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Boston Fed On The Panic Of 1907 ( Or Is That 2008?)
Spot the 10 differences (if any) between this text and the one historians (hopefully not Fed bankers) will write about our time period in 2109.
Some interesting comparisons, demonstrating that even as one hundred years pass, nothing really changes (except for the Fed Chairman's printing press, which luckily, did not exist in 1907). Then and now:
- New York Clearing House Committee - FDIC
- New York City’s clergy - CNBC
- Knickerbocker Trust Company - Lehman Brothers
- New York bankers - New York bankers
- J.P. Morgan - J.P. Morgan (of course)
- Cold - Swine Flu [TBD?]
MONDAY OCTOBER 14: The stock of United Copper Company soars past $62 a share.
WEDNESDAY OCTOBER 16: United Copper closes at $15 a share after bank owner/speculator F.A. Heinze fails in his attempt to corner the company’s shares.
THURSDAY OCTOBER 17: Shortly after midnight, Heinze resigns as president of Mercantile National Bank. Later that morning, prompted by the fear that Heinze’s stock market losses might affect the bank, Mercantile National’s depositors scramble to withdraw their money.
During the day, Heinze’s Butte (Montana) Savings Bank fails as does the brokerage firm of Otto Heinze & Co., which is owned by the brother of F.A. Heinze.
That night, the New York Clearing House Committee declares that Mercantile National is "perfectly solvent and able to meet all its indebtedness." The Committee’s acting chairman also announces that
the Clearing House will stand by the bank in the event of a run by depositors.
FRIDAY OCTOBER 18: Nine banks form an emergency pool of funds to aid Mercantile National. But depositors at Knickerbocker Trust Company begin to withdraw their money. They are concerned because
Knickerbocker’s president, Charles T. Barney, is an associate of F.A. Heinze.
SATURDAY OCTOBER 19: Charles W. Morse, a banker and speculator who was involved with Heinze in the disastrous copper corner, announces he will resign official positions at nine banks and trust companies.
MONDAY OCTOBER 21: Charles T. Barney resigns as president of Knickerbocker Trust Company. Depositors withdraw $8 million in less than four hours before Knickerbocker suspends operations.
TUESDAY OCTOBER 22: J.P. Morgan refuses to aid Knickerbocker Trust, wtiich does not reopen for business. A headline in the Neap York Times announces that Morgan will organize support for Trust Company of America, which is deemed to be in much better condition than Knickerbocker.
WEDNESDAY OCTOBER 23: Treasury Secretary George Cortelyou travels to New York to meet with Morgan and other financiers.
THURSDAY OCTOBER 24: At 1 a.m., Cortelyou announces that the U.S. Treasury will deposit $25 million in several New York City banks. Later in the day, oil tycoon John D. Rockefeller commits $10 million
of his own money to stabilizing the financial situation.
FRIDAY OCTOBER25: Under heavy pressure, firm J.P.Morgan, New York bankers contribute to a $25 million rescue pool for cash-strapped stockbrokers, who have been unable to borrow and are facing ruin.
SATURDAY OCTOBER 26: The crisis takes its toll on J.P. Morgan. Under the headline "J.P. Morgan Has a Cold," the New York Times reports, "J. Pierpont Morgan has a slight Cold resulting from exposure to the night air. In the last week Mr. Morgan has attended many night conferences dealing with the banking situation. In doing so he was obliged on several occasions to ride about in his cab late at night, and in some instances in the early morning. The result was that he contracted a cold which gave him some trouble yesterday. When he left his office late yesterday afternoon he wore a handkerchief about his neck."
SUNDAY OCTOBER 27: At the behest of J.P. Morgan, New York City’s clergy preach sermons urging "Calmness and Confidence."
WEDNESDAY OCTOBER 30: In response to a plea from New York’s Mayor, a Morgan-led syndicate bails out the city by agreeing to place $30 million worth of its revenue bonds with investors. The night before, Morgan had pressured trust company presidents into putting up funds to support the still ailing Trust Company of America and Lincoln Trust-Company. Morgan and his associates also devise a plan to save the brokerage firm of Moore & Schley from failure.
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Greed is good TD
Wait till you see what he grosses on those "I AM TYLER DURDEN " t-shirts...
wait till you see the server bills...
Hey Tyler; a question; have you heard about the depression of 1920 ? Check that out; and check the measures ( or lack of them ) that were enacted then. You'll find the outcome surprising.
