Liberty
Bruce Ramsey
July 20, 2018
The Caxton Press has just published my book, The Panic of 1893, and I can now write for Liberty about it. Its topic is the final economic downturn of the 19th century. For more than three years, my head was in the 1890s — in books, articles, personal and official papers, lawsuits, and, especially, old newspapers, chiefly from my home state. The book’s subtitle is, The Untold Story of Washington State’s First Depression.
It is a popular history, not a libertarian book as such. But I have a few thoughts for a libertarian audience.
Many libertarians espouse the Austrian theory of the trade cycle, in which the central bank sets interest rates lower than the market rate, leading to a speculative boom, bad investments, and a collapse. In the 1890s the United States had no central bank. Interest rates before the Panic of 1893 were not low, at least not in Washington. The common rate on a business loan was 10%, in gold, during a period in which the general price level had been gently falling. Washington was a frontier state then, and it needed to pay high interest rates to attract capital from the East and from Europe. Credit standards, however, were low, sometimes appallingly low. Many of Washington’s banks had been founded by pioneers — optimistic patriarchs who lent freely to their neighbors, associates, relatives, and themselves. By a different road from the Austrians’ theory, the economy was led to the place it describes: a Hallowe’en house of bad investments.
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http://libertyunbound.com/node/1873