm...]

Obviously all of this has to be abstracted for gameplay to be fun/manageable, and I want to say that I think the vanilla version of AACW's economics is really nice. Many of the South's economic woes seem to be nicely abstracted by limiting WSU production. (Gray Lensman's new militia mod adding 1 WSU to base cost will help rein things in.)

[soundoff]

For once I tend to fence squat on the issue of Printing Money and, widening the scope of the thread at my peril, Raising Drafts.

On the printing money side, given the hyper inflation of the South, and not discounting the Norths horrendous inflation rate over the course of the war, it actually seems 'ahistorical' NOT to print money particularly as the South.

I also sit somewhat uneasily about the Drafts. I totally understand the viewpoint of those that say that the draft was not used until mid 62 by the South and as late as 63 by the North. But then how do you square that against the actual sizes of the Union and Confederate forces at the start of 62 if within the game you dont call the drafts? Seems to me 'tis a puzzlement.

So personally I prefer going with allowing printing money and calling drafts whenever able particularly as within the game as its currently constituted its impossible for the Union to achieve the numerical superiority of arms that it enjoyed in reality.

[tagwyn]

Hey, you guys, Did you pay your taxes lately? Could be a position for you in DC!! LOL tag

[TheDoctorKing]

On drafts: I like the way Clovis has worked this in his SVF mod. The first couple of calls for volunteers produce enormous numbers. This way, the armies can get big without need of the draft. Then, as historically happened, it gets harder and harder to get volunteers without paying enormous bonuses that bankrupt your country, especially the CSA. So the CSA prints money (USA to a lesser extent) in order to keep the recruits coming in, but finally the manpower shortage gets too bad and you go to the draft. There is a political price to be paid, and also I believe your newly raised troops are of lower quality, at least at first. But at least you have somebody to put in the firing line, so long as you can keep morale up.

[77NY]

On drafts: I like the way Clovis has worked this in his SVF mod. The first couple of calls for volunteers produce enormous numbers. This way, the armies can get big without need of the draft. Then, as historically happened, it gets harder and harder to get volunteers without paying enormous bonuses that bankrupt your country, especially the CSA. So the CSA prints money (USA to a lesser extent) in order to keep the recruits coming in, but finally the manpower shortage gets too bad and you go to the draft. There is a political price to be paid, and also I believe your newly raised troops are of lower quality, at least at first. But at least you have somebody to put in the firing line, so long as you can keep morale up.

I believe Lincoln called for 75,000 volunteers in April 1861 to fill 40 infantry regiments and other units. The following year, however, the draft riots started in various places as the draft was instituted and there was a call for 300,000 conscripts. Interestingly, bonuses were only awarded to enlistees who agreed to join line units to replace casualties (i.e., replacements in AACW). No bonuses for new homegrown volunteer/militia units.

I finished my first campaign as the Union and don't recall seeing any events for the draft riots of 1862 and 1863. Has anyone had any draft riot events?

I am playing my first campaign as CSA and used 8% bonds, printed money, and exceptional taxes to give the army a jumpstart. But now that I have to wait a few months to draft again, there is no incentive to raise more $$ since WSu are so limited.

Just had a thought: a finances option that allows the CSA to purchase WSu from England/France at the cost of increasing inflation. This would be historical b/c the CSA had to deplete its reserve of gold/silver specie in order to buy arms/raw materials from abroad. The depletion of specie contributed significantly to the debasement of CSA scrip. Any thoughts on this as a mod feature?

[Banks6060]

Just had a thought: a finances option that allows the CSA to purchase WSu from England/France at the cost of increasing inflation. This would be historical b/c the CSA had to deplete its reserve of gold/silver specie in order to buy arms/raw materials from abroad. The depletion of specie contributed significantly to the debasement of CSA scrip. Any thoughts on this as a mod feature?

Interesting idea. But I had assumed the CSA's "blockade runner" brigs would be the ones that represented something to that affect.

