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Cashin On The Anniversary Of Bank Of The United States' Failure, The Start Of US Bank Runs And The Great Depression

Tyler Durden's picture




 

Art Cashin recalls how it all started 81 years ago. Naturally, it "ended" with World War 2. Will history rhyme, or will "this time be different"?

From UBS

On this day (-1) in 1930, American savers, the Federal Reserve and a Republican President all got a nasty surprise. The banking system had been shaky for a year or two but it looked like things might finally be beginning to stabilize. That is until today.

On this day, a major financial institution, The Bank of the United States went belly up. And, with it went the savings, "in whole or in part", of over 400,000 depositors.

The Bank of the United States has been a historically unlucky name for several institutions. The first “Bank of the United States” was proposed by no less than Alexander Hamilton. It was a privately held central bank for the United States some 125 years before the Fed was created. It was very controversial as Southerners saw it as a boon and tool of the mercantile North while the South’s main industry, agriculture, didn’t need strong banking. The bank’s charter was allowed to expire and the bank disappeared.

Without a strong central bank, however, the young government had found it very difficult to finance the War of 1812. So, Congress proposed another Bank of the United States. This one succeeded for a while until Andrew Jackson and his Southern coalition determined to kill it. They succeeded and the result, many feel, was the Panic of 1837, one of the worst economic contractions in American history.

Now back to the other Bank of the United States.

In the early 1900’s, immigrants were pouring through Ellis Island and onto the streets of New York. A fellow immigrant and a very successful garment merchant realized they would need a place to put their meager earnings and savings. Perhaps to convey an image of governmental security or even an implied guarantee, he named his enterprise, “The Bank of the United Sates”.

As previously noted, when it went under it had over 400,000 depositors. They all began to scramble for money anywhere which tended to strain the other banks. The large New York garment industry was pushed to the edge and merchants desperately sought credit. Lines began to form at other banks. Soon the nation was sinking into the Depression.

To celebrate meet a couple of auditors at the Olde TARP Trust Lounge. Have a few perfect Rob Roys and explain that these days’ surprises are federally reserved for things like birthdays - not economic events. Crises, like dinosaurs, are now ancient history. Then have several more sips.
The stock market slumbered its way to another 180 point gain. The impetus was the European Summit.

 

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Mon, 12/12/2011 - 10:17 | 1969784 Saxxon
Saxxon's picture

2011 minus 81 = 1930.

Mon, 12/12/2011 - 10:21 | 1969807 Irish66
Irish66's picture

damn math

Mon, 12/12/2011 - 10:30 | 1969844 YBNguy
YBNguy's picture

Swedbank bank run happening in Latvia and now more people in Sweden following suit.... Happy days.

Mon, 12/12/2011 - 10:52 | 1969921 Manthong
Manthong's picture

The Latvian event?

Mon, 12/12/2011 - 11:04 | 1969962 Pladizow
Pladizow's picture

Who is today's Bank of the United States?

Bank of America, perhaps?

Mon, 12/12/2011 - 11:44 | 1970128 Don Birnam
Don Birnam's picture

"Biddle thou Monster Avaunt ! Avaunt I say ! Or by the Great Eternal I'll cleave thee to the earth !"

http://upload.wikimedia.org/wikipedia/commons/thumb/b/b8/General_Jackson...

Mon, 12/12/2011 - 10:19 | 1969790 Oh regional Indian
Oh regional Indian's picture

if a hammer blow falls on one's head, I wonder if it matters whether it was rhyming blow or a dissonant one...

Funny, the FED is the current BUSA. Version 4 or 5. And it looks like it's being prepped for a take-down (smoothly into the waiting folds of the IMF/WB complex). 

ORI

/the-plan/

Mon, 12/12/2011 - 11:36 | 1970096 CPL
CPL's picture

It's the only plan tptb have.

Mon, 12/12/2011 - 10:20 | 1969795 TradingJoe
TradingJoe's picture

They Will Commence Printing, Shortly!

Mon, 12/12/2011 - 10:37 | 1969870 FEDbuster
FEDbuster's picture

"Printing" is so last century. 

"I don't know who would have actually pushed the button.", Jon Corzine on the theft of customer funds

Mon, 12/12/2011 - 10:21 | 1969797 MFL8240
MFL8240's picture

Amazing to watch the US criminal enterprise knock Gold while pushing junk fiat paper higher and bonds of an insolvent goverment up.  When does this fucking joke end?  Gold has been a safe haven for 5000 years until now?  Please!

