The Poor Man’s Panic
TimeWatch Editorial
January 11, 2016
In his book entitled: Business Cycles, Wesley Clair Mitchell describes the market period from 1903 to 1904 as “The Rich Man’s Panic.” Here is how Wesley Mitchell records the events of that period.
“The liquidation in stocks which began in November and December, 1902, continued with hardly a check until November and December, 1903. So pronounced and so long a decline of security prices had scarcely occurred before.” Wesley Clair Mitchell, Business Cycles, Chapter III. The Annals of Business, 1890-1911.
The years 1897 to 1903 were considered to be years of prosperity. There was a brief pause in activity during the run up to the Presidential election, but after McKinley was elected the market again began to move.
“For the period of prosperity which began in 1897 ran a long and even course, resisting both the pressure of the European crisis in 1900-01 and the excesses of domestic speculation. Indeed, it was not until after some six years of abounding prosperity that general business, as opposed to financial operations, received a serious setback.” Wesley Clair Mitchell, Business Cycles, Chapter III. The Annals of Business, 1890-1911.
President William McKinley was shot on Sep 06, 1901 and died on September 14, 1901. The market sharply slipped when this occurred but regained for a while its movement upward. It was not to last very long. Listen to this:
“The post-election speculation of 1900, with which the trouble began, had been financed largely with funds borrowed from foreign banks. Favored by the business dullness abroad, the borrowers were able to retain a large part of these loans until towards the end of 1902. Then the Europeans began to recall their funds. To meet such demands American banks had to insist upon repayment of loans by their own borrowers. There remained nothing for the latter but to dispose of their investments. Hence the great outpouring of securities which began in November, 1902, and ran for at least a year.” Wesley Clair Mitchell, Business Cycles, Chapter III. The Annals of Business, 1890-1911.
So we see that when foreign entities find themselves in trouble, they usually demand payment of outstanding debts, regardless of the relationship they might have to the debtor nation. Today we see the financial world engulfed in uncertainty, while we have a tremendous amount of outstanding debt to some of the most troubled nations. Regardless of the rhetoric of apparent self sufficiency which pervades the airwaves, the obvious vulnerabilities still exist. It would be impossible for the United States to repay that which it presently owes, and therefore impossible for the lender to recoup or survive the difficulties that they will ultimately face. The results of such a scenario would be catastrophic.
This is why there are so many who are warning of a coming financial meltdown, this is perhaps why the very rich have begun to sell so high a percentage of their investments, turning rather to cash. The middle class, even though they are shrinking in numbers, insist on ignoring the necessity to put aside something for emergencies. They continue to purchase that which under other circumstances they might well do without. The poor continue to become poorer while longing for that which under the circumstances to come will only bind them in their dependency upon the rich. As matters unfold before us this year, I do believe that a clearer vision of reality will be driven home to our hearts, and we will make the kind of choices that will prepare us for the days to come.
Cameron A. Bowen
The Poor Man’s Panic
TimeWatch Editorial
January 11, 2016
In his book entitled: Business Cycles, Wesley Clair Mitchell describes the market period from 1903 to 1904 as “The Rich Man’s Panic.” Here is how Wesley Mitchell records the events of that period.
“The liquidation in stocks which began in November and December, 1902, continued with hardly a check until November and December, 1903. So pronounced and so long a decline of security prices had scarcely occurred before.” Wesley Clair Mitchell, Business Cycles, Chapter III. The Annals of Business, 1890-1911.
The years 1897 to 1903 were considered to be years of prosperity. There was a brief pause in activity during the run up to the Presidential election, but after McKinley was elected the market again began to move.
“For the period of prosperity which began in 1897 ran a long and even course, resisting both the pressure of the European crisis in 1900-01 and the excesses of domestic speculation. Indeed, it was not until after some six years of abounding prosperity that general business, as opposed to financial operations, received a serious setback.” Wesley Clair Mitchell, Business Cycles, Chapter III. The Annals of Business, 1890-1911.
President William McKinley was shot on Sep 06, 1901 and died on September 14, 1901. The market sharply slipped when this occurred but regained for a while its movement upward. It was not to last very long. Listen to this:
“The post-election speculation of 1900, with which the trouble began, had been financed largely with funds borrowed from foreign banks. Favored by the business dullness abroad, the borrowers were able to retain a large part of these loans until towards the end of 1902. Then the Europeans began to recall their funds. To meet such demands American banks had to insist upon repayment of loans by their own borrowers. There remained nothing for the latter but to dispose of their investments. Hence the great outpouring of securities which began in November, 1902, and ran for at least a year.” Wesley Clair Mitchell, Business Cycles, Chapter III. The Annals of Business, 1890-1911.
So we see that when foreign entities find themselves in trouble, they usually demand payment of outstanding debts, regardless of the relationship they might have to the debtor nation. Today we see the financial world engulfed in uncertainty, while we have a tremendous amount of outstanding debt to some of the most troubled nations. Regardless of the rhetoric of apparent self sufficiency which pervades the airwaves, the obvious vulnerabilities still exist. It would be impossible for the United States to repay that which it presently owes, and therefore impossible for the lender to recoup or survive the difficulties that they will ultimately face. The results of such a scenario would be catastrophic.
This is why there are so many who are warning of a coming financial meltdown, this is perhaps why the very rich have begun to sell so high a percentage of their investments, turning rather to cash. The middle class, even though they are shrinking in numbers, insist on ignoring the necessity to put aside something for emergencies. They continue to purchase that which under other circumstances they might well do without. The poor continue to become poorer while longing for that which under the circumstances to come will only bind them in their dependency upon the rich. As matters unfold before us this year, I do believe that a clearer vision of reality will be driven home to our hearts, and we will make the kind of choices that will prepare us for the days to come.
Cameron A. Bowen
