Echoes Dispatches From Economic History

Philip Scranton

The Banks and the Reich: Echoes

over 2 years ago
This Week

"The measures taken in Germany to reconstruct the banking system of the country are without precedent in economic history," intoned an Economist writer in late February 1932.

The magazine's Berlin correspondent said the operations under way to save the country's financial system involved "a further penetration by the State into the sphere of banking."

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Echoes: Oil

This year's Republican nomination battle has again highlighted the contentious nature of the U.S. tax code. And with regard to Mitt Romney, the founder of private-equity firm Bain Capital LLC, the argument has grown especially heated over the categorization of income and capital gains.

Many analysts have questioned the tax policies governing an important component of Romney's income, a form of compensation known as "carried interest." Portrayed in the press and academic writing as a modern product of hedge funds and private equity, carried-interest arrangements and the tax issues surrounding them actually have a long history, linked to oil speculation and wildcatting at the turn of the 20th century.

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Ruml Plan

Chances are you’ve never heard of Beardsley Ruml. But if you pay income taxes, he has exerted a significant influence on your life. He's the man who conceived what he called the "pay-as-you-go" method, now better known as estimated tax payments. In the process, he transformed the American way of income taxes.

Before 1940, only about 7 percent of Americans even paid income taxes. World War II changed that drastically. The unprecedented costs of the war meant two things to American leaders: People would have to pay much higher taxes and, more important, far more people would have to pay them.

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Echoes: wed - main

We live in a golden age of financial journalism. Michael Lewis, Gretchen Morgenson, James Stewart, William Cohan, Jesse Eisinger, Jake Bernstein, those fellows at Bloomberg: They’ve turned the business page and business books into required reading, and sometimes thrilling entertainment.

But this style of reporting isn't new. It began in the '60s -- the 1860s -- with the work of one man. He was a relentless investigator, a witty writer, a teller of gripping tales, America’s first great financial journalist.

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Philip Scranton

Short Selling and the Great Depression: Echoes

almost 3 years ago
The Great Depression: Short Selling

In the midst of the Great Depression, people who bet on stock-market declines were considered unpleasant, unwanted, un-American, un-something. Yet as a New York Times writer noted in February 1932, "The bearish speculator is not often reviled in healthy markets; it is when prices are declining that opprobrium is heaped upon him."

Short-selling transactions involve a broker "lending" equity shares to an investor, who pledges to return them at a later date. Usually, the broker sells the shares, credits the investor's account, then waits for the investor to repurchase and return them. If the buyback price is lower, the account balance, less fees and interest, represents profit; if the price is higher, the investor adds funds and takes a loss. Short sales can yield big gains when markets collapse, but analysts have long debated whether they accelerate price slides or instead help establish "fundamental" values after a bubble.

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Ellen F. Brown

Why Book Publishing Can Survive Digital Age: Echoes

almost 3 years ago
Gold Medal Books from Fawcett Publications

Word on the street is that the publishing industry is under attack by technology. Amazon.com Inc. has launched a bare-knuckled assault against independent bookstores. Print-on-demand firms make it possible for anyone to get his work on the market, and thus threaten to render agents and editors obsolete. And with e-books priced so low, how can authors and booksellers earn a decent living?

Yet the publishing industry has a long history of weathering these sorts of challenges, and its past offers some optimism for the future.

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Fed’s 100-Year Roots

Although it may seem shocking to watch the 112th Congress, there was a time when national leaders were swift and decisive in getting things done. In November 1910, in the space of less than two weeks, a group of government and business leaders fashioned a powerful new financial system that has survived a century, two world wars, a Great Depression and many recessions.

Of course, the Jekyll Island conference, which met that month, was dodgy even by the standards of the Gilded Age: a self-selected handful of plutocrats secretly meeting at a private resort island to draw up a new framework for the nation’s banking system. Add in the gnarly live oaks and dripping Spanish moss of coastal Georgia, and the baronial becomes baroque.

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Echoes: Drachman

Before Greece entered the euro area, its basic monetary unit was called the drachma. As the country debates with growing seriousness whether to return to its old currency, the coin's history and design repay a closer look. They speak of the extreme persistence of an idea, a coin and an image -- going back 25 centuries.

The word drachma comes from the Greek "drax," meaning a handful. It originally referred to a handful of six iron rods, called obols. Obols were used as currency before the widespread use of coinage.

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Kristin Aguilera

Breaking Wall Street's Color Barrier: Echoes

almost 3 years ago
Echoes: Searles

Feb. 12, 1970, was a historic day on Wall Street. For the first time in the 178-year history of the New York Stock Exchange, a black man joined the trading community on the exchange floor.

Joseph L. Searles III, the Newburger, Loeb & Co. partner who achieved this milestone, took a meandering route to the Street. He had been a professional football player for the New York Giants and later made a name for himself in politics as an aide to New York City Mayor John Lindsay. But Searles's experience in finance was extremely limited.