[77NY]

Interesting idea. But I had assumed the CSA's "blockade runner" brigs would be the ones that represented something to that affect.

I am sure you are right. I'm reminded of the "Lend Lease" and "Murmansk Convoy" ASW/Sub box in AH's Third Reich, if anyone knows what I'm talking about.

Basically, the US could send resource points to the UK and/or USSR subject to a % loss caused by German U-boats/air/fleets deployed in those boxes with losses offset by ASWs deployed to combat those units.

So a revised model in AACW would be an outright purchase of WSu from Europe by CSA (with inflation effect) subject to shrinkage/delay caused by Union blockade elements and boosted by CSA blockade runners.

The thought here is that there should be another reason to cause hyperinflation in the CSA. I don't hate the current abstraction of blockade runners; I'm just concerned about inflation not really having a bite being a bit of an exploit for CSA.

[Banks6060]

The only CSA exploit of inflation that I can think of is with militia purchases. Most of the other units in the game are expensive enough for inflation to take a pretty nasty toll on finances.

I try really hard not to have my inflation creep above 30% as the CSA...but honestly...it's almost unavoidable.

[soloswolf]

I finished my first campaign as the Union and don't recall seeing any events for the draft riots of 1862 and 1863. Has anyone had any draft riot events?

There are events reflecting the riots. I don't recall the specific dates/turn numbers though. (I also don't play the Federals as often either, so I am sure that helps contribute to my not remembering. :bonk

[Redeemer]

I have seen riots in several different major cities, but I think NM has to be low for them to fire.

[soloswolf]

They all fired in my current PBEM, and my NM is quite high. I don't think it has anything to do with that.

I think they were in NY and Boston. Both were 100% mc at the time, and they may have been as low as 98% loyal, but most likely they were at 100%.

[Mangudai]

I don't think inflation is very painful in the game. I only worry about NM and VP.

Also the new event "economic surprise, inflation -1" is extremely frequent.

[Gray_Lensman]

deleted

[Major Tom]

It will be eventually, but due to its nature, adjustments to inflation cannot be made until all other cost items are working properly, otherwise improper initial costs will be even more improper when multiplied by inflation effects.

When it's all done and done properly it will be extremely painful as it was historically in the Civil War itself especially in regards to the CSA.

For everyone else reading this, it's just a comment, as there has been no work at all attempted to rework this flawed part of the game design yet.

What???? How can you even consider "fxing" inflation? You'll ruin the game!

Just kidding

I agree it doesn't seem to work right, especially with regards to lower cost items like militia.

[77NY]

Attached is a spreadsheet showing the effects of adding 4% inflation each turn through Turn 100. My earlier attempt to analyze the inflation model incorrectly assumed that the 4% is compounded on already existing inflation. The model is actually much simpler than that. The inflation rate is pegged to the benchmark costs at the start of the game.

The spreadsheet tries to answer the simple question: How many $10 (inflation-adjusted) regiments can I buy each turn using only printed money through Turn 100?

The problem here is definitely the relationship between cumulative VPs and printed money generated. It greatly outstrips inflation penalties over time. The bottom line is that, after 100 turns, the CSA could generate enough cash to pay for 3000+ regiments, probably at least three times the historic number -- which I've seen estimated at closer to 1000.

Again, the CSA's serious WSu problems limit construction of line inf, arty, ships, and supply. Militia spamming will probably be abated by Gray's plan to add +1 WSu to cost. Also, there are some absolute limits on unit types that cap production in any case.

The gameplay issue that several people have pointed to goes more to the timetable of CSA troop building.

In terms of solutions, there are probably several good ways to skin this cat. For example, just tweaking the inflation rate for printing to 8%, when combined with the cumulative effects of high-rate bond issues, extensive taxes, etc., can give you a nice 1000% inflation. Adding the option of trading England/France cash for WSu (maybe linked to the intervention index) at astronomical prices and at the cost of even more inflation could very nicely bankrupt the CSA by 1864/65.