Cheeky, do you have any sources,
preferably online?
http://findarticles.com/p/articles/mi_hb5814/is_n3_v29/ai_n28604039/
http://en.wikipedia.org/wiki/1921_recession
http://freepages.history.rootsweb.ancestry.com/~cescott/interwar.html
http://www.lewrockwell.com/orig4/powell-jim4.html
http://www.nber.org/chapters/c4671.pdf
http://www.cato.org/pub_display.php?pub_id=9880
Here ya go
Hey Cheeky,
Thanks for the posts... one follow up questions: have you been following New Zealand closely as they navigate through the downturn?
I saw 2 articles in the WSJ about the NZ gov't cutting taxes and other pro-growth policies. Unfortunately I haven't followed up on how it's working out for them, but I thought you might have more insight, being in the Commonwealth.
Here are the WSJ articles for those who are curious:
http://online.wsj.com/article/SB122928801357304815.html
http://online.wsj.com/article/SB123376917763348479.html
would be more than glad to help you; but i stopped following NZ back in May when i exited NZD. Don't have a clue whats going on there. Oh, and I'm not in the Commonwealth; try Central Europe.
Before i forget; you can ask Ray; he is following whats going on with Commonwealth nations pretty closely.
Rock n Rolla....
Thanks for the 20-21 info cheeky...very enlightening.
No drought...
one more:
http://www.meltingpotproject.com/mpp/2009/02/the-great-depression-of-1920.html
Fact is, as Ron Paul pointed out in live Congressional Hearings with BB that did not see the mainstream monopoly media light of day: "Before the Fed and IRS, depressions were a matter of years. After the Fed, a matter of decades."
Wonder when the MMM may report this? After the fall?
Meantime, tough to trade against the Fed, GS and JPM.
no one remembers it because it was over and done and we recovered. There was no massive intervention and as such no extended dragged-out slog to the bottom due to government intervention. It was in the post-1920 period that there was way too much discussion and pushing for government intervention during periods of crisis. Rothbard has an excellent discussion of how government interventions were put forward as the answer to booms/busts in the post-1920 era.
I found it to be so.
good articles; good articles 4 slow news day ..http://www..
hat tip: finance news & finance opinions
Baltic Dry Index Does Not /Confirm Fake Rally
http://www.dryships.com/pages/report.asp
This link includes a Baltic Dry chart:
http://navigatemag.ru/
Wow thanks, good site
There have been several depressions in the U.S. How Great they were is all relative. 1807-1814, 1837-1844, 1873-1879, 1920-1921, 1929-1941 (or longer if inflation adjusted to 1949). The 1920-21 was very short, but it included very sharp price deflation, in fact the largest one-year on record at that point and greater than the 1929-* depression.
Panics are a different beast: The outbreak of World War I shut the New York Stock Exchange for more than 4 months. Supposedly the closure prevented a repeat of the Panic of 1907.
When you get right down to it, since the Fed was created by the big boys in the room, there hasn't been enough financial tragedy to balance things out. Depressions are not inherently a bad thing other than that they are depressing for those that lose their shirts and jobs. But at the end of the day there is much more to life. All economies need to reset every so often. That is probably the real story, as far as I'm concerned: Too many bankers controlling the show for far too long in an institution and collusive government that is out of control.
"There have been several depressions in the U.S. How Great they were is all relative"
A recession is when your neighbor can't find work.
A depression is when you can't.
Good comment.
IMO the government/fed has no place in business. I would bet my front teeth if LTCM collapsed this crisis and it's severity could have largely been avoided (not completely, but not as painfull). The day LTCM was bailed out was the day that financial risk was redifined. If Chrysler collapsed like it should have years ago I bet the U.S auto industry would be in alot better shape as well.
I'm sure you know this, but remember, LCTM was bailed out at the insistence of the NY Fed through a consortium of IB's (sans Bear Stearns) to put up the cash. I lived through it and at that point there were no public dollars. It was still banker control/gov collusion. Letting AIG, Freddie, Fannie, and Citi fail--that would have cleaned the clock. Alas, Hank Faultson gave Pelosi a licking on his knees (his words--he got down on his knees--argh) and the shenanigans began that have put us where we are now. The end of the world as we know it should have happened a year ago...so sad we have to duplicate or exponentially create a more serious problem. We are there.
I am well aware.
What I am saying is this.
