Alasdair Roberts has out a new book (ht: MR) America's First Great Depression: Economic Crisis and Political Disorder After the Panic of 1837. Since I do not have access to an advanced copy of the book, I will take an earlier Boston Globe article of his to highlight some issues.
A precipitous situation, not without precedent
Alasdair Roberts, Boston Globe 10 July 2011 (some paragraph ordering changed).
Many states were caught up in the mania of 1836-37. They borrowed in Europe and competed with each other to build infrastructure that would open their markets. Legislators spent indiscriminately. Every new canal, railroad, and turnpike was supposed to pay for itself. But when the economy collapsed, so did the projects.
There was no toll revenue to repay the loans. Foreign creditors pressed the states to raise property taxes instead. But voters resisted new taxes, and many states simply lacked the capacity to collect them…Between July 1841 and December 1842, eight of the country’s 26 states defaulted on their loans. Other states and the federal government also struggled to avoid insolvency. The entire nation quickly became a pariah in international financial markets….
The crisis was a critical point in the evolution of American government. States abandoned their infrastructure schemes and adopted constitutional restrictions on borrowing.
Voters accepted new taxes, and governments developed the capacity to collect them efficiently.
“Self-government is no longer a theory,’’ said John Pettit, an Indiana
What a concept, you restrict spending and raise taxes. Today we sometimes raise taxes a little, and sometimes cut them a little. But mostly we just print more money.
Of course the States back then couldn’t make anyone take their printed money. We are not yet at that point.
When we reach that point, we will begin to understand just how wealthy we actually are.
3 comments:
Ya having the reserve currency that everyone keeps accepting is kinda the key isn't it. Once the rest of the world stops accepting our printed money the real fun will begin.
Thanks for this one. I know quite a bit about the long depression (circa 1970) but nearly nothing about this one.
Does sound a bit familiar. I wonder how long it will be before people stop taking our money and I am SOL. Saving at this point may not be enough.
That is what surprises me sometimes. Some folks think that when this happens (other people stop accepting out money) thing will get better.
Nope, when that happens, things will get radically worse. I for one, am not at all looking forward to the mess we will find ourselves in.
I agree with both of you.
At the moment they are taking the money just to keep their own economy going.
In the long run of course, what they want is not our money, but the stuff that we produce. Because we do have some oii, and we are an surplus agricultural country, we are not nearly as bad off as some.
But commodity producing countries have often turn into financial basket cases. If they don't implode (look at the African diamond producing countries) they tend to turn into a country with a small elite, and everyone else.
But even there, Canada is ahead of us in the process.
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