Heard a new one today. Can someone tell us about 1910?

[Sentath]

The theory expounded was short and even then I might not have caught it all as I had to leave the room . But, the gist of it was that in 1910 the same thing as is happening now happened then, and that by doing absolutely nothing the situation had righted itself by 1912.

I admit having paid little or no attention to my football coaches .. ah I mean social studies instructors. (never could put up with the little-minded totalitarians enough to be on anything past little league) What happened in 1910 and, if you would, how does it compare to 1929(?) and or today. Please?

[TimesSquareCowboy]

1. per Wikipeida:

The Panic of 1910-1911 was a slight economic depression that followed the enforcement of the Sherman Anti-Trust Act. It mostly affected the stock market and business traders who were smarting from the activities of trust busters, especially with the breakup of the Standard Oil Company.


and even though it was a slight economic depression, it's apparently not true that 'nothing was done.'

In 1910, seven men held a secret meeting on Jekyll Island off the coast of Georgia. It's estimated that those seven men represented one-sixth of the world's wealth. Six were Americans representing J.P. Morgan, John D. Rockefeller, and the U.S. government. One was a European representing the Rothschilds and Warburgs.

In 1913, the U.S. Federal Reserve Bank was created as a direct result of that secret meeting.

http://finance.yahoo.com/expert/article/richricher/124339

[Spider Jerusalem]

2. Possibly you mean 1907

http://en.wikipedia.org/wiki/Panic_of_1907

It was the Panic of 1907 and the aftermath that led to the creation of the Federal Reserve System, when the need for guaranteeing bank deposits and providing liquidity to protect the financial system in times of crisis became clear.

The present situation isn't really comparable because the economy has grown tremendously since 1907 and the types of assets involved represent a much broader economic spectrum. There's not really a comparison.

[willing dwarf]

3. There've been multiple bank panics from the time the nation started

Let's face it -- capitalism runs on boom-bust cycles and inspite of the intervention of the Fed, the bust we're in now, while unique to itself, is really just another bust. The cycles seem to be a way that wealth gets spread around a bit.

Well it would be, but for the last 35 years, since Reagan was elected wealth has become more and more concentrated into the hands of fewer and fewer people. If those folks were to loose some of it, it would be well for the rest of us. But they have swindled and conned and they're not going to loose anything. Instead we'll be paying for their losses -- and our children and grandchildren.

It seems to me that this is the first time the bust has been socialized. We're a socialist state in bust times, a capitalist state in times when the rich can get richer.

[ColbertWatcher]

9. Those bank panics happened like clockwork (every 20 years) until the New Deal ended them. n/t

[Loge23]

4. Apples and oranges

Whatever happened in 1910 - and I can't find any reliable account of anything anyway - is simply not relevant to what we have today.
The global infrastructure of finance is the game-changer.
Arguably, the depression that began in 1929 isn't much of an indicator either.
Today's conditions will probably not find shoeless men in shabby overcoats selling apples on street corners.
Many think we're already in a depression.
Different times - 1910 is like prehistoric times compared to where we are today.

[NewEngland4Obama]

5. financier J. P. Morgan, pledged large sums of his own money

and convinced other to do the same.... just like the stimuluspackage...

The Panic of 1907, also known as the 1907 Bankers' Panic, was a financial crisis that occurred in the United States when the New York Stock Exchange fell close to 50 percent from its peak the previous year. Panic occurred during a time of economic recession, when there were numerous runs on banks and trust companies. The 1907 panic eventually spread throughout the nation when many state and local banks and businesses entered into bankruptcy. Primary causes of the run include a retraction of market liquidity by a number of New York City banks, loss of confidence among depositors, and the absence of a statutory lender of last resort.

The crisis occurred after the failure of an attempt in October 1907 to corner the market on stock of the United Copper Company. When this bid failed, banks that had lent money to the cornering scheme suffered runs that later spread to affiliated banks and trusts, leading a week later to the downfall of the Knickerbocker Trust Company—New York City's third-largest trust. The collapse of the Knickerbocker spread fear throughout the city's trusts as regional banks withdrew reserves from New York City banks. Panic extended across the nation as vast numbers of people withdrew deposits from their regional banks.

The panic may have deepened if not for the intervention of financier J. P. Morgan, who pledged large sums of his own money, and convinced other New York bankers to do the same, to shore up the banking system. At the time, the United States did not have a central bank to inject liquidity back into the market. By November the financial contagion had largely ended, yet a further crisis emerged when a large brokerage firm borrowed heavily using the stock of Tennessee Coal, Iron and Railroad Company (TC&I) as collateral. Collapse of TC&I's stock price was averted by an emergency takeover approved by anti-monopolist president Theodore Roosevelt. The following year, Senator Nelson W. Aldrich established and chaired a commission to investigate the crisis and propose future solutions, leading to the creation of the Federal Reserve System.