If LTCM collapsed many people would have lost alot of money (as a result of collateral damage) Those that lost money would have would have said "shit, I lost money, I better be more careful" Others would have said "wow they lost money, I better be more careful" However, that did not happen and it set a precedent. That is also why I brought up the Chrysler situation. If Chrysler went bankrupt (like they should have) Ford and GM might have made the changes they needed to become more competitive. Now we have cash for clunkers....Ford explorer #1 clunker...Toyota #1 seller....Get it? Government = bad
Point taken..and appreciated.
+ 1,000
And a panic is when your wife is out of work...
Good thought. We are obviously in a depression "credit depression" that will last for another 6 years and which every person affected is now changed and going forward they will cautiously consider how they live. No more $30,000 millionaires.
Interesting article, the long view,
"A Panoramic View of Eight Centuries of Financial Crises"
Carmen M. Reinhart, University of Maryland and NBER
Kenneth S. Rogoff, Harvard University and NBER
http://www.economics.harvard.edu/faculty/rogoff/files/This_Time_is_Diffe...
Some newspaper clips from the 1930s,
"In the early years of the Great Depression, many economists and businessmen believed that the depression was a mild one , and that prosperity was "just around the corner".
http://www.joliet.lib.il.us/Digitization%20Projects/The%201930s/Depressi...
http://newsfrom1930.blogspot.com/
My father told me that as a child, during the 30's, whenever he came to a street corner, he'd look around it. He was looking for the "prosperity".
1930s New Yorker Magazine had a great cartoon of the down stair-stepping Dow, with the caption "Is THIS the bottom?
"According to the Times, "The reason the Knickerbocker Trust was
not aided by the Clearing House Association and Mr. Morga’n and
his associates was that the company’s capital and surplus, were impaired,
and that Mr. Morgan did not care to assume the responsibilities of previous poor management.""
Some things have changed...
There used to exist the concept of a Jubilee (debt forgiveness every 50 years). Sure, lending dries up a little the year before the Jubilee, but other than that, it seems a pretty natural event to organize, esp. given the current debt load of the average american.
There also used to be anti-usury laws. You know, laws against charging excessive compounding interest! We could do with a return of that, as well. Bring back simple interest, and precious metal-backed currency!!
Destroy the Fed! Audit it, but just as a first step in its disintegration.
I am amazed at the people who would be happy if the Fed (and Fort Knox and Comex) were merely audited!!! You underestimate the ability of words to smooth out and obfuscate the findings!
No that is a Jewish folk tale from the bible. The Fed is also another Jewish folkish tale.
There used to be laws against usury on debt!
Since 90+% of the worlds gold is in the hands of the bankers, a metal backed currency is in essence the same as the current system: ie bankers control all 'money'.
Most long-term scriptures outlaw usury because interest ultimately compounds faster than economies grow, leading to debt collapse and forgiveness. Sabbatical also when contracts, debts were and indentures paid, reviewed and released, according to The Gift:
http://www.jubileeprosperity.com/
Fed already (faux) audited as BB says to deter a real audit.. Every year a proposal to thoroughly audit the NYC Federal Reserve Deep Vault Gold, Treasury West Point Mint Gold, dies Fort Know Gold withers in the Senate.
Follow the money:
http://www.americanbankingnews.com/2009/08/23/what-would-be-involved-in-...
Only after disaster can we be resurrected.
Good, let the elites get wiped out this time. It'll stop the cycle.
May I recommend to anyone interested in this, "The Forgotten Man" by Amity Shlaes. Some things never change.
One thing that has not really changed is the perception of JPM throughout the ages. As a man, he was seriously in trouble financially unless we got involved in WWI. But the dynasty has lived on and made it through every boom and bust for nearly a century. I find it interesting that Dimon and Co are considered best in breed by the MSM when they are the most egregiously infected TWD (toxic waste dump--new acronym) of all the surviving banks. There is no doubt that this will be the greatest put buying opportunity of all time after the fall recess. Not to get too boring with repeating myself, but a cluster of equity cycles call for a major top Sep 4-8th to descend for 8 weeks. Whether Santa comes to town is the big "if" since the next cluster of important cycles is for March 2010--either a lower high or final top of the bear market rally. I think it will be the top.
