Some Thoughts on Reading "The Panic of 1907" & "The Forgotten Man" | by Doc Fenton on Sep 15, 2009 at 7:53 am |  | |
Well, I didn't have as much time as I had planned on having to spend on this blog, but just to let you know, I think I will go ahead with the financial history project sometime after October 10th. I think I got a little too ambitious about what I was going to write on here, but that's okay; I'll just narrow things down a bit and give a sparser outline of my take on big events in the history of financial banking crises as they unfolded since ancient times.
Anyway, recently I just perused through two very interesting books. The first of which was "The Panic of 1907: Lessons Learned from the Market's Perfect Storm," by Robert F. Bruner and Sean D. Carr. The second of which is "The Forgotten Man: A New History of the Great Depression," by Amity Shlaes.
I'll just convey a short timeline of what went wrong for each particular crisis, and then list the "seven elements" of a financial crisis given by Bruner and Carr at the bottom of the post.
With respect to the great Knickerbocker Panic of 1907, the initial trigger appears to have been the San Francisco fire in April 1906, which caused gold to flow out West from NYC, London, and other places around the world. British insurance firms, in particular, were forced to liquidate a lot of their assets (much of it being in American equities listed in NYC), since they had underwritten fire insurance for SF that many could not make payments on.
There was also plenty of demagoguery from the primary leftists in the America of that era, which were the Progressives in the GOP led by Teddy Roosevelt. Standard Oil and U.S. Steel were being attacked in the courts, Sinclair Lewis was railing against meat packers, and the Hepburn Act of 1906 allowed TR to set maximum shipping rates for railroad companies, whose stock went into sharp decline as a result. But after a "sharp break" in the market on March 13, 1907, the U.S. Treasury was able to deposit enough gold in national banks to calm the crisis down.
That is, until the Bank of England imposed a prohibition on finance bills from the U.S. which were used by Americans to help finance agricultural harvest-time credit in the fall by reducing currency exchange volatility. The BOE decision led to sudden outflows of gold from NYC to London in the summer, leading to another money market panic in July.
All of this left the financial system in a perilous state of affairs, when the Heinze brothers made their fatefully horrible decision to try to execute a short squeeze on the bears who had borrowed stock in United Copper, only to find out that there were far fewer people to actually squeeze than they had thought. In October of 1907, United Copper collapsed, the Heinzes couldn't make their payments, the Gross & Kleeberg brokerage house went under as a result, and NYC clearing houses had to scramble to come up with a rescue.
It seemed to work at first, but didn't carry the day, as a classic run on Knickerbocker Trust occurred on October 22. This was very similar to what happened to Lehman Bros. in September 2007, and what Gordon Brown allowed to happen to Iceland's banks as well. People thought that they could safely quarantine the problem to a bank that they did not think highly of, only to learn that the panic fire spread faster than they had imagined it would. About $350 million had been withdrawn from banks by American depositers as a result of the panic, and an unduly severe recession occurred in 1908 as a result. It was only Morgan's special intervention at his personal library on November 2 that kept the situation from going into an even worse spiral.
***
The situation with Hoover and Mellon and the Great Depression was a little different. Hoover, like Roosevelt before him, also belonged to the Progressive wing of the Republican Party. He had spent the entire decade of the 1920s finding ways to artificially raise farm prices and incentivize overproduction in agriculture. His initial response to the normal correction of the stock market in 1929 was to bully American businesses into raising wages and spending more capital. Ironically, this just caused corporate profits, and thus American equity to drop even more precipitously in succeeding years, thus making the deflationary spiral and unemployment problem even worse.
His response in 1930 was to sign the absurd Smoot-Hawley Tariff, which killed exports and raised import price. All the talk was on budget discipline, restricting immigration, not paying too much to veterans, and allowing the Bank of the United States (which catered mostly to immigrants) to fail.
In 1930 and 1931, Mellon did the worst thing imaginable, raising interest rates and curtailing bank credit to banks with a high percentage of agricultural mortgages, in order to continue to pursue a strong dollar policy. The obvious result of his "liquidationist" approach was disaster. The more banks went under, the worst the problem became for those that remained. Contagion spread.