Wed, 03/28/2012 - 11:37 | 2297425 Barbarians_R_Us
Barbarians_R_Us's picture

Apparently gold is no longer safe because THEY say it isn't safe....much in the same way an event is racist because Jackson, Sharpton and Farrakhan say it is. <shameless homaginization of two current events, both equally fucked up>

Mon, 12/12/2011 - 10:20 | 1969800 Ruffcut
Ruffcut's picture

I thiink it too be worse. Too many criminals to feed and too much fire power. Even without war, it is self destruct mode.

Mon, 12/12/2011 - 10:21 | 1969804 kito
kito's picture

bank runs, here, in the united states of america, home of the free, land of the brave, the greatest empire ever to have graced the good earth? pshaawww!! thats what the fdic is for!!! ;)

Mon, 12/12/2011 - 10:21 | 1969806 rambler6421
rambler6421's picture

Bank run bitchez!  Only this time, this will be an inflationary depression.

 

libertarian86.blogspot.com

Mon, 12/12/2011 - 10:39 | 1969879 FEDbuster
FEDbuster's picture

I am counting on "Helicopter" Ben Bernake to keep his promise.

Mon, 12/12/2011 - 10:22 | 1969810 slaughterer
slaughterer's picture

When do I buy more gold?  1650?

Mon, 12/12/2011 - 10:27 | 1969830 LawsofPhysics
LawsofPhysics's picture

Whenever someone is willing to accept worthless paper for it.

Mon, 12/12/2011 - 10:27 | 1969831 kito
kito's picture

when you need to repair your teeth..............

Mon, 12/12/2011 - 10:39 | 1969880 falak pema
falak pema's picture

when your wife gets tired of sex!

Mon, 12/12/2011 - 11:08 | 1969973 Pladizow
Pladizow's picture

I'll fix it .....

"When your wife gets tired of sex WITH YOU!"

Mon, 12/12/2011 - 10:56 | 1969935 lynnybee
lynnybee's picture

When do I buy more gold? 1650?   !!! it doesn't matter when you buy more gold !!! JUST BUY IT !   Price is fiat, that's what you guys all taught me !    Now, go forth, run to that coin guy & get yourself some metal before you can't lay your hands on it, someday there will be "runs on coin dealers" .    

Mon, 12/12/2011 - 11:57 | 1970187 IamMarla
IamMarla's picture

986

Mon, 12/12/2011 - 12:35 | 1970369 Free Markets
Free Markets's picture

My feeling is that Gold will move with the market down, but at some point in time will break free.  I will buy physical gold and put a hedge on with paper using GLL.  Once Gold breaks some upper limits, I will remove the hedge.  Let me know any negatives to this.

Mon, 12/12/2011 - 14:33 | 1970962 Stuck on Zero
Stuck on Zero's picture

As the economy gets worse more people will cough up gold jewelry to pay bills.  There's a lot of gold jewlery out there.  I've heard estimates that ~60% of the world's gold is held by individuals in the form of jewlery.  This will work to keep the price of gold from rising too high.  Also, there is the acceleration factor.  Gold will move around so quickly that it will seem commonplace.

 

http://www.bloomberg.com/news/2011-12-08/japan-s-gold-exports-most-since...

 

Tue, 12/13/2011 - 00:08 | 1972715 Lord Koos
Lord Koos's picture

Most people owning gold jewelry live in India, and I doubt they are gonna be selling anytime soon.  People living on the edge in the USA already have sold a lot of gold and silver jewelry, and although this may continue, with Central banks buying it by the ton, what part of this picture don't you understand?  It takes a shitload of wedding rings to make a ton of gold. The current price drop is manipulation -- notice how gold and silver are going down but preserving the exact relationship?  They are being very careful to keep the ratio over 50.

Mon, 12/12/2011 - 10:23 | 1969816 Taterboy
Taterboy's picture

Go long paper and ink!

Mon, 12/12/2011 - 10:28 | 1969833 CClarity
CClarity's picture

Krugman wrote that it's time to call this what it is.  A depression.  Not the great depression, but a depression.  Long, with peaks and valleys contained within. 

Mon, 12/12/2011 - 10:42 | 1969889 SheepDog-One
SheepDog-One's picture

Far worse than the Great Depression, in those times, most people were still growing their own food, making their own clothes, etc.

Today if something as simple as McRibs stop flowing, chaos.

Mon, 12/12/2011 - 12:02 | 1970205 Temporalist
Temporalist's picture

What?!?!  McRibs are back?!?! 

Mon, 12/12/2011 - 11:46 | 1970142 moonstears
moonstears's picture

Krugman is a great Keynes spouting idiot, not just an "Idiot", but a Keynes, often misquoted, unoriginal idea crafting, Iron Mountain quoting "Great Idiot".  JMHO

Mon, 12/12/2011 - 12:00 | 1970196 IamMarla
IamMarla's picture

the amnesia about the federal gold grab before the Depression of the 1930 is funny. Like did you believe the shit that was shoveled at you in American History?

