A letter to a bud

[Old and In the Way]

A buddy of mine sent an e-mail tonight about prior economic emergencies...he's one of the good guys, but I don't profess to understand economic and political circumstances from 100 years ago. I have, however, been paying attention to the economy and politics since 1970. Here's my response which I'm happy to share...

Hmmmm…I’m no historical economist and I really can’t comment on the economic/political influences on our economy 100 years ago. An economy radically different then ours today. Here’s what I do know-

Bill-

How goes it? Tom's starting on special teams for the Mariners this weekend...he's obviously psyched and we couldn't be prouder!

In regard's to your e-mail-

Late in Clinton’s term, while he was fighting an impeachment for lying about sex, from a Republican Congress who didn’t give a rat’s ass about terrorism or populist economics, we got a serious restructuring of investment banking, thanks to Phil Gramm. We also got a deregulation of energy trading (now known as Enronomics, thanks to Phil). Since the Supreme Court selection in 2000, we got a deregulating Presnit and a deregulating Republican Congress. Since 2006, we got a Democratic Congress unable to override minority filibusters or Presidential vetoes. Here we are. 2 months before a national election, the Republicans, who were against government interference in the free markets since St. Reagan, now want the government to nationalize the investment banking, commercial banking, and banking insurance markets. Well, not underwrite exactly, but buy their crappy paper that Republican legislation created. 2 months before a national election. Reminds me of 2002 when the IWR vote got jammed up our ass (“mushroom clouds if we don’t act”).

This is political theater at its finest…the Bush administration, by their own admission in a WH press conference 2 days ago, said they’ve been working on this for 2 months. Why now are we facing a depression on Monday? We aren’t. The market was down 12 points today…is that a market in meltdown? This is all about getting McCain elected in November…I really hope the American people are smart enough to figure this out. Have we got structural economic problems? Sure. Do we need to give Bernacke $700BB that we don’t have tomorrow…with no oversight? Fuck no. Schumer had it right. “Here’s $150BB….with strings. Use it and we’ll see you in January to see what you did and what we need to do next.”

Anyone who trusts Republicans to look out for our best interests havien’t been paying attention to politics since 1980.



Bob




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From: my bud
Sent: Wednesday, September 24, 2008 8:30 PM
To: Undisclosed-Recipient:;
Subject: Fw: delanceyplace.com 9/23/08-panics and crashes


In today's excerpt--the history of the United States has been filled with financial panics and market crashes: The Panic of 1819, the Panic of 1837, and the stock market crash that signaled the Great Depression--to name just a handful. In 1819, the end of the Napoleonic Wars brought an economic boom, and when the crash came, the Second Bank of the United States sharply curtailed its lending, greatly worsening the problem. This monetary curtailment, also employed by the Federal Reserve in the early 1930s, stands in contrast to the policies being pursued by the Federal Reserve and Treasury during our current market crisis:

"February 20, 1817, would prove the zenith of the 'Era of Good Feelings' as far as the Bank of the United States and American enterprise were concerned. A year later, Astor warned Gallatin that redoubled speculation, goaded by the BUS, now threatened 'a general Blow up' among the state banks. A year after that, the American economy collapsed from top to bottom. ... American staple prices and land values dropped by anywhere from 50 to 75 percent; and backward the dominos fell, from ruined speculator to merchant farmer. ...

"Early in 1819, pushed by Astor and Girard, the bank's directors finally dismissed Jones and replaced him with the South Carolinian Langdon Cheves. The new president ... tightened the screws, reducing the bank's liabilities by more than half, sharply cutting back the total value of bank notes in circulation, and more than tripling the bank's specie reserve.

"Without question, Cheves's decision to contract instinctually made sense, both in halting the runaway inflation and in doing right by his stockholders. ... Yet, for the national economy, his timing and the extent of his actions could not have been worse, ... turning what might have been a sharp recession into a prolonged and disastrous depression. Just as the bank intensified its deflationary pressure, commodity prices for American staples on the world market collapsed. Coupled with the bank's brutal deflation, the free fall of agricultural prices prevented state banks from either collecting from their debtors or meeting their obligations to the BUS--leading to a tidal wave of bank failures, business collapses, and personal bankruptcies. As the financial writer and bank critic William Gouge later observed, 'The Bank was saved and the people were ruined.' "

Sean Wilentz, The Rise of American Democracy, Norton, Copyright 2005 by Sean Wilentz, pp. 205-207.