In 1932, Hoover made the idiocy of his term as President complete when he got Congress to pass a huge tax increase through the Revenue Act of 1932. Is it any wonder that blacks and ordinary Americans in the North switched their allegiance to FDR and the newly leftist-socialist Democratic Party in droves?
A simple, conservative policy pursued by FDR in his initial days of President, of weakening the U.S. dollar and declaring a bank holiday to sort out what was left to be saved, did the trick in terms of finding a bottom to the madness of the Hoover Administration, resulting in spectactular rates of real GDP growth in the following years. Unfortunately, this growth was used as a political talking point by FDR to reach unprecedented levels of tyranny and socialism in U.S. government, most specifically, with the National Industrial Recovery Act, and with the Wagner Act (which officially sanctified union power into federal law), not to mention the oppressive regulation and taxes that came in the form of the SEC, Social Security, and payroll taxes.
Again, we see that pursuing strong dollar policies in times of financial panic is sheer madness, and has disastrous results. When reality hits and people realize that a currency has long been overvalued, the last thing you want to do is try to prop that illusory value up. Better to provide additional monetary cushions to soften the blow, a lesson known at least as far back ago as in the times of the 1st century Roman emperor Tiberius.
***
In any case, here are the aforementioned "seven elements" of a financial crisis, as discussed by Bruner & Carr:
#1. System-Like Architecture (They seem to mean here a hidden dependence of many elements of a larger system on other elements, obscured from outside viewers by the arcane and complex contracts involved by which one part of the system depends on other parts in ways that few people realize, since they only see the surface result as a system appearing to work smoothly on the outside.)
#2. Buoyant Growth
#3. Inadequate Safety Buffers
#4. Adverse Leadership
#5. Real Economic Shock
#6. Behavioral Aberrations
#7. Failure of Collective Action
I think that #'s 1, 2, & 3, are the most fundamental here, and a lot of the others are merely incendental to specific cases in only some cases, although with #5, you could bend this to your own definition to be as fundamental as the first 3. As a game theory type of thinker, I think the elements #4 & #6 really don't tell you much of anything of any real importance, and I also think that #7 is more of a matter of measuring the effectiveness of a response, rather than describing the actual problem itself.
Category: Politics
A Word on Sources, Part I: Contemporary Data | by Doc Fenton on Feb 20, 2009 at 6:54 am | | |
As I've said before, I'm trying to trace the development of human financial history through the ages, focusing especially on U.S. monetary policy. The chief inspiration for this effort, aside from the current mortgage debt crisis, is Murray Rothbard's A History of Money and Banking in the United States: The Colonial Era to World War II, which gives the best and most thoroughly researched arguments for the Austrian version of "sound money" that I know of.
I'm trying my best to augment this with other sources of data, especially raw data, but this is easier said than done. If you look at sources of economic data on the Internet, you will find that the further back in time you want to go, the murkier things get.
For example, the Federal Reserve Bank has a wonderful webpage devoted to " Statistics and Historical Data." But consider the table of Charge-off and Deliquency Rates for the 100 largest U.S. commercial banks, that gives charge-off rates for loans and leases going back every quarter to 1985. Now this is a nice source on the surface, and it gets to the heart of the subprime crisis, in that there just isn't very much data available before 1991, which is the first year for which an aggregate charge-off rate is given for residential real estate loans.
As we've heard in the past year over and over again, the #1 reason why the sophisticated mathematical risk models failed so badly, was that they simply lacked enough raw data, and indeed, I've actually read the specific phrase "before 1991" in more than one article in The Wall Street Journal or elsewhere.
The same problem occurs with foreclosures. I think RealtyTrac.com tries to give a cumulative total of monthly foreclosures in the U.S. every month (the website seems to have been revamped since the last time I visited it), but even there, it only goes back a couple of years. There are other subscription services to look up past foreclosure rates, but I'm pretty sure they are quite limited as well for historical research purposes. In fact, the best study of pre-1970s foreclosures was done recently by the St. Louis branch of the Fed, where David C. Wheelock estimated (in his 16-page paper, " Changing the Rules: State Mortgage Foreclosure Moratoria During the Great Depression") that "the foreclosure rate jumped from 3.6 per 1,000 mortgages in 1926 to 13.3 in 1933" ( LINK). Figure 1, "Nonfarm Real Estate Mortgage Foreclosure Rate, 1926-1941," is great, but it still doesn't give you a consistent set of historical data. Still, you do the best you can.
Looking Up Contemporary Economic Data
I try to keep abreast of the most important streams of incoming data in my monthly economic forecast thread, but it's useful to know where to look up recent economic data directly.
So, sticking with government data for a second, we can still use the BEA's GDP figures going back to 1930 ( LINK and LINK)--with quarterly rates going back to 1947--or, for that matter, other BEA data on official economic accounts ( LINK).
If you're looking for the BLS's CPI-U data on consumer price inflation, you can go straight to the government website, or more conveniently, look at the same data at InflationData.com, either to see year-on-year percentages ( LINK) or to see the plain monthly index numbers ( LINK). Going back to the BLS, though, you can see tables ( LINK) relating to official unemployment figures going back, I think, to 1942.
Switching to housing data, we can go with the currently popular S&P/Case-Shiller data ( LINK), the currently unpopular data from the National Association of Realtors ( LINK), or with the FHFA home price index ( LINK)--the FHFA HPI being formerly known as the OFHEO HPI.
Going further back in time for hard data on government actions and economic policies, we see again that Yale Professor Robert Shiller has useful information on his personal website ( LINK). Note that he is an especially valuable resource for U.S. equity and real estate prices going back to the 1870s. The White House Office of Management and Budget ( LINK) and the Government Printing Office ( LINK) are generally where you want to go to find hard data on U.S. fiscal policy. If you dig a little bit, such as looking at the historical tables nested within the FY 2009 budget ( LINK), then you can look up government receipts and outlays since 1789. In many cases, these tables are a more valuable resource for looking up U.S. tax history than you can find with the U.S. Treasury Department ( LINK).
If you're looking for further analysis of the fiscal policy of the U.S., an excellent resource can be found at The Heritage Foundation's Federal Revenue and Spending Book of Charts. The foundation has plenty of other webpages also devoted to fiscal policy, usually breaking down more specific issues, and other think tanks may have similar (but probably much less comprehensive) data online.
If you're looking at monetary policy, then you have to be cognizant that institutions such as the FOMC and freee exchange markets for fiat currencies have only been around for much less than a century. Once again, we have a limited data set. But for what it's worth, the British Bankers' Association lists historical LIBOR rates going back to 1986 ( LINK), the St. Louis Fed lists federal funds rates going back to July of 1954 ( LINK), and MeasuringWorth's website gives official and market prices for gold going back centuries.
MeasuringWorth.com, by the way, is one of my very favorite resources, since it has such comprehensive and easily comparable data sets for the U.S. and the U.K. going back centuries and centuries. Since it is impossible to know what's going on in U.S. monetary history without also knowing what's going on with U.K. monetary policy, then this proves to be a great tool, especially when trying to verify the theories of those who place such great importance on gold and credit inflation via fractional reserve banking.
Researching the history of financial legislation and various forms of financial regulation is not quite so easy, but I suppose that's why Wikipedia exists.
As an aside, historical data for countries outside of the U.S. and the U.K. are harder to nail down, but for those interested in the phenomenon of Japanese deflation, there are inflation statistics available going back to 1993 ( LINK and LINK; I mentioned this in another thread).
Other international data can be found at the websites of the IMF, World Bank, indexmundi.com, the U.S. Treasury Department (such as their TIC data on international capital), and PWCMoneyTree.
Category: Politics
The Promised Three Paragraphs | by Doc Fenton on Feb 8, 2009 at 8:37 pm | | |
Well, actually there's a 20,000 character maximum to TD blog posts including spaces, so I guess I'll leave you with those three paragraphs here ... lol:
"The history of economic thought deals with different thinkers and theories in the field of political economy and economics from the ancient world to the present day. Although British philosopher Adam Smith is cited by many as the father of modern economics, his ideas built upon a considerable body of work from predecessors in the eighteenth century. They in turn were grappling with ideas received from centuries before and attempting to apply them to a modern setting. In this sense, Smith was an interpreter to his day of ages-old information.
