- Paperback: 480 pages
- Publisher: Beard Books (December 19, 1999)
- Language: English
- ISBN-10: 1893122468
- ISBN-13: 978-1893122468
- Product Dimensions: 5.5 x 1.1 x 8.5 inches
- Shipping Weight: 1.4 pounds (View shipping rates and policies)
- Average Customer Review: 4.6 out of 5 stars See all reviews (6 customer reviews)
- Amazon Best Sellers Rank: #1,098,207 in Books (See Top 100 in Books)
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Panic on Wall Street: A History of America's Financial Disasters
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Panic on Wall Street stands as a solid foundation for later research on the topic. -- Turnarounds and Workouts, January 15, 2001 by Gail Owens Hoelscher
From the Publisher
Here is a book dealing with a subject endemic to many Eastern and Western countries financial panic. Covering 12 of the most harrowing moments in American financial history from 1792 to 1962, it demonstrates that Wall Street and the public are at once the heroes, villains, and victims of past panics.
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Top Customer Reviews
Robert Sobel is an assistant professor of history at Hofstra University and has written other books. The `Conclusions' of this 1968 book lists the many causes blamed for financial panics (or depressions). Most are symptoms of the problem, which is a lack of money to buy what people want. This can be caused by crop failure (the weather), war (its destruction), or plague (sick or dead people consume less). A mismatch between production and consumption is the obvious symptom ("under-consumption"). While human error can account for some of these, all people are not fools. [Or so I assume.] Can a totally managed society prevent this? Yes (on paper). But every plan has a flaw: it is based on the past and does not address the changes that have occurred since the plan was written. It can't account for fickleness in popular tastes.
Is it caused by a lack of knowledge of conditions or optimism (p.409)? Sobel blames "weaknesses in the financial structure", yet the Federal Reserve did nothing to prevent the Savings & Loan crisis of the 1980s, the High-Tech Stock scams or bubble in the 1990s, or the destruction in manufacturing that followed NAFTA in the late 1990s. This destroyed more industry than by enemy action during the World Wars. The Federal Reserve System helped to cause the Great Depression after 1929 (they did not prevent bank runs as in England). When there is an economic depression small businesses are likely to fail, their loss of customers is a gain for big businesses. Now that small businesses are mostly destroyed by the Fed's policies who can be sacrificed now? Small grocery stores are mostly a distant memory, so too many mid-size manufacturers. "A Note on Sources" lists the many books that go into more details. The "General Bibliography" lists all the books by author order.
The `Contents' list the twelve panics. It can not list the problems that followed Nixon's devaluation of the dollar in 1971. Could a newer edition cover the last forty tumultuous years?
1) "William Duer and the Panic of 1792" resulted from speculation in bank stocks whose value declined.
2) "The Crisis of Jacksonian Finances:1837" resulted from land speculation paid for by paper money (bank notes).
3) "The Western Blizzard of 1857" followed a drop in gold and cotton production that affected the economy.
4) "The Circus Comes to Town: 1865-69" tells about the free market in stock speculation. Jay Gould tried to corner the gold market but failed.
5) "Crisis of the Gilded Age: 1873" tells about overproduction of wheat and falling prices that impoverished farmers, railroads, and steel production.
6) "Grant's Last Panic: 1884" resulted from falling prices and bankruptcies that spread like a chain reaction.
7) "Grover Cleveland and the Ordeal of 1893-1895" occurred during the worst economic depression of the 19th century for the farmers and miners of America (p.235).
8) "The Struggle of the Titