During the hopeful days of 1862--that Golden Age of Confederacy--Mason, though not recognized by the English Government, was shown every kindness by leading members of the aristocracy, who visited him in London and received him at their houses in the country. It was during this period of buoyant hope that the Alabama was allowed to go to sea from Liverpool in July, 1862. At the same time Mason heard his hosts express undisguised admiration for the valor of the soldiers serving under Jackson and Lee. Whether he formed any true impression of the other side of British idealism, its resolute opposition to slavery, may be questioned. There seems little doubt that he did not perceive the turning of the tide of English public opinion, in the autumn of 1862, following the Emancipation Proclamation and the great reverses of September and October--Antietam-Sharpsburg, Perryville, Corinth--the backflow of all three of the Confederate offensives.
The cotton famine in England, where perhaps a million people were in actual want through the shutting down of cotton mills, seemed to Mason to be "looming up in fearful proportions." "The public mind," he wrote home in November, 1862, "is very much disturbed by the prospect for the winter; and I am not without hope that it will produce its effects on the councils of the government." Yet it was the uprising of the British working people in favor of the North that contributed to defeat the one important attempt to intervene in American affairs. Napoleon III had made an offer of mediation which was rejected by the Washington Government early the next year. England and Russia had both declined to participate in Napoleon's scheme, and their refusal marks the beginning of the end of the reign of King Cotton.
At Paris, Slidell was even more hopeful than Mason. He had won over Emile Erlanger, that great banker who was deep in the confidence of Napoleon. So cordial became the relations between the two that it involved their families and led at last to the marriage of Erlanger's son with Slidell's daughter. Whether owing to Slidell's eloquence, or from secret knowledge of the Emperor's designs, or from his own audacity, Erlanger toward the close of 1862 made a proposal that is one of the most daring schemes of financial plunging yet recorded. If the Confederate Government would issue to him bonds secured by cotton, Erlanger would underwrite the bonds, put the proceeds of their sale to the credit of the Confederate agents, and wait for the cotton until it could run the blockade or until peace should be declared. The Confederate Government after some hesitation accepted his plan and issued fifteen millions of "Erlanger bonds," bearing seven percent, and put them on sale at Paris, London. Amsterdam, and Frankfort.
As a purchaser of these bonds was to be given cotton eventually at a valuation of sixpence a pound, and as cotton was then selling in England for nearly two shillings; the bold gamble caught the fancy of speculators. There was a rush to take up the bonds and to pay the first installment. But before the second installment became due a mysterious change in the market took place and the price of the bonds fell. Holders became alarmed and some even proposed to forfeit their bonds rather than pay on May 1, 1863, the next installment of fifteen percent of the purchase money. Thereupon Mason undertook to "bull" the market. Agents of the United States Government were supposed to be at the bottom of the drop in the bonds. To defeat their schemes the Confederate agents bought back large amounts in bonds intending to resell.
The result was the expenditure of some six million dollars with practically no effect on the market. These "Erlanger bonds" sold slowly through 1863 and even in 1864, and netted a considerable amount to the foreign agents of the Confederacy.
The comparative failure of the Erlanger loan marks the downfall of King Cotton. He was an exploded superstition. He was unable, despite the cotton famine, to coerce the English workingmen into siding with a country which they regarded, because of its support of slavery, as inimical to their interests. At home, the Government confessed the powerlessness of King Cotton by a change of its attitude toward export. During the latter part of the war, the Government secured the meager funds at its disposal abroad by rushing cotton in swift ships through the blockade. So important did this traffic become that the Confederacy passed stringent laws to keep the control in its own hands. One more cause of friction between the Confederate and the State authorities was thus developed: the Confederate navigation laws prevented the States from running the blockade on their own account.
The effects of the blockade were felt at the ends of the earth.
India became an exporter of cotton. Egypt also entered the competition. That singular dreamer, Ismail Pasha, whose reign made Egypt briefly an exotic nation, neither eastern nor western, found one of his opportunities in the American War and the failure of the cotton supply.