The Commercial-News, Danville, IL

January 6, 2013

Bad decisions by leaders


Commercial-News

COVINGTON, Ind. — Editor:

The Panic of 1907 might have become the 1930’s Great Depression. The same earmarks were there: rapid fall of the stock market and a run on banks.

Money monopolist J. P. Morgan belatedly learned of the panic. He then locked wealthy banker friends in a room until all agreed to provide cash to “bail out” failing banks. The crisis ended.

The quick actions of Morgan clearly showed how runs on banks could be averted; our future should have been brighter than it turned out to be.

There is no evidence that Morgan, nor any monopolist, held the public hostage to high prices. Despite that, attacking wealth for political reasons was just as popular in 1907 as it is today. So, by 1913, monopolies had been destroyed and the Federal Reserve had been created to replace Morgan’s bankers as the “lender of last resort.”

Throughout the 1920s, the Fed maintained an easy money policy and the economy roared. The Fed did not raise lending rates until late 1928; too late to prevent, and maybe causing, the stock market crash of 1929. Worse yet, when banks started failing the Fed ignored the Morgan example, actually shrinking the money supply by 7 percent.

A few government decisions had caused America to suffer 12 years of depression.

Morgan’s rescue marked the high water mark of free economy capitalism. The Depression, today’s Great Recession and the fiscal cliff are a result of the government control that followed; yet, we blindly allow the control to continue.

Ron Gore

Covington, Ind.