The Real Great Depression (Panic of 1873)

[EconProf]

Greekfire: your are sooo right.
And it wasn’t even very long ago. What is remarkable is how this crisis resembles the Long Term Capital Management moment of, I believe 1998. Then LTCM used extremely high leverage, a complicated and flawed economic model with innovative new tools, and even a Nobel-prize winning economist in their highest management. The whole structure was based on an assumption that success was nearly inevitable–only a 1 in 1000 probability of failure. Well, a black swan flew by, and they blew up.
I think their top guy was named Merriweather, and he recently was in control of a hedge fund that just collapsed. Basing this all on my flawed memory of news events, so if anyone can fill in the blanks please do.

[Anonymous]

Hello Greekfire.
Is this what you are talking about?
http://www.sjsu.edu/faculty/watkins/ltcm.htm

Also the PBS program cover LTCM in the program Command Heights, it is very well done.
http://www.pbs.org/wgbh/commandingheights/

[Anonymous]

Hello Greekfire.
Is this what you are talking about?
http://www.sjsu.edu/faculty/watkins/ltcm.htm

Also the PBS program cover LTCM in the program Command Heights, it is very well done.
http://www.pbs.org/wgbh/commandingheights/

[Anonymous]

Hello Greekfire.
Is this what you are talking about?
http://www.sjsu.edu/faculty/watkins/ltcm.htm

Also the PBS program cover LTCM in the program Command Heights, it is very well done.
http://www.pbs.org/wgbh/commandingheights/

[Anonymous]

Hello Greekfire.
Is this what you are talking about?
http://www.sjsu.edu/faculty/watkins/ltcm.htm

Also the PBS program cover LTCM in the program Command Heights, it is very well done.
http://www.pbs.org/wgbh/commandingheights/

[Anonymous]

Hello Greekfire.
Is this what you are talking about?
http://www.sjsu.edu/faculty/watkins/ltcm.htm

Also the PBS program cover LTCM in the program Command Heights, it is very well done.
http://www.pbs.org/wgbh/commandingheights/

[Carl Veritas]

Great info, Greek.
There is a common thread however: Bank credit by way of fractional reserve banking. Banks are technically insolvent and this is where booms, financial panics and depressions originate. Even when paper notes were required to have backing of specie, bankers routinely issued in excess of their reserves, causing bank runs. Picture a wagon full of specie being delivered to bank after bank, ahead of the bank examiner. It may be a blip on the screen today but it’s the same unstable, leveraged banking system that allows for all the subsequent abuse to occur.

What appeared to be prosperity from 1813-1818 was nothing but a bubble that resulted from inflationary war finance. It was unsustainable. And the panic of 1819 was the result. The Second Bank of the United States, authorized to issue note, had fueled land speculation. (from Panic of 1819 by Rothbard)

The panic of 1837 was also a culmination of expanding banks and bank credit and bank runs. The bankers were expanding credit with or without a central bank, which only served to coordinate the credit expansion and to a wider area. So was the bank panic of the 1920s that turned into a great depression by Hoover’s economic policies.

[Carl Veritas]

Great info, Greek.
There is a common thread however: Bank credit by way of fractional reserve banking. Banks are technically insolvent and this is where booms, financial panics and depressions originate. Even when paper notes were required to have backing of specie, bankers routinely issued in excess of their reserves, causing bank runs. Picture a wagon full of specie being delivered to bank after bank, ahead of the bank examiner. It may be a blip on the screen today but it’s the same unstable, leveraged banking system that allows for all the subsequent abuse to occur.

What appeared to be prosperity from 1813-1818 was nothing but a bubble that resulted from inflationary war finance. It was unsustainable. And the panic of 1819 was the result. The Second Bank of the United States, authorized to issue note, had fueled land speculation. (from Panic of 1819 by Rothbard)

The panic of 1837 was also a culmination of expanding banks and bank credit and bank runs. The bankers were expanding credit with or without a central bank, which only served to coordinate the credit expansion and to a wider area. So was the bank panic of the 1920s that turned into a great depression by Hoover’s economic policies.

[Carl Veritas]

Great info, Greek.
There is a common thread however: Bank credit by way of fractional reserve banking. Banks are technically insolvent and this is where booms, financial panics and depressions originate. Even when paper notes were required to have backing of specie, bankers routinely issued in excess of their reserves, causing bank runs. Picture a wagon full of specie being delivered to bank after bank, ahead of the bank examiner. It may be a blip on the screen today but it’s the same unstable, leveraged banking system that allows for all the subsequent abuse to occur.

