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Sunday, September 28, 2008

Andrew Jackson Had the Courage, Will We?

"Gentlemen, I have had men watching you for a long time and I am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter, I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves." -Andrew Jackson, 7th US President

In 1836, Andrew Jackson forced the closing of the Second Bank of the U.S. by revoking its charter.

Interesting... now why is this so familiar?

"The Second Bank of the United States provided a convenient way for the government to handle its affairs. The bank was created when James Madison and Albert Gallatin found the government unable to finance the country in the aftermath of the War of 1812. The War of 1812 had put the United States in significant debt, and the First Bank of the United States had closed in 1811. The debt of the nation led to an increase in banknotes among the new private banks, and as a result, inflation increased greatly. As a result, Madison and Congress agreed to form the Second Bank of the United States.

After the war, despite the debt, the United States also experienced an economic boom, due to the devastation of the Napoleonic Wars. In particular, because of the damage to Europe's agricultural sector, the U.S. agricultural sector underwent an expansion. The Bank aided this boom through its lending, which encouraged speculation in land. This lending allowed almost anyone to borrow money and speculate in land, sometimes doubling or even tripling the prices of land. The land sales for 1819, alone, totaled some 55 million acres (220,000 km²). With such a boom, hardly anyone noticed the widespread fraud occurring at the Bank as well as the economic bubble that had been created.

In the summer of 1818, the national bank managers realized the bank's massive over-extension, and instated a policy of contraction and the calling in of loans. This recalling of loans simultaneously curtailed land sales and slowed the U.S. production boom due to the recovery of Europe. The result was the Panic of 1819 and the situation leading up to McCulloch v. Maryland 17 U.S. 316 (1819)."

Central Banks and fiat currency have always imploded. Some just last longer than others...

8 comments:

Michael said...

Hi Ben.

You are Canadian, no? I thought I read that somewhere.

The reason I ask is because the Canadian real estate market has held up just fine. My sister-in-law, a real estate salesperson in Toronto, tells me there are still fights to buy property - multiple offers!

I'm surprised by this. Canada usually lags the U.S. by a bit, but it appears banks still have plenty to lend and the people are still happy to borrow.

Will this end or is Canada somehow going to dodge the bullet?

Any thoughts?

Love your blog.

P.S. Sobre ruedas is "smooth ride"? Not "on wheels" or "with wheels"?

peterthepainter said...

so itz lose the FED right?

I read that this whole fed thing is bogus. there being stock holders who can make profits?

RED DOLLARS...

randy said...

everyone needs to read The Creature From Jekyll Island". It's about the creation of the current federal reserve. Very good reading about current events and what is really going on. Most people don't understand.

Anonymous said...

Michael,
The Canadian real estate market does a good job of keeping their negative stats out of the public eye and spinning the ones that do get out. Nationally, sales activity has been in a steep decline all year despite listings making new highs, while prices began dropping YoY in July, currently prices are down 5.1% nationally from Aug 07 to Aug 08.

Whatever you do, don't listen to the real estate agents. You should tell your sister in law that sales activity in Toronto declined 22% YoY, Aug 07 to Aug 08. That's 22%!!!! People may be fighting alright, fighting to sell.

This stuff is page 20 news in Canada today, but soon will be page 1 news. Position yourself accordingly.

erik said...

Regarding the Canadian banking system and economy, Prime Minister Steve had some stuff to say on the subject:

Canada's Harper Joins G-7 Chorus, Pins Crisis on U.S.

Bank of Canada governor Mark Carney had some comments on the subject as well on friday:


Governor Carney Discusses Impact of Recent International Developments


Looks like Canada is not exposed to a potential credit crisis death spiral the way the US was based on what they are saying.

On the other hand they're not exactly saying things look great economically for Canada either. Just not as bad as the US.

If this whole bail-out plan falls apart and the US economy does fall into a nasty economic depression (and we really haven't seen anything yet compared to what that would be like I'd imagine) then I'm sure Canada is in for serious trouble as well by economic association. But we're not there yet. As the magic 8-ball says: "Ask again later".

Here are some Canadian real estate links that might be interesting:

CREA MLS Statistics
CMHC Housing Market Information

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