Mon, 12/12/2011 - 12:36 | 1970374 SheepDog-One
SheepDog-One's picture

Looks like the FED already grabbed a whole lot of gold thru MF Global, and handed it to JP Morgan so they didnt go under.

Mon, 12/12/2011 - 12:30 | 1970341 The Count
The Count's picture

Krugman deserves his nobel prize as much as Obama deserves the peace prize. I am beginning to think those Norwegian nobel prize committee members have been out in the cold too long...

 

Mon, 12/12/2011 - 13:13 | 1970575 blueridgeviews
blueridgeviews's picture

It's not a depression when the Gov't can spend away 12% GDP contraction for 3 years in a row ($1.6 trillion deficit spending).  It's only a depression when the gov't losses it's ability to hide the contraction which I'm guessing is coming soon.

Mon, 12/12/2011 - 10:29 | 1969842 monopoly
monopoly's picture

I just buy on every dip. Do not worry about the charts. The system is broken. Just let this play out and I guess we will have to put up with the "brilliant ones" today. Every time I see gold sell off I just shake my head, smile and buy more knowing my daughter will have something real.

 

Mon, 12/12/2011 - 10:42 | 1969888 falak pema
falak pema's picture

You'd think these bankers are training for the London Olympics. All you can hear about is "bank runs!". I guess there are bankers for each race : 100M and Marathon.

Mon, 12/12/2011 - 15:13 | 1971113 Sunshine n Lollipops
Sunshine n Lollipops's picture

They'll also be competing in the Printathlon, Pole Default and an exciting new event called 10th Floor Window Jumping. Can't Miss TV!

Mon, 12/12/2011 - 10:51 | 1969919 AGuy
Mon, 12/12/2011 - 13:36 | 1970681 Zedge Hero
Zedge Hero's picture

Also on the rise in Bulgaria and the rest of Europe, another rise of Nationalism?  Hmmm -Sounds oh too familiar.

 http://www.youtube.com/watch?v=Vr7ePW44QuU&list=UUu2oVxe8F7qwVz9kxbGSpAw&feature=plcp

Mon, 12/12/2011 - 10:52 | 1969922 Citizen of an I...
Citizen of an IKEA World's picture

Cashin is incorrect on one fact.  The financial institution that failed was called "Bank of United States" with no "the" in there. 

Mon, 12/12/2011 - 10:57 | 1969941 Reptil
Reptil's picture

Correction: It didn't end with WW2, it ended before Pearl Harbour in a slow ascend of economic activities. This after the Federal Reserve was able to count the USA Federal Government as a borrower, with the citzens of the USA as collateral (check your Birth Certificate). The next step after the institution of the Federal Reserve was accomplished. And all of this happened after contracting (artificially) the money base, which led to the Great Depression. They got what they wanted, and then laxed the reigns again.

To (casually) claim WW2's effect on the USA (war)economy, was the reason the depression ended is a dangerous fallacy, given the warmongering at the moment. WW2, as all wars and militairy spending does to any country, plunged the USA deeper into debt. It has absolutely NOTHING to do with prosperity in the civil economy. This was discussed in articles also posted on ZH (if I remember correctly, early 2010, but search yourself)

US of A, ruled by Bankers, since 1910 https://www.youtube.com/watch?v=OwUb1SbRfNo

Mon, 12/12/2011 - 12:04 | 1970217 IamMarla
IamMarla's picture

clearly you are not sleeping at the key board well said Reptil!

Mon, 12/12/2011 - 16:30 | 1971447 besnook
besnook's picture

you are wrong about the effect of war upon the economy. the main benefit of war is capacity destruction, labor and capital. the destruction of capacity leaves a hole to be filled by new labor and capital. in the ww2 example the usa filled the gap wrought by the total destruction of continental europe which fueled the boom years from 1947 to 1967.  it is true that britain's debt burden prevented a recovery for the people but the banks made out like bandits. even the destruction of iraq has provided opportunity for multinational public companies mostly based in the usa. so ww2 did provide the opportunity for the usa to accelerate out of the depression and even laid the groundwork(pheonix principle otherwise known as the marshall plan)) for the ensuing boom in europe and japan.

i am convinced this idea of massive capacity destruction is being implemented now as the ultimate means to the ultimate goal of a one world political/economy........if only they can get the chinese and russians on board.

