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Wide Awake in America


A new president is sworn in today, and with him a new beginning.

Greetings from New York where, once every month or, I simply don't get as much as one second of sleep for an entire night. I'm 39 years old and this only slightly irregular pattern of sleeplessness extends as far back as I can remember. The details have changed, headphones and TiVo have made the hours feel slightly less akin to being the only person on earth awake, or perhaps even alive. But whether I'm kicking it with a book or watching an American Experience I'm awake and, by about 3am, I've given up entirely on the concept of "rest" for that evening. I'm awake. I'll be awake until dawn. You could get me drunk, hit me with a Rhino tranquilizer or load me up with some of the experimental drugs that are about to be released from Guantanamo Bay this afternoon but the chances I'm even closing my eyes are slim to none.

With acceptance comes the deeply American trend of "making the best of it." Thus, perhaps inspired by the inauguration, I used my wakeful hours to study financial disasters throughout the years. As the the Great American Poet Eddie Vedder sang, "those who forget the past are destined to remember." Not me, Ed. I'm pulling an all-nighter on financial catastrophe. In the interest of making it useful for today's investors I'm hitting the high points of 400-odd years of financial catastrophe, then grading our chances of repeating them in one form or another. I'm geeked up on John Kenneth Galbraith's The Great Crash of 1929, a documentary on FDR and the recently published Panic of 1907 and fueled by a core belief that the human condition is one of being a generally hairless and usually tailless chimp, little capable of learning from much of anything. So let's review our new President's chances of steering us clear of a financial meltdown.

Hey, just maybe the exercise will help us forestall the inevitability of the next great meltdown! But we're getting ahead of ourselves. In the fine French tradition of opening with a joke prior to announcing our disastrous, tragic fate to panic-stricken citizenry, let's start with one of my favorites (and not just because it involves an Englishman conning France to the brink of poverty): The King, the Crook, and the Gambler: The True Story of the South Sea Bubble and the Greatest Financial Scandal in History. While some of the details have been called into question in recent years, the indisputable facts are that an Englishman named John Law, in an effort to fund the nascent South Seas Company, developed a lottery system to fund operations.

As these things seem to happen repeatedly, the event ended in tears with wealthy Frenchmen and women rushing to the trading squares in an attempt to dump their rapidly dropping shares. As it turned out the South Seas Company didn't actually have ownership claims, let alone a monopoly, on the North American Continent. Let's see, unrealistic promises of wealth based on a new but wildly expensive discovery ending in tears and near collapses (NB: France's actual collapse wouln't come for some 80 years when we stiffed them for their financial assistance during the revolution. "Thanks, Chuuummmps."

Chances of repeat: 7:10 but likely not during the Obama administration.

Because reading two books in a row can cause what Victorians called "Brain Fever," we turn next to the generally outstanding PBS American Experience. In case there is one person reading this who is under the misunderstanding that Roosevelt's New Deal ended, or even improved conditions during the Great Depression, it's worth repeating that this is simply not the case.

During the glorious Hoover administration, estimated Unemployment Rates in the US were as follows:

Year Unemployment Rate
1929 3.2%
1930 8.7%
1931 15.9%
1932 23.6%
1933 (FDR) 24.9%
1934 21.7%
1935 20.1%
1936 16.9%
1937 14.3%
1938 19.0%
1939 17.2%

It's widely considered that the political capital FDR had achieved with his marginal employment gains were squandered after the 1936 midterm elections when FDR, frustrated at the Supreme Court's reluctance to light the constitution on fire in favor of adding four pro-New Deal Justices the economy re-tanked in what was called "The FDR Recession" though, in fairness, looks quite a bit like the Great Depression continued when one considers the data as a whole.

Two take aways from this rather striking piece series of data, shockingly neither of which being "Thank Goodness Hitler's invasion of Poland rescued the global economy".
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