PREV ARTICLE
NEXT ARTICLE
FULL ISSUE
PREV FULL ISSUE
V11 2008 INDEX
E-SYLUM ARCHIVE
WHY THE UNITED STATES BANKING SYSTEM IS PRONE TO PANICS
One of my favorite authors, historian John Steele Gordon
penned an article in Friday's Wall Street Journal titled A Short
Banking History of the United States - Why our system is prone to
panics. It's a great overview of how we got to where we are today, and
provides not only a view of private banknotes but a lesson in what's wrong
with today's system and how it might best be fixed. -Editor
We are
now in the midst of a major financial panic. This is not a unique
occurrence in American history. Indeed, we've had one roughly every 20
years: in 1819, 1836, 1857, 1873, 1893, 1907, 1929, 1987 and now 2008.
Many of these marked the beginning of an extended period of economic
depression.How could the richest and most productive economy the world has ever known have a financial system so prone to periodic and catastrophic break down? One answer is the baleful influence of Thomas Jefferson.
Jefferson, to be sure, was a genius and fully deserves his place on Mt. Rushmore. But he was also a quintessential intellectual who was often insulated from the real world. He hated commerce, he hated speculators, he hated the grubby business of getting and spending (except his own spending, of course, which eventually bankrupted him). Most of all, he hated banks, the symbol for him of concentrated economic power. Because he was the founder of an enduring political movement, his influence has been strongly felt to the present day.
Jefferson's chief political rival, Alexander Hamilton, had grown up almost literally in a counting house, in the West Indian island of St. Croix, managing the place by the time he was in his middle teens. He had a profound and practical understanding of markets and how they work, an understanding that Jefferson, born a landed aristocrat who lived off the labor of slaves, utterly lacked.
Hamilton wanted to establish a central bank modeled on the Bank of England. The government would own 20% of the stock, have two seats on the board, and the right to inspect the books at any time. But, like the Bank of England then, it would otherwise be owned by its stockholders.
To Jefferson, who may not have understood the concept of central banking, Hamilton's idea was what today might be called "a giveaway to the rich."
While it will be painful, the present crisis will at least provide another opportunity to give this country, finally, a unified banking system of large, diversified, well-capitalized banking institutions that are under the control of a unified and coherent regulatory system free of undue political influence.
To read the complete article, see: A Short Banking History of the United States (http://online.wsj.com/article/SB122360636585322023.html)
Wayne Homren, Editor
The Numismatic Bibliomania Society is a non-profit organization promoting numismatic literature. See our web site at coinbooks.org.
To submit items for publication in The E-Sylum, write to the Editor at this address: whomren@gmail.com
To subscribe go to: https://my.binhost.com/lists/listinfo/esylum
All Rights Reserved.
NBS Home Page
Contact the NBS webmaster
