Originally Posted by ChrisC
Some people insist that the Confederate States of America was a separate country between 1861-1865 in North America. The CSA had hyperinflation and defaulted on bonds that were placed in the European market. There are numerous economic studies on the CSA.
The CSA case is interesting, but I'm not sure it directly applies here. They had only two small bond sales in Europe: One in Amsterdam ("junk" bonds) denominated and payable in pounds sterling (so, not backed by CSA fiat currency). The other sale was of "Cotton Bonds," which were denominated in pounds sterling but payable in a specific amount of cotton (so, these were not backed by fiat currency). The value of these bonds held up quite well, even with the considerable "hitch" that they bearer had to take delivery of the cotton in the CSA, and there was a blockade in place. The CSA serviced these bonds throughout the war--I don't know if you could say they defaulted on them, since the CSA "went away" before the bonds were due to be paid off.
These cotton bonds were an interesting case of attempting to buy political influence. They were targeted to wealthy and influential British buyers, and the South sold them at an attractive price. The idea was to give some influential folks in England a stake in supporting the South in the war, and there is some evidence that it worked.