Three Articles From Readers
Now that the book manuscript is turned in, I am attending to the black hole known as my Inbox. Here are three items of interest:
* Arthur Foulkes (not related to Guy Fawkes) sent his column giving a great critique of Keynesianism for the layperson.
* Foulkes also sent this Keynesian professor’s response.
* Brian Shelley sent this hilarious article on boom-busts in US history. My personal favorite:
The Panic of 1907 started the way many panics do, with a greedy capitalist. Multimillionaire Augustus Heinze, who had made his fortune mining in Montana, believed he had enough control over the copper industry to corner the market.
With the help of several major banks, he concocted a scheme to buy up all the shares of United Copper. But Heinze had overestimated his prowess, and the scheme failed, bringing down Heinze, United Copper, the banks, and many, many stockholders.
The debacle sent ripples of anxiety throughout the market, and investors started pulling their money out of banks altogether. After one of New York City’s biggest trusts went under, panic ensued, and the stock market collapsed.
At the time, there were no central banks in place, so the federal government had no means of bailing out businesses or injecting cash into the economy. It just stood by, idly waiting for a hero to save the day. Amazingly, one did.
James Pierpont Morgan, banker extraordinaire, rescued the American economy. He propped up many of the failing banks in New York by twisting the arms of other financiers, and he assuaged investors’ fears by backing up the market with his own vast cash reserves. Before long, Wall Street was on the mend.
The government also learned its lesson. With the panic resolved, it created the Federal Reserve, ensuring that it could buttress the economy during hard times. Since then, the government has taken a more active role in financial matters and relied less on the kindness of robber barons.
Phew! I’m glad the government learned its lesson from the Panic of 1907. You know how everyone nowadays is comparing the current mess to the Panic of 1907? Man I can’t believe how bad the financial markets were in 1907. Glad we don’t ever have to worry about living through that again.