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Philip Scranton

Hoarding Cash After the Crash: Echoes

almost 3 years ago
Echoes

For President Herbert Hoover, the election year of 1932 would be a rough one. It opened with weak equities markets, declining commodities prices and intensifying anxiety about both economics and politics.

Benjamin Roth, a lawyer from Youngstown, Ohio, noted in his diary: "Even those who invested after 1930 -- after the crash -- at what they considered bargain prices, now find their 'bargains' selling at half price or lower." He added: "Business shows no sign of pick-up. People are already looking toward the next presidential election when a Democrat will probably replace Hoover. In the meanwhile, Hoover adds to his long list of artificial stimulants."

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Charles Geisst

Dodd-Frank's Successful Predecessor: Echoes

almost 3 years ago
Echoes: Pecora, main

More than a year and a half after the Dodd-Frank financial reform was enacted into law, many of its provisions are under attack.

Banks have fiercely opposed everything from its proposed limits on proprietary trading to its new rules on derivatives to its regulation of the muni-bond market. Republicans in Congress have opposed much of what the Consumer Financial Protection Bureau was established to do. Republican presidential candidates have called for the act's repeal. And regulators have missed three-fourths of the law's rulemaking deadlines.

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Wendy Woloson

A Brief History of the American Pawn Shop: Echoes

almost 3 years ago
Echoes: Pawnbroker

Cable television has lately been bringing the art and science of owning a pawnshop to life -- even for those fortunate enough to experience it only vicariously. But pawning has been integral to Americans' financial lives for centuries.

History Channel's "Pawn Stars" features the oversized Harrison family and their Las Vegas pawnshop, Gold & Silver. Old paper currency, antique pistols, classic guitars and works of art are typical of the items offered up for appraisal there, making the series seem like a less genteel version of "Antiques Roadshow."

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Elizabeth Tandy Shermer

The Long War Between the States (for Business): Echoes

almost 3 years ago
Echoes

American firms have been on the move of late -- and not just to Mexico or China. Most major job relocations are from one U.S. state to another, according to the Department of Labor. And with unemployment remaining stubbornly high, and companies sitting on a lot of cash, states have been competing ever more fiercely to attract new businesses.

Ohio reportedly has offered incentives worth $400 million to Sears to entice the company and its 6,000 employees to move from Illinois. Pennsylvania, Ohio and West Virginia are vying intensely to be the home of a new "ethane cracker" Shell plans to build. The governors of Kansas and Missouri have intervened, personally, in a battle to host the headquarters of AMC Entertainment.

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Philip Scranton

Will Rogers, Funnyman of the Depression: Echoes

almost 3 years ago
Will Rogers

Americans struggling through the Great Depression didn’t have Jon Stewart and Stephen Colbert to provide a nightly lampooning of the rich, powerful and foolish, but they did have Will Rogers. “I am not a member of any organized political party," he famously observed, "I am a Democrat.”

Born in the Territory of Oklahoma in 1879, Rogers became a working cowboy. In about 1900, he assembled a circus act that performed roping tricks, and took it to New York City theaters, where he headlined in vaudeville for a decade. He started touring nationally, offering witty commentaries on the news, and he began a syndicated "Daily Telegram" which soon ran in 500 newspapers. (His columns are collected here.)

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Echoes: Country Grocery

India's ambivalence about modern retailing has brought derision from the West. The government's decision to put off legislation that would have opened India's retail market to foreign investors, announced Dec. 7, led to howls of outrage. On Jan. 10, the government partially reversed course, decreeing that foreigners could own single-brand stores under certain conditions.

Those conditions include obtaining at least 30 percent of the products sold from small Indian manufacturers -- which was unattractive to retailers who gain competitive advantage from their ability to source globally on a large scale. On Jan. 22, the Swedish furniture retailer IKEA said it was putting its entry into the Indian market on hold.

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Robert E. Wright

Why the Early U.S. Didn't Go the Way of the Euro: Echoes

almost 3 years ago
U.S. Bond, Signed by George Washington

We usually don't think of the U.S. as a monetary union, but early in its history it essentially was. Unlike the crisis-wracked euro zone, the dollar zone survived its first few decades without a major crisis, providing the fragile young republic with a period of relative stability during which it began to congeal culturally, economically, politically and militarily.

European policy makers hoped that the euro would serve as the unifying and integrating force of the European Union much as, they believed, the dollar had for the early U.S. What the Europeans failed to appreciate was that early America's real glue was not its dollar union but its fiscal one.

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About Echoes

Echoes is Bloomberg View's economic history blog. It is edited by Stephen Mihm, an associate professor of history at the University of Georgia and the author, with Nouriel Roubini, of "Crisis Economics: A Crash Course in the Future of Finance," and of "A Nation of Counterfeiters: Capitalists, Con Men and the Making of the United States."