I was talking to a customer the other day and he brought up a subject that I suspected was happening, but don’t want to believe: We are in another housing bubble.
I hope he’s wrong, but all the signs are there. We all remember the last one. Many businesses and families were destroyed because of that federal government created disaster. Why do I say that? Because that crisis couldn't have happened without government sponsored entities such as Fannie Mae and Freddie Mac and all the Clinton cronies who ran those two organizations.
As a student of history, I can’t help but notice that most economic calamities that befall our country have been induced by the federal government. For instance, let’s take the Panic of 1873. Jay Cooke became the richest man in the country due to his financial dealings with the federal government, that was until his empire crashed bringing about one of the worst depressions in American history. Here is an excerpt from Murray N. Rothbard’s, The Progressive Era:
The railroad financier with the closest ties to the Republican administration was the redoubtable banker, Jay Cooke, head of Jay Cooke & Co. A small Philadelphia financier at the outset of the Civil War, Cooke had the vision to found his banking house and to wangle from the federal government a monopoly on underwriting the massive bond issues floated during the war. To sell them to the gullible public, Cooke launched the first modern propaganda campaign for selling the bonds, employing thousands of subagents and such slogans for the credulous as “A national debt a national blessing.”
Cooke obtained the highly lucrative monopoly underwriting concessions from Washington through his influence on Secretary of Treasury Salmon P. Chase. Cooke’s brother, Henry, was a long-time aide of Chase, from the latter’s tenure of Governor of Ohio,. Henry then followed Chase to WAshington. After extensive wining and dining of Chase, and after demonstrating his propaganda methods in selling government bonds, Jay Cooke won the coveted concession that was to make him one of the richest men in America and his new Jay Cooke & Co. by far the leading investment bank. Cooke became widely known as “The Tycoon,” and the phrase “as rich as Jay Cooke” became a popular saying.
One of the casualties of the Panic of 1873 was the Freedman’s Bank. This institution’s clientele consisted of ex-slaves, mainly veterans of the Union army, who entrusted their life savings to a bank they thought was backed by the federal government. Boy were they wrong, especially after Henry Cooke got his mitts on it. Here is an excerpt from Mr. Speaker by James Grant:
In 1870, they amended the charter to permit a more liberal policy. No more was the management restricted to buying dull government bonds but could now roll the dice in real estate. Up, therefore, went a splendid new headquarters building for the bank on Pennsylvania Avenue. It was in this same year that the board fell under the spell of Henry D. Cooke brother of the era’s most bedazzling financier, Jay Cooke. Under Cooke’s leadership, the Freedman’s Bank finance committee took to calling the reserve fund “idle money.” Why bother with a rainy-day fund when the sun shone bright?
What extent Henry Cooke played into the demise of this institution is debatable. The Freedman’s Bank was rife with mismanagement and outright fraud; it wouldn’t have survived either way. But the underlying belief was this bank was guaranteed by the federal government and many a petition was filed decades after and all for naught. The federal government paid not one penny to a depositor.
One of the biggest shoes yet to drop is our national debt. When this federal government behemoth befalls our country, it will put all other depressions to shame. And this couldn’t have happened without the Federal Reserve (another government sponsored entity) and the greenback. Here is another excerpt from Mr. Speaker! By James Grant:
The Greenback furor is calculated to mystify most patrons of a 21st century automatic teller machine, for whom paper money is the only money they know. Not since 1971 has the dollar been remotely backed by gold, and not since 1933 has an American citizen been able to exchange paper for gold, or gold for paper, at a fixed, statutory rate. From the millennial vantage point, therefore, the paper dollar is the modern contrivance, the gold dollar the anachronism. Not so, however, in the late 1870’s. At the time, gold was the money of the future, as it had been in the past. As Reed was finishing his first congressional term and beginning his second, the gold standard was being institutionalized in Europe. Silver, now much the cheaper of the two precious metals, was the money of Mexico, China, India and other such poor and forlorn lands. Paper, held the enemies of Solon Chase, was the money of communism and anarchy.
Without fiat money, communists like Bernie Sanders and his acolytes wouldn’t have a platform to stand on. And when this whole house of cards falls around us the anarchists will have their day.
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