[Veritas_et_Aequitas]

6. The theory doesn't hold water.

1910 was a recovery year. The stock market was generally bullish as Taft was striking down sine regulations imposed by TR back in 1907 (maybe that's what you're thinking of). While the Sherman anti-trust act was enforced in 1910, it caused what more or less accounts to an economic hiccup. It didn't take much effort to recover.

In 1907 Roosevelt pushed through a good amount of anti-monopoly legislation, which caused a scare on the stock market. Also in 1907 there was a major bank failure; The Knickerbocker Trust Company went under, causing a severe monetary contraction. The Treasury bought $36m worth of government bonds to offset the decline (the first recorded instance of quantitative easing in US history). As of December last year, the 1907 - 1908 panic was the third worst bear market (and one of our worst economies) in US history.

I'll post on the 1929 and 1930 crashes in a minute.

[SergeyDovlatov]

7. Another one that they keep bringing up is 1921 recession

http://en.wikipedia.org/wiki/1921_recession

The National Bureau of Economic Research dates the 1921 recession from a general business peak in January 1920 to a trough in July 1921. The recession in the United States was brief relative to the Great Depression later that decade, but it included a very sharp price deflation. The decline in the GNP price deflator from 1920 to 1921 is the largest one-year percentage decline in the series in the more than 120 years covered.

Various estimates show that one-year deflation figures were 18 percent, 13.0 percent, and 14.8 percent, respectively. The closest comparator is the 11.5 percent deflation recorded for 1931-32, the third year of the Great Depression. Wholesale prices declined by 36.8 percent for 1920-21, the largest one-year decline on record, going back at least to the American Revolutionary War period. The 1921 deflation contains another striking feature. Not only was it sharp, it was large relative to the accompanying decline in real product. The ratio of the percentage decline in the GNP deflator for 1920-21 to the percentage decline in real GNP is 2.6 using the Department of Commerce figures. By contrast, during 1929-30, the first year of the Great Depression, the GNP deflator declined by 2.7 percent and real GNP by 9.4 percent, for a ratio of 0.3. The ratios of the percentage decline in GNP prices to the percentage decline in real GNP for 1930-31, 1931-32, 1932-33, and 1937-38, the other Great Depression years in which real GNP declined, were 1.0, 0.9, 1.2, and 0.3, respectively, all well below the 1920-21 figures.

Deflation was so sharp, both in itself and in relation to the decline in real product, because the deflation was produced by a sharp decline in aggregate demand combined with an increase in aggregate supply, a supply increase in which deflationary expectations played a prominent role.

As usual, a buoyant expansion followed the severe contraction of 1920-1921. In the 22 months after the depression bottom, industrial production rose 63%, the money stock expanded by 14%, and wholesale prices rose by 9%. Net national product rose 23% in the corresponding two calendar years.

[Veritas_et_Aequitas]

8. Ah, yes... the year of our first major tech burst - the automotive industry.

It was the 6th worse bear market in the 20th century (as of December 2008).

[Veritas_et_Aequitas]

10. 1907, 1929, and today.

Interestingly, the crash in 1929 was only the fourth worse bear market in US history, even though many investors saw up to 50% of their money disappear in 2 months.

The real damage was done from 1930 - 1932. The Smoot-Hawley Tariff Act passed in 1930. While it is hotly debated if this act ultimately helped or harmed US industry and commerce, everyone agree it missed the mark and probably caused more panic on the stock market. Hoover's failure to act effectively wreaked havoc on the economy. Apparently it takes more than confidence to repair a severely wounded economy. During this time investors lost on average 86% of their investments, a catastrophic figure.

As for today, there's good news and bad news. The bad news is that the underlying factors that caused or contributed to the 1907, 1929, 1930 - 1932, 1937, and 1973 recessions/depressions are integral parts of the current crisis. While economists have yet to title our depression, I prefer calling it the Clusterfuck of 2008 because of all of the underlying causes. As of today, the current bear market is the 5th worse in US history (there's been about a 48% loss). If the market drops below 7500, it will surpass the 1929 crash in severity. The good news is, we're not entirely screwed. We know how our government responded to each of these problems, so it's possible to determine how we can best handle this crisis from past experience.

Bush's econ people started doing one thing right when things started going to hell - they tried to use monetary policy to soften the blow (1907). As much as I hate to give Bernanke props, he had enough common sense to start quantitative easing to slow the economy's descent. Geigner has continued using this practice. The stimulus bill should kick into action 2 to 3 months from now, and by the fourth quarter this year we'll probably see some positive results from it (1933).

[Sentath]

11. Thank you Thank You

This should pop that talking point!

Lots of good information for other fights. And the fact that they did anything sinks this one.