[Major Tom]

77NY - Very interesting analysis. It's probably correct in the conclusions if not the details.

Your spreadsheet shows CSA money printing starting at a base of $100 on turn 1. In fact, it starts from a base of $206. Also, your formula for how money printing is tied to VP is too simple. The real formula is much more complicated, and I've been struggling to figure it out for a few days.

I have test data from one full year, and there appears to be a straight line relationship between VP and the amount af monwy generated by each of the finance options. But the line is actually not quite straight -- there's a slight curve to it. The curve is so slight that it's hard to see it with just one year's data, so I need to do more. Plus, I'm not that great with higher math, so figuring out the formula for a curve instead of a straight line is not something I can easily do. But, it's clear from the one year of data that I've gotten that there's a slowly diminishing effect of VP on financial options. For instance, for 5% bonds, in the early part of 1861 the slope of the line is approx 0.2 (or +$10 for every 50 VP gained), but by the end of 1861 the slope is more like 0.16 ($8 for every 50 VP). For money printing, the slope is around .045 earlyier in the year and 0.38 later in the year.

These are imprecise because there's some other sources of variation (rounding, for one).

I need to test out further to get a better feel for how this affects late war money printing, but I think the amounts generated will be less than your spreadsheet projects.

[77NY]

77NY - Very interesting analysis. It's probably correct in the conclusions if not the details.

Your spreadsheet shows CSA money printing starting at a base of $100 on turn 1. In fact, it starts from a base of $206. Also, your formula for how money printing is tied to VP is too simple. The real formula is much more complicated, and I've been struggling to figure it out for a few days.

I have test data from one full year, and there appears to be a straight line relationship between VP and the amount af monwy generated by each of the finance options. But the line is actually not quite straight -- there's a slight curve to it. The curve is so slight that it's hard to see it with just one year's data, so I need to do more. Plus, I'm not that great with higher math, so figuring out the formula for a curve instead of a straight line is not something I can easily do. But, it's clear from the one year of data that I've gotten that there's a slowly diminishing effect of VP on financial options.

Thanks. I am sure that my model is an over-simplification of the VP/finance relationship, but without rigorously collecting datapoints as you are doing, my sense after playing a campaign as the Union was that there was a roughly linear relationship over time. That seems grossly consistent with what you are finding, but certainly not a precise match.

I think that the really complete and thorough analysis will have to look at the interplay between the different finance options (not just printing $$) over five years.

Part of the fun and "re-playability" will also involve external factors such as battle results and the resulting urgency (or lack thereof) to build/re-build different unit types. I think there is a lot to be said for letting players tweak production to try out different grand strategies.

But in the end, we do have the demographic data to know what the upper limits of conscription would have been for both North and South and we have a decent (not exact) idea of how many regiments were fielded by both sides. So this allows us to cheat and back into the production numbers we want the economies to get to. I think the big question is how the proper formulas should impact the timing of production.

[Brochgale]

Hey, you guys, Did you pay your taxes lately? Could be a position for you in DC!! LOL tag

Tax Evasion was a problem for the Confederacy. However what is the point of collecting taxes when you have a currency that has undergone a rapid devaluation due to infaltion?

In relation to inflation my household inflation for last year was over 200% yet the govt fiddles the so called infaltion rate - it is the perogative of govts to lie and lie compulsively.

After Gettysburg Confederate currency and Confederate bonds become pretty useless as Brits and France just wont touch them in reality. So finacing the war becomes an even greater problem for CSA Also the confederates by that time really have nothing else that they can trade as any tangible assets such as land , property etc is also of questionable value?

However this is just a game and if at the end of summer 1863 you are winning game as CSA it would be reasonable to assume that inflation is less of a problem as material shortages are less of a problem? Your armed forces are in a better condition presumably so the need to plough money/ resources into them is less pressing. Unless of course you introduce a factor to account for political corruption and political deceit? Spivs thrive in a time of war.