What appeared to be prosperity from 1813-1818 was nothing but a bubble that resulted from inflationary war finance. It was unsustainable. And the panic of 1819 was the result. The Second Bank of the United States, authorized to issue note, had fueled land speculation. (from Panic of 1819 by Rothbard)

The panic of 1837 was also a culmination of expanding banks and bank credit and bank runs. The bankers were expanding credit with or without a central bank, which only served to coordinate the credit expansion and to a wider area. So was the bank panic of the 1920s that turned into a great depression by Hoover’s economic policies.

[Carl Veritas]

Great info, Greek.
There is a common thread however: Bank credit by way of fractional reserve banking. Banks are technically insolvent and this is where booms, financial panics and depressions originate. Even when paper notes were required to have backing of specie, bankers routinely issued in excess of their reserves, causing bank runs. Picture a wagon full of specie being delivered to bank after bank, ahead of the bank examiner. It may be a blip on the screen today but it’s the same unstable, leveraged banking system that allows for all the subsequent abuse to occur.

What appeared to be prosperity from 1813-1818 was nothing but a bubble that resulted from inflationary war finance. It was unsustainable. And the panic of 1819 was the result. The Second Bank of the United States, authorized to issue note, had fueled land speculation. (from Panic of 1819 by Rothbard)

The panic of 1837 was also a culmination of expanding banks and bank credit and bank runs. The bankers were expanding credit with or without a central bank, which only served to coordinate the credit expansion and to a wider area. So was the bank panic of the 1920s that turned into a great depression by Hoover’s economic policies.

[Carl Veritas]

Great info, Greek.
There is a common thread however: Bank credit by way of fractional reserve banking. Banks are technically insolvent and this is where booms, financial panics and depressions originate. Even when paper notes were required to have backing of specie, bankers routinely issued in excess of their reserves, causing bank runs. Picture a wagon full of specie being delivered to bank after bank, ahead of the bank examiner. It may be a blip on the screen today but it’s the same unstable, leveraged banking system that allows for all the subsequent abuse to occur.

What appeared to be prosperity from 1813-1818 was nothing but a bubble that resulted from inflationary war finance. It was unsustainable. And the panic of 1819 was the result. The Second Bank of the United States, authorized to issue note, had fueled land speculation. (from Panic of 1819 by Rothbard)

The panic of 1837 was also a culmination of expanding banks and bank credit and bank runs. The bankers were expanding credit with or without a central bank, which only served to coordinate the credit expansion and to a wider area. So was the bank panic of the 1920s that turned into a great depression by Hoover’s economic policies.

[stockstradr]

Thanks to the EconProf for remarking about LTCM

http://en.wikipedia.org/wiki/LTCM

..and its connection to:

http://online.wsj.com/article/SB123000810251629677.html

I was obviously aware of the LTCM story, but not aware of how John Meriwether had later set up a hedge fund (to mimic LTCM strategies only with “less leverage”) and how that fund is also now in serious trouble.

If that story alone isn’t sufficient grounds for greater regulation of hedge funds, I don’t know what is!

[stockstradr]

Thanks to the EconProf for remarking about LTCM

http://en.wikipedia.org/wiki/LTCM

..and its connection to:

http://online.wsj.com/article/SB123000810251629677.html

I was obviously aware of the LTCM story, but not aware of how John Meriwether had later set up a hedge fund (to mimic LTCM strategies only with “less leverage”) and how that fund is also now in serious trouble.

If that story alone isn’t sufficient grounds for greater regulation of hedge funds, I don’t know what is!

[stockstradr]

Thanks to the EconProf for remarking about LTCM

http://en.wikipedia.org/wiki/LTCM

..and its connection to:

http://online.wsj.com/article/SB123000810251629677.html

I was obviously aware of the LTCM story, but not aware of how John Meriwether had later set up a hedge fund (to mimic LTCM strategies only with “less leverage”) and how that fund is also now in serious trouble.

If that story alone isn’t sufficient grounds for greater regulation of hedge funds, I don’t know what is!

[stockstradr]

Thanks to the EconProf for remarking about LTCM

http://en.wikipedia.org/wiki/LTCM

..and its connection to:

http://online.wsj.com/article/SB123000810251629677.html

I was obviously aware of the LTCM story, but not aware of how John Meriwether had later set up a hedge fund (to mimic LTCM strategies only with “less leverage”) and how that fund is also now in serious trouble.

If that story alone isn’t sufficient grounds for greater regulation of hedge funds, I don’t know what is!

[Author]

Posts