Getting to the point--JPM stock is in the midst of setting up the most bearish chart formation possible. Technicians call it an expanding triangle--witness the ban of short selling last year in the financials with a top at $50.63 and the low of $14.96 in March. Take it back to Oct 2007 to see the formation. If JPM can top $50.63--let's say $55 as the top--it is the put buy of the century. Meredith Whitney can't figure out how to make money (captured)and is hanging out with the big boys in Jackson Hole, stating that a floor has been formed in the financials--not that she never stated the obvious but she did have balls at Oppenheimer. But going back to the panic of 1907, and JPM, it's time to take notice. Look at this little story on how JPM saved the world from the 1907 panic: http://www.buyandhold.com/bh/en/education/history/2000/122499.html
Did you know that Dimon and Co own a large chunk of print media...how's that for news?
Economic panics are an interesting topic to discuss.
Tulip bulbs anyone?
However, fortunes are made during panics/depressions/recessions.
An interesting sociological discussion indeed. It should be a course taught in college.
Yes, but the timing is not there just yet for the fortunes to be made. The day is coming but it is a few years away--get your dollars into Krone or Canadian--and when the time comes, there will be buys of a lifetime for your spawn to enjoy for generations to come.
Thank you for the advice but I'm a grown man. I can handle my own :)
I'm in my 40's and haven't delivered a pizza in 20 or so years. My moniker is a representation of my humble beginnings. Never forget where you come from.
Happy to withdraw advice...only sharing my view. Of course we are all going to take care of ourselves as we see fit. : ) We are mostly all grown men/women here. But I seem to be getting shorter in my aging years!
I doubt anyone commenting on this blog is getting any taller.
If they are, they need to find a girlfriend/boyfriend.
hey PDM; i resent that comment !
ption exercise results in a position in the underlying cash-settled Futures contract. Options which are in-the-money on the last.
good articles; good articles 4 slow news day ..http://www..
hat tip: finance news & finance opinions
Wow...you are in your forties and I'm actually a woman--no shit. I figured I would never be taken seriously as a man here so I took on a male handle. But that's just info for you Pizza Man--hah. Ok, I'm outed. Howard Beale--the only man assassinated on live TV for bad ratings is really a woman on ZH. True confessions. I was also the first female institutional MBS options trader on the street when it was still being paved. But I'm only 50. And I still rock.
I'm single...Coffee?
If you were so concerned about your gender, you should have used the moniker "Brock Johnson"
I actually thought that Howard Beale was such a magnificent being in film that his tyrades allowed me/him to say whatever we wanted to. I love Network as much as Fightclub--although the very first DVD I purchased was Fightclub and have been sad that I could never say to TD that "I want to have your abortion" which was the substitute for I haven't been fucked like that since gradeschool if you have been through the extended DVD talk. Anyway, Pizzaman, coffee? Sure. My Canadian fiance may get jealous though. But his banking system turns me on.
Well if you guys need a pizza I will deliver. I am fortunate to have a higher class of transprtation than I did 20 some odd years ago.
As much as I would love to continue this dialogue I have an "appointment" I must fly to.
Take care Howard.
Kisses..
for your bulletin board, back in the bailout days
http://anonymousmonetarist.blogspot.com/2009/03/outraged-about-nickels-a...
Hit the enter twice--sorry
Do you know what amazes me? The 'bearish' bloggers are ridiculed and belittled for their 'affinity' for bad economic news.
Personally I get no satisfaction from studying the current state of the US economy. I follow this blog because it provides better information and insight than can be found elsewhere. What the pundits don't seem to understand is that unlike some, zero hedge is sincerely concerned with the future of this economy and country.
Aberrations and parabolic curves are troubling rather than satisfying. The destruction of the middle class is anything but enjoyable. Zero hedge should be applauded for understanding that staying quiet and playing it safe is no longer an option. Someone has to say what needs to be said. I appreciate your candor.
Thanks, ZH.
It is truly a phenom unparallelled. ZH offers all of us the ability to peruse outstanding offerings of information, banter amongst eachother, and more than anything, achieve a common goal of seeking the truth in the most corrupt financial system ever. I applaud their every move and am grateful for their aplomb.
The United States is going to pass a health care plan
written by a committee, whose head says he doesn't understand it,
passed by a Congress that hasn't read it but exempts themselves from it,
signed by a president that also hasn't read it and who smokes,
with funding administered by a treasury chief who didn't pay his taxes,
overseen by a surgeon general who is obese, and
financed by a country that's nearly broke.
What could possibly go wrong?
Throw in a leather jacket and this thing could be a ripoff of "The Sure Thing".
That is an incredible paragraph, the pen is mightier than the sword indeed.