Economics was not considered a separate discipline until the nineteenth century. In his works on politics and ethics, the ancient Greek philosopher Aristotle grappled with the "art" of wealth acquisition and the question of whether property is best left in private or public hands. In medieval times, scholars like Thomas Aquinas argued that it was a moral obligation of businesses to sell goods at a just price. Economic thought evolved from feudalism in the Middle Ages to mercantilist theory in the renaissance, when the prevailing wisdom advocated that trade policy be structured in order to further the national interest. The modern political economy of Adam Smith appeared during the industrial revolution, when technological advancement, global exploration, and material opulence that had previously been unimaginable was becoming a reality. Changes in economic thought have always accompanied changes in the economy, just as changes in economic thought can propel change in economic policy.
Following Adam Smith's Wealth of Nations, classical economists such as David Ricardo and John Stuart Mill examined the ways the landed, capitalist and labouring classes produced and distributed national riches. In London, Karl Marx castigated the capitalist system he saw around him which he thought was exploitative and alienating, before neo-classical economics in a new era sought to erect a positive, mathematical and scientifically grounded field above normative politics. After the wars of the early twentieth century, John Maynard Keynes led a reaction against governmental abstention from economic affairs, advocating interventionist fiscal policy to stimulate economic demand, growth and prosperity. But with a world divided between the capitalist first world, the communist second world, and the poor of the third world, the post-war consensus broke down. Men like Milton Friedman and Friedrich von Hayek warned of The Road to Serfdom and socialism, focusing their theory on what could be achieved through better monetary policy and deregulation. As Keynesian policies seemed to falter in the 70's there emerged the so called New Classical school, with prominent theorists such as Robert Lucas and Edward Prescott. Their revival of laissez-faire ideas caught the imagination of some western leaders. However, the policies of governments through the 1980s have been challenged, and development economists like Amartya Sen and information economists like Joseph Stiglitz have brought new ideas to economic thought in the twenty first century."
Category: Politics
Basic Economic Concepts and a Quick Review of the History of Economic Thought | by Doc Fenton on Feb 8, 2009 at 8:35 pm | | |
I wrote earlier that I was planning on doing a post just on sources, but Colonel Hapablap suggested that it might be a better idea to do a series of very simple explanations of basic economic concepts. I agree that this seems like a good idea, but I think I'll mix it in with some of my usual historical development stuff that I like to do.
Keep in mind that my larger plan is to concentrate on financial history of the world and the economic schools of thought that have gone with it, so just looking at the wider history of economic thought constitutes something a little different (as financial economics--especially as it relates to government actions in America, which is my chief focus--is just a small subset of economic thought in general).
Also keep in mind that I can be a horrible teacher, especially when it comes to rehashing old basics, so bear with me here. I'm not going to go through much of the details, but rather just go through a hastily assembled laundry list of basic economic concepts.
Where to start? As always, with basic supply and demand in a perfectly competitive market. Since I'm a Wikipedia fanatic, I'll just go ahead and link to many of the entries that can be found there, beginning with " Supply and demand." The basic chart (in this case indicating a slightly positive shift in the demand curve) looks like this...
The first thing to note is that in this basic economic model, demand and supply are not fixed quantities, nor are they even variable quantities based on some function, but are properly thought of as "schedules," or curves. This just reflects the basic fact that economics is a quantitative science of decision-making, or as is usually stated, the study of how best to allocate scarce resources (since nobody can get everything they want).
For the demand curve, or demand schedule, it makes sense that the lower the price of something, the more of it will be sold, and the higher the price of something, the less of it will be sold--but that's just the buyer's perspective. For the sellers out there, the lower the price of something, the less they will be inclined to sell, and the higher the price of something, the more they will be inclined to sell. Ideally, if you are at some country market commodity fair or some similar environment, the " spot market" will almost automatically, through the "invisible hand" of commerce (an Adam Smith reference), come up with the proper price for a good as indicated by the crossing of the curves on the chart. At this point, you get no surplus or shortage, but instead have everything clear at the most efficient price.