To break limits would be to cheat and what would be the point of playing then? However as we see from the present world we have govts printing money with nothing to back that up with and we have had banks handing out loans without the assets to cover those loans - has human behaviour changed at all?

[Tex Willer]

I think that money paper printing is not a good choice, because can also win without that effort.

[phantomfeather]

It will be eventually, but due to its nature, adjustments to inflation cannot be made until all other cost items are working properly, otherwise improper initial costs will be even more improper when multiplied by inflation effects.

When it's all done and done properly it will be extremely painful as it was historically in the Civil War itself especially in regards to the CSA.

For everyone else reading this, it's just a comment, as there has been no work at all attempted to rework this flawed part of the game design yet.

I don't claim to have the knowledge that many of these very informed players possess. I will acquiesce to them on many things involving this game, history, etc. But one thing I know for certain: Inflation for the CSA spiraled completely off the charts! I really don't know how they raised taxes or how much they collected but I do know the CSA printed paper money until it became worthless. To do this in the game would probably cripple the CSA player; some things you just can't do in the name of historicity (is that a word?). A thing such as that would hurt the playability of the game though to be honest with you I probably need to find myself some live competition. The AI as the USA makes it so easy to win

[phantomfeather]

I also would just like to add this: The guys that do the work on this & other games need to know my (our) heartfelt gratitiude for busting their butts to put out a quality product. At this moment I can only think of Gray Lensman & Pocus though I know there are many others. I want to particularly point out Lensman as a great help in these forums & the other work he does.

We make suggestions & I believe we're all trying to be helpful to better the game. All you testers, modders, programmers & others I have missed ( & I know I have), a very big thank you for a great game, one that I've found to be addictive. LOVE IT!!!!!!!!!!!!!

[Cato Uticensis]

I don't claim to have the knowledge that many of these very informed players possess. I will acquiesce to them on many things involving this game, history, etc. But one thing I know for certain: Inflation for the CSA spiraled completely off the charts! I really don't know how they raised taxes or how much they collected but I do know the CSA printed paper money until it became worthless. To do this in the game would probably cripple the CSA player; some things you just can't do in the name of historicity (is that a word?). A thing such as that would hurt the playability of the game though to be honest with you I probably need to find myself some live competition. The AI as the USA makes it so easy to win

I'm sure if Inflation/Hyperinflation is implemented correctly it would be a double edged sword encouraging the player to think twice. Game-wise it would decrease the amount of troops and regiments in the game forcing the player to be more strategic and invest more in the future. Thus prolonging each game.

[phantomfeather]

I'm sure if Inflation/Hyperinflation is implemented correctly it would be a double edged sword forcing the player to think twice. Game-wise it would decrease the amount of troops and regiments in the game forcing the player to be more strategic and invest more in the future. Thus prolonging each game.

Absolutely!!! Excellent point, Cato. I don't know if it's possible in a game against the AI but I wouldn't mind playing a live suc, oops, excuse me, player using the most historically correct options (volunteers, drafts, raising moolah, etc.) just to see how that would go. In other words, use the stuff that most accurately portrays the war but puts the players on the spot for what they got.

What I've noticed most is the AI & myself maxing out all options when those twice a year options occur.

Still a great game though.

[soloswolf]

Absolutely!!! Excellent point, Cato. I don't know if it's possible in a game against the AI but I wouldn't mind playing a live suc, oops, excuse me, player using the most historically correct options (volunteers, drafts, raising moolah, etc.) just to see how that would go. In other words, use the stuff that most accurately portrays the war but puts the players on the spot for what they got.

What I've noticed most is the AI & myself maxing out all options when those twice a year options occur.

Still a great game though.

Lots of players use house rules in their PBEM games. I'm sure you could find an opponent willing to try whatever you had in mind.