Section 1801 and 1803 of the original Medicare law (Public Law 89-97, 1965) stated:
"Nothing in this title shall be construed to authorize any federal officer or employee to exercise any supervision or control over the practice of medicine or the manner in which medical services are provided, or over the selection, tenure, or compensation of any officer or employee or any institution, agency or person providing health services; or to exercise any supervision or control over the administration or operation of any such institution, agency or person."
[Now there are 132,000 pages of Medicare regulations, the federal government interferes with every aspect of the practice of medicine. Federal bureaucrats oversee all hospital care, "setting standards" (as JCAHO) and demanding reports. Via "medical necessity" pronouncements, they determine who gets in and who gets out of the hospital. And, via DRGs, they determine how long a Medicare patient will stay. They determine the manner in which medical services are provided and how they must be documented. And, the government has instituted a system of price controls and price fixing for most medical services provided today (RBRVS, Balance Billing Laws, Correct Coding Initiatives etc)].
"Sec. 1803: Nothing contained in this title shall be construed to preclude any State from providing, or any individual from purchasing or otherwise securing, protection against the cost of any health services."
[The private health insurance market for those 65 and older, however, simply no longer exists. So, although the individual is not "precluded" from purchasing private health insurance, there are simply no policies to be purchased in the marketplace.]
wow --- well said.
Steven Galson is not obese
http://www.fitness.gov/news/photos/photos-08physicalactivityguidelinesla...
http://www.fitness.gov/images/pag_launch-lopez_brothers_garcia_galson-10...
(center right)
Cheap money in response to crisis always = fail
My favorite example from history is the US's relationship with silver between 1850 and 1900. There are twists and turns where we first allowed it to be coined into money, then went to a series of government programs to purchase silver and support the price, then back to full gold standard.
All throughout one party supported gold, the other bimetallism and the whackos supported greenbacks. Dems finally got their asses handed supporting silver in 1896, so the next dem (wilson) went with the other anti gold (republican) which was the greenbacked Fed.
It pitted Northern creditors against midwest farmers. In so many words the creditors wanted deflation (gold) and the debtors wanted inflation (bimetallism).
And I relate it to today thusly: back then it was possible to exchange silver for gold. Its kinda like being able to exchange toxic assets for hard currency paid in the form of fatazz bonuses.
http://en.wikipedia.org/wiki/Free_Silver
http://en.wikipedia.org/wiki/Sherman_Silver_Purchase_Act
http://en.wikipedia.org/wiki/Bland-Allison_Act
http://en.wikipedia.org/wiki/Panic_of_1896
That's why the currency should be defined by one metal only -- in the 1800s there was always a dearth of either gold or silver because the market ratio of one vs the other was never the same as the government ratio. Google Gresham's Law: soft money (overpriced by government) drives out hard (underpriced).
IMO the best solution is the most libertarian: eliminate legal tender laws and let people make contacts in any money they want, whether that is USD, gold, silver, or foreign currency. Gold would likely emerge as the standard, since its physical properties make it the best money.
The news about New Zealand is quite interesting. Thanks. I wish we would do the same, a smart and well planned effort to increase business and employment.
Hmmm, a guy named Cetin said there will be no panic and the Dow is going to 14K this Fall. k then, going long, no stops...
Jesse Livermore has a much better account of the 1907 panic as he lived it from the front-lines. Lots of parallels to today.
Obviously one can get all the facts right and still reach the wrong conclusion. The government as such is not the problem. The problem comes from corporatists and their network having taken over the government infiltrated and subverted it.
So the challenge here is to clean out that rot from goverment and disable that network without damaging the institutions, because they have served you well several times throughout the last 220 years.
The backbone of the beast is the financial institutions, don't forget.
Panic of 1907? The bulls certainly hope so. The market after plunging 50% was making new highs within a couple of years.
Critics say they are little more than a tax on long-term investors and can even worsen .
good articles; good articles 4 slow news day ..http://www..
hat tip: finance news & finance opinions
W.D. Gann was nice enough to resurrect himself for an interview this weekend:
What have your studies determined?
'The culmination of the bull market in September 1929 was really the result of a long trend business cycle which began in August, 1896 and continued for 33 years, with each campaign in the market making higher prices, which showed that the long-term trend was up. The Bryn Silver Panic August 1896 low of the Dow-Jones Averages at 29 was the end of a panicky decline that marked the beginning of the McKinley boom which lasted several years'
'The lows in this uptrend were:April 1897 at 40 and one half; October&November of 1903 at 42 and one half; Nov 1907 and June 1913 which both saw 53; December 1914 touched 53 and a half; and then December 1917 and 1920 which both bottomed at 66.'