This classical, pro-"liberal" view of economics was based on a model of perfect competition, and tended to look at government actions as the source of problems in creating artificial surpluses and shortages in various markets, and historically speaking, there is much truth to this. Hence the popularity for laissez-faire economists back in the day. Consider that creating an artificial floor (e.g., the price of labor in terms of hourly wages) on a market price by official decree will often create a surplus of people who want to sell their services, but cannot find a buyer. In contrast, creating an artificial ceiling (e.g., the price of a gallon of gasoline) on a market price by official decree will often result in a shortage of goods to potential buyers willing to pay the official price.
Granted the hands-off price mechanism, like most everything else in the world, isn't always completely fair as a social system, for a variety of reasons, but the key importance of these first economists was in helping to demonstrate that top-down government actions usually made these situations worse, not better. (Interestingly, this could become popular in Great Britain for a peculiar set of reasons, where the poor working classes actually demanded free trade and a strong currency in order to avoid government price supports for aristocratic farmers.) Just from an information perspective focusing on system knowledge, how efficiently can one government bureau really be in assigning millions of finely differentiated good and services to millions of different people?
Now of course the idealistic model is still far from perfect. A lot of assumptions have to be made in the classical model, and so economists eventually hammered out in some detail the distinguishing characteristics of " perfect competition": (1) many buyers/many sellers; (2) homogeneous products; (3) low entry/exit barriers for competitors and potential competitors; (4) perfect information; and (5) an environment where firms rationally seek to maximize profits.
ASIDE: There are also a lot of little odd phenomena (my favorite are Giffen goods), as well as cases where things could go wrong (as occurs with monopolies and cartels, which tend to artificially restrict supply and result in deadweight loss to society as a whole), that were discussed and illustrated by economists around the end of the 19th century. But I digress...
One of the most important concepts to grasp when trying to understand the rational behavior of individual firms is that the costs and benefits of actions are calculated "at the margin," which leads naturally into the subject of marginal utility, and indeed the philosophy (or economic worldview) of utilitarianism in general. (This school of thought is most associated with Jeremy Bentham and John Stuart Mill, and was parodied or criticized to some degree by Romantic writers, and also by popular novelists such as Charles Dickens.)
In any case, utilitarianism reminds us that economics is not just about nominal prices, and indeed, in perfect competition, economic profits are assumed to be zero, as it is reasoned that any existing economic profits would immediately bring in new competitors who would drive them down to nothing. If this seems strange, keep in mind that economists and accountants generally have differing paradigms for measuring opportunity costs.
The concept of the opportunity cost of capital then flows naturally toward the concept of the time value of money. (I know, I know, this subject is introduced so many times in so many different classes that it often gets comical when a teacher decides to go over it again near the beginning of a course--still, I had to mention it.) I'll just go ahead and repeat the first sentence in the Wikipedia article: "The concepts of present and future value hinge upon the premise that an investor prefers to receive a payment of a fixed amount of money today, rather than an equal amount in the future, all else being equal."
(By the way, this simple concept, along with the concept of marginal utility, is all you need to demonstrate that the Marxist ideas about the labor theory of value, and of the theft of worker surplus by capitalists, are false, even in theory.)
So getting back to the historical development of these ideas in economics, as I mentioned I like to follow, a good page to look at the different schools of thought can be found at a VisualWikipedia page, " History of economic thought." After perfect competition and anti-competitive behavior and sunk/opportunity/marginal costs and price elasticity and substitution/income effects and consumer indifference curves all that stuff was mostly hashed out way back when, economics in general tended to shift toward more macroeconomic concerns in the 20th century, and the rise of Keynesianism and monetarism (or alternatively, the neoclassical Chicago school of economics), both of which were opposed by many thinkers of the Austrian school of economic thought. But before diving into Keynes and Friedman, a short word might be in order about free trade and the death of mercantilism, at least in terms of its respectability amongst economists at the time.
