Have you heard this story? Once upon a time, U.S. banks stopped making loans; credit dried up; the stock market plunged; Americans lost their jobs, got poor, cold, hungry and frightened; and the U.S. government gave the bankers a pile of dough just to make it all stop.
If you’re thinking of the 2008 banking crisis, you are 100 years off. I was describing the “Bank Panic of 1907.”
The U.S. had suffered through similar panics in 1837, 1857, 1873 and 1893, and by 1907, Americans were just fed up. Something had to change and that change was the Federal Reserve.
Unfortunately, after the Fed came on-line in 1914, nothing improved. We had the depression of 1920, the crash of 1929, the Great Depression, the savings and loan crisis of the 1980s and now the 2008 bank crisis and Great Recession.
Wealthy bankers have always loved depressions.
In the 1830s, Nicholas Biddle, president of the Second Bank of the United States, single-handedly contracted our nation’s money supply and caused a five-year depression. Later, after Andrew Jackson shut down the central bank, national bankers had to circulate incriminating letters in order to coordinate the timing of money contractions and depressions.
With the advent of the Federal Reserve, monetary contractions were much easier to manipulate, but since there was only one place to point the finger of blame, the bankers had to concoct elaborate dog-and-pony shows in order to convince Americans that what they are doing was different. The ironically titled book, “This Time it’s Different,” by Carmen Reinhart and Kenneth Rogoff, documents the remarkable similarities of 800 years of bank-caused panics and depressions, worldwide.
Two years ago, in the Daily Republic article, “Why we have recessions,” I wrote: “When bankers raise interest rates, refuse to loan or otherwise contract the available money supply, our national economy goes into a nosedive. Businesses close their doors, workers become unemployed and homes, farms and factories go into foreclosure. The poor and middle classes always lose in these recessions, but the wealthy can buy those foreclosed homes, farms and factories at a tremendous discount, then re-inflate the economy, and sell at a profit, pocketing lifetimes of labor. While it sounds illegal, it’s merely immoral. Instead of the usual, petty ‘victimless crimes,’ America now has 100 million ‘crimeless victims.’ We’ve been robbed of our jobs, homes, savings and futures with no prosecution – none – only bailout money flowing in vast torrents, again, from taxpaying workers to wealthy bankers.”
As promised last week, this column is about Sens. Elizabeth Warren and Bernie Sanders’ questions for the next Federal Reserve chairman: “If you were to be confirmed as chairman of the Fed, would you work to break up ‘too-big-to-fail’ financial institutions so that they could no longer pose a catastrophic risk to the economy?” and “Do you believe that the deregulation of Wall Street, including the repeal of the Glass-Steagall Act and exempting derivatives from regulation, significantly contributed to the worst financial crisis since the Great Depression?”
The obvious answers are “yes” and “yes,” but even if we amended our banking system, regulated derivatives and charged a 0.01 percent fee every time they were traded, history would repeat.
The core problem remains: Private citizens own the Federal Reserve and issue and regulate our nation’s money.
Monetary contractions are man-made pathogens and immunizing against one type, merely stimulates the creation of another strain. The look may be slightly different, but the results are exactly the same. What happened here in Fairfield happened to every “Fairfield” in America, over and over and over again.
Generations come and go, but the song remains the same.
Mike Kirchubel grew up in Fairfield and is the author of “Vile Acts of Evil – Banking in America.” He can be reached at firstname.lastname@example.org.