Going Bust Today and Yesterday: Recurring Anecdotes

On the Panic of 1837, from the “Democratic Review,” 1840, when England called the tune:

“Give (our merchants) credit at home, they take the money and make still greater purchases on credit in England. And this credit is renewed and maintained at the pleasure or the fortune of the creditor people; and it may be arrested or contracted by their fears, their caprice, or their disasters. And a contraction of this credit there is followed, as we have lately seen, by panic, convulsion, prostration, paralysis of credit, commerce, property and labor here.”

On the Depression of 1893 in Kansas by the great American journalist William Allen White in his Autobiography:

“Money was easy. The farmers were borrowing up to their ears. The mortgage companies and trust companies had money to lend. No one cared what interest he paid – or promised to pay. Kansas was plastered with farm mortgages. Crops were good, and prices reasonable; times on the boom, and no one watched how the wheels of plutocracy were whirring and grinding, generating the power that ran the land. I was a part of it and never remotely dreamed its significance… Through 1893 and 1894 the depression held its blighting hand over the country and especially over the Missouri Valley. Railroads were going through bankruptcy, the big ones swallowing the little ones. Financial institutions were reorganizing after failure, or to avoid it. The whole structure of American business and finance was being recast before our eyes.”

On the Great Depression by sociologist Frederick Lewis Allen as set forth in 1952 in his book, “The Big Change:”

“What was destined to halt the forward progress of business was the fact that the businessmen of America had become bemused with paper values – with the piling up of speculative or artificially generated wealth which had little relation to the production of goods… there developed a speculative mania which benefited immediately only those who could lay their hands on capital; and in addition, there were invented or improved a series of devices for distributing the fruits of prosperity – or what looked like them – into the pockets of the few.

“These devices included company mergers at inflated prices which gave insiders a chance to line their own pockets; the piling of holding companies one upon another until… they were sometimes five or six or seven deep, with the result that the heaviest cream of the profits of the concerns at the base of such a pyramid could be drawn off by the owners of the concern at the top; the formation by banks of “security affiliates” which in effect used the depositors’ funds to make investments, in securities and in real estate, such as wsere denied to the banks themselves by law; the frequent practice of inflating corporate profits by selling properties back and forth among a group of companies at rising prices; and the formation of stock-market pools in which the officers of a company would join with brokers and well-heeled speculators to push up the price of the company’s stock – and then unload the stock on a new lot of buyers, thus making making money at the expense of those officers’ own stockholders.”

Sounds familiar, doesn’t it?

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Author: Helian

I am Doug Drake, and I live in Maryland, not far from Washington, DC. I am a graduate of West Point, and I hold a Ph.D. in nuclear engineering from the University of Wisconsin. My blog reflects my enduring fascination with human nature and human morality.

One thought on “Going Bust Today and Yesterday: Recurring Anecdotes”

  1. “Sounds familiar, doesn’t it?”

    It’s even more intriguing that the government sponsered enterprises (Fannie Mae) turned a blind eye to the prepackaging of junk debt into portfolio’s, with a triple A rating to boot, and sold to the public after the repealing of the Glass-Steagall Act in 1999. Investment banks breached commercial banks and pillaged the coffers dry.

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