'The August 1921 low of 64 was still a good sign of support in this uptrend, for it did not violate previous lows by 3 points, roughly 5%, thus indicating that a bull market would follow. From this August low followed the greatest bull market in the history of the United States, culminating at 386 in September 1929.'
Greater than 1992-2000?
'Yes, actually your recent run from 1982 to 2000 was a bit larger in price gain than 1896-1929..and of course in less than half the time. However the 8 year bull in the 20s that ended on September 3, 1929 increased price by a factor of 6 while your 8 year run from 1992 to 2000 increased prices less than 4 times.On September 3, 1929 when the final top was reached the Industrial Averages made 386 which was approximately 13 times higher in price than the Bryn Silver Panic Low.' '
'After the greatest bull market in history, the greatest bear market in history must follow... my philosophy is that one must look back in order to determine how long the bear campaign might run. Going back over all the records, we find that the greatest bear market had lasted not more than 43 months and the smallest had been as short as 12 months. Some of them had culminated around 27 months,30 months,34 months and in extreme declines,anywhere from 36 to 43 months. You handed me cue cards describing the research since the Great Depression but I can't read your writing...'
13 recessions since 1929 lasted on average 10 months. The longest,the Great Depression, lasted 44 months. The third longest(1973-1975, 1981-1982) each lasted 16 months, and we're in the second longest and counting. How would you then compare our outcome given yours?
'On July 8, 1932, the Dow Jones Averages made a low at 40 and 1/5. This was equal to the April 1897 low and was successfully tested. Several bear market lows were tested and broken on that campaign. In fact we can track a general uptrend of higher lows from this April 1897 and July 1932 low up through the May 2000 highs. This current bear market campaign with highs in March of 2000 and May of 2007 (2007 higher closing but lower intraday) has broken past support similar to our crash in 1929 and subsequent rally. The key will be to see what support holds. So far, the 2002 S&P 500 low of 768 obviously did not hold.'
Thank you William
CFTC & OTS looks like... Keep on keeping on it..
good articles; good articles 4 slow news day ..http://www..
hat tip: finance news & finance opinions
I would say Knickerbocker Trust Company fits more closely with Bear Stearns collapse, rather than Lehman
There are two major differences between the Panic of 1907 and the most recent financial crisis: (1) the United States had no central bank (i.e., there was nothing like the Fed); (2) the United States subscribed to the Gold Standard.
Yet history repeated itself? I keep hearing that the primary reason for the most recent crisis was the Fed, and that another major problem is the fact that we abandoned the Gold Standard and have only a fiat money system.
And the analogies are incomplete and incorrect. First, the New York Clearing House Committees were NOT like the FDIC in that they did not insure deposits. That's a major difference. Second, J.P. Morgan played the role of the Federal government (including Hank Paulson) and bailed out a number of firms.
Thus, before there was Bailout Nation there was J.P. "Bailout" Morgan. Of course, nobody knew that Morgan was going to behave that way, so it's not like the promise of a Morgan "bailout" created any type of moral hazard that caused the Panic of 1907, so can Ritholtz' thesis of bailout-inspired moral hazard as the cause of the most recent crisis be correct?
The similarities between the Panic of 1907 and the most recent crisis are stunning, and the fact that none of the "primary causes" of the current crisis existed in 1907 should make everyone question the popular narrative.
For a lot more information on the Panic of 1907, go read Bruner's The Panic of 1907, available at Amazon.
Our credit based economy was doomed from inception. We need to increase the money supply exponentially just to service our debts. These fools(bankers) got fat on fees for proprietary products to keep the party going after hours. The average American's income can not service the debt(mortgage, credit cards, car, student loans) they have been allowed to accumulate. Then people like me who have been shaking their heads at the situation since 2003 have to pay for this mess. We should have let Fannie/Freddie/AIG fail and let sovereigns who invested take a haircut. Government spending 185% of tax receipts in 2009. This will last minimum until 2012, but more likely 2020. If we spend 125% - 150% of tax receipts conservatively for the next decade, what rate will the federal tax rate go to so that we can pay down the debt? We'll have to inflate. After 2 years of modest deflation due to the slowdown in the velocity of money, we are gonna see one heck of an inflation storm. Godspeed all