ASIDE: I don't want to spend too much time on Malthusianism, because I think it that's a side issue, and I also don't want to spend too much time on Say's law, along with the lesser-known Gresham's law, because I'll get to this stuff later, as it relates directly to monetary economics.
Mercantilism is generally disfavored by economists, who tend to favor more free trade. According to the theory of Ricardo, free trade should benefit both parties so long as there exist different levels of comparative advantage between the two trading blocks. Note that having differences in comparative advantage does not necessarily imply that one country is more efficient at producing one product than the other (this would constitute what is called an " absolute advantage" of one country for a particular good). Also, if one country remains protectionist, and the other opens itself up to trade, both countries should benefit from the opening up. Policymakers often talk about "giving" away concessions in free trade agreements, but what they're talking about typically refers to special interest groups and sociopolitical pressures. In economic terms, even by giving these things up, their economies should become better off as a result. Now certain modern economists might disagree with such blanket statements, and there is some serious game theory stuff (read about von Neumann and Nash if you're interested in learning more about the economic theory of games--or if you're interested specifically in the games of politics, look up the public choice theory of the Virginia school of economics) that complicates the hell out of everything, but in general, the classical Ricardian school would just say, "open up to freer trade whenever possible." It generally works for Singapore and Hong Kong.
But finally getting to 20th century popular economics, Keynes changed things a lot with two new models for looking at how governments operate on the macro level. The first is just your typical AD-AS model, where the demand curve for a particular good has been abstracted out to a theory of aggregate demand for all products and services in the economy as a whole, and is not plotted across quantity and price axes, but rather axes representing total national income/output (y) and price (according to a GDP deflator or some other general measure of price for a relatively stable basket of goods). This creates a bigger bone of contention that you might realize, as if I'm not mistaken, many Austrians take issue with the aggregate demand and aggregate supply curves of the Keynesian cross.
When you think about it, it is a sort of strange idea that a greater supply of currency should make people demand, and thus create, more goods. But pricing behavior is almost never instantaneous, especially across a whole economy, and especially across a whole economy that's already operating in dysfunction. Thus, you have to keep in mind that a lot of Keynesian economics, admittedly, and for that matter explicitly, depends on price mechanisms having certain time lags to outside events, a notion that has been attacked by members of the rational expectationists school ( LINK) and others, who tend to think that individuals and the marketplace will always be a step ahead of the government.
Whether that's true or not, the Keynesian aggregate model is typically employed when figuring out how our GDP is calculated today, using the familiar equation y = C + G + I + (X - M). This leads to an alternative way of looking at the national income, using a Keynesian cross instead of the AD-AS model:
A Keynesian cross, sloped upward, since additional income results in additional demand for goods.
To temper the excesses of policymakers claiming to follow Keynes (more on that in later posts), there is also implied by monetarists a certain optimal rate of macroeconomic growth and a certain natural rate of unemployment (note there is also a theoretical natural real interest rate), beyond which you are only "overheating" the national economy for temporary gain, but long-term expense. It's difficult to know where this boundary lies, so many hard-core monetarists want policymakers to largely ignore growth and unemployment data (which they criticize as "fine-tuning"; see Okun's law and the Phillips curve), and look chiefly at the money supply instead.
This is a "Marshallian" Keynesian diagram, showing long run aggregate supply as an inelastic vertical line, y*, representing " potential output." Short run aggregate supply can go beyond this temporarily, but it is considered inefficient overheating.
This graph separates aggregate supply into different schedules for the short run, medium run, and long run, as market players rationally alter their expectations based upon the effects of public policy or other events.
I wrote that the Keynesian AD-AS model was the first of the two major Keynesian models, and the second, the IS/LM model ("IS" for investment/savings, and "LM" for liquidity/money preference), was actually introduced by Hicks and Hansen in 1936. It represented an advance in economic thinking, as it made concrete the notion that money was itself a good or service (depending on how you look at it), just like all the other goods and services that for which it served as a purchasing store of value. Of course, it makes no sense to describe the price of money in terms of its own face value, but with the IS/LM model, we see that market interest rates dictate their own sort of "price" of money as they affect the opportunity cost of holding on to cash.