Mon, 12/12/2011 - 11:00 | 1969945 Debt-Is-Not-Money
Debt-Is-Not-Money's picture

Does anyone know (with references) the end date for the charter of the Federal Reserve?

Mon, 12/12/2011 - 13:06 | 1970520 silverbullion
silverbullion's picture

I have the same question in mind, especially considering rumours that the end date is at the end of 2012.

Mon, 12/12/2011 - 15:23 | 1971153 Sunshine n Lollipops
Sunshine n Lollipops's picture

That's right about the time some Mayan el jefe is supposed to return. I think he wants his gold back.

Mon, 12/12/2011 - 11:01 | 1969950 HungrySeagull
HungrySeagull's picture

Look at the History of the United States.

Not worth a continential.

 

5 dollar Union or 30 Confederate>?

 

Gold coins preserved by a man away from the early 1900's confisication was finally confisicated by Uncle Sam out of a estate when that man finally died.

 

Anyone in Physical resources and or assets such as Bullion free and clear will be the ones to call the next tune.

 

If you dont need the bank, they smile at you. If you need the bank, you SMILE at the bank.

 

SAVVY?

Mon, 12/12/2011 - 11:13 | 1969991 Dr. Engali
Dr. Engali's picture

Bank of United States ,......Bank of America. History doesn't repeat but it very often rhymes.

Mon, 12/12/2011 - 11:39 | 1970109 bjennings
bjennings's picture

The article suggests the Panic of 1937 and the resulting contraction was brought on by the closing of the Second Bank of the United States.  It was my understanding that the Panic of 1937 was engineered by Nicolas Biddle in an attempt to prevent Jackson from closing the central bank.

Anyone here more knowledgeable on the matter?

Mon, 12/12/2011 - 11:39 | 1970110 The Count
The Count's picture

My money is safe! It is all deposited with GWB (Gringotts Wizarding Bank). 

Mon, 12/12/2011 - 12:12 | 1970250 Dr. Engali
Dr. Engali's picture

If memeory serves me correctly 3 young wizards and a goblin successfully robbed that bank. All the bankers ended up dead shortly thereafter. Not a bad outcome.

Mon, 12/12/2011 - 12:27 | 1970332 The Count
The Count's picture

At least there is justice somewhere :-)

Mon, 12/12/2011 - 12:03 | 1970210 Temporalist
Temporalist's picture

Art Cashin just now: "Hope was enough for Friday; but now...reality..."

Mon, 12/12/2011 - 12:04 | 1970220 Orange Pekoe
Orange Pekoe's picture

Governments are obsolete.

Mon, 12/12/2011 - 12:59 | 1970489 New American Re...
New American Revolution's picture

Art Cashin's artery's are getting congested and cutting of blood to his brain.   Again, Art has completely murdered and mischaracterized the history of finance, this time misleading the demise of the Second US Bank by Andrew Jackson and the Southern States.   It was not a fight Jackson sought, but when faced with it, it was a fight Jackson embraced.    He had to, his re-election was at stake, mind you, a re-election he wasn't sure he wanted, but when faced with the smarmy leadership of the bank and his nemisis Henry Clay, Jackson as usual was drawn to the plate.   In truth, it was the American voter who returned Jackson to the White House for a second term which decided the question of the Second US Bank.

And the problem with Art's history lessons, is that when he misses parts, he frequently misses the whole and his conclusions are brought into question.   Never was this more apparent when Art decided to enlighten us on the hyper-inflation of the Weimar Republic in 1924, which Art missed so flagrantly that he is now always brought into question and repute.   My suggestion is that Art bounce his memory off of someone more qualified than himself to report history before he jams his foot into his mouth and damages his reputation further.

I'm certain however, that he will continue to be a lightening rod, because eventually, at the end of the day, Art will prove to be the willing syncopant to our ruling Kleptocratic elite.

Mon, 12/12/2011 - 14:30 | 1970941 Forbes
Forbes's picture

Will history rhyme,

Or is it different this time.

 

That's better.

Mon, 12/12/2011 - 15:08 | 1971087 AldoHux_IV
AldoHux_IV's picture

Central banking if you really think about it caused more wars and crises than any one individual. It has allowed governments to effectively steal from their citizens and allow a small group of few to wreak havoc upon the rest of the world.

The Napoleon's and Hitler's of the world have been born out of economic imbalances caused by central banking.

Mon, 12/12/2011 - 19:50 | 1972058 Debt-Is-Not-Money
Debt-Is-Not-Money's picture

That's why we call them BANKSTERS!

Mon, 12/12/2011 - 17:24 | 1971650 theprofromdover
theprofromdover's picture

I grieve for Art. They destroyed his world. The markets were hijacked and it broke his heart.

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