With this model in place, economists could think more effectively about the opportunity cost of capital, the allocation of risk and risk tolerance (later to develop into modern portfolio theory, which is a separate subject I won't get into right now), and the relation of business cycles to the monetary supply. It was this model that helped usher in the age of the FOMC, which focuses most of its concentration on the issue of interest rate targets. (Note that in the " impossible triangle" of monetary theory, you have to make choices among price or interest rate stability, exchange rate stability, and free flow of capital.)
It also helped shed a little light on the mysterious multiplier effect of Keynesian economics, especially as it relates to fractional reserve banking, which Austrian economists so vehemently oppose for its role in money creation by banking institutions.
Admittedly, uneven money creation is what causes the familiar boom-bust business cycle, where manic lending based on false expectations in one decade can lead to harmful imbalances which crash down on people in the next decade (which has led to many modern international economists these days, such as Nouriel Roubini, who focus intently on capital and current account balances), but I'll write more about this later.
In general, while economists can rarely run laboratory experiments (except for in very specialized fields like behavioral finance or prospect theory), they do have a lot of sophistication in econometric models to attempt to tease out causation from empirical historical data, which after all, what the motivation for this blog is all about. (And like I wrote earlier, I'll go over sources for this empirical historical data next time.)
For what it's worth, sorry if I confused anybody with my frantic writing from throwing all this crap together in a relatively short amount of time. I went through everything in a very fast and disorganized way, and there might be mistakes, but I still thought it'd be nice as one this blog's starting points. You know, "don't let the perfect be the enemy of the bad," and all that.
For what it's worth, I'll leave you with the little three-paragraph spiel from the VisualWikipedia page I linked to earlier, just for the hell of it:
Category: Politics
Inaugural Post | by Doc Fenton on Jan 29, 2009 at 11:53 am | | |
I've decided to start an economic history and theory blog on TigerDroppings.com. There are two things I'm aiming to do. First, we've been seeing a lot of debate on economic policies lately, so I thought it might be beneficial to work through a historical retelling of the history of banking and finance in order to get better perspective on our situation in current times.
Later on, maybe I can use this blog to hash through some troubling theoretical issues (anything from supply-side tax policy to vouchers to immigration to government-enforced transparency, etc.) that are dividing American citizens who generally consider themselves to be libertarian-leaning economic conservatives. For that kind of stuff, I'll be using the term "economic" in a very broad Becker-Posner kind of sense, where it applies to personal decisions and utility, and not necessarily monetary figures. But that's all probably months away.
Of particular interest to many right now is the debate over government efforts to provide price stability, and whether or not deflation is as dangerous as is commonly believed. I think a lot can be learned about this debate from history, so as I reflect back on America's past, I'll rely heavily on a book by libertarian economist Murray Rothbard (now deceased), which was published a few years ago by the Von Mises Institute in Auburn, Alabama, as I think this will make for a good base to discuss certain eras in U.S. financial history.
Also, as I go through different historical time periods (probably with posts every other weekend or so), I'll try to frame my posts around a particular issue for debate, so that there will be something to think about rather than me just telling a bland story that many people already know. For instance, how much did monetary debasement really lead to the deterioration of the Roman economy? Is Christian animus to usury overstated in most histories of medieval banking? Why did the British global trading empire become unsustainable? What were the real effects on the U.S. economy from progressive legislation under Roosevelt, Taft, and Wilson? Etc.
Since arguments often get heated and reptitive right now, I'll try to stay away from recent issues as I get started, preferring to build up to them over time. Hopefully, we'll be able to talk about the economic history of the deregulatory era (1978-present) and the last 10 years with more detachment and perspective later on as time makes certain issues clearer.
It's my wish that people will be interested in what I post, but if not, I think my dry and boring digressions will still serve as a useful personal exercise for me to organize in a consistent fashion all these historical thoughts running in my mind ... so please bear with me.
Finally, I offer a sincere thanks to Chicken and all the other admins at TD.com.
-Doc Fenton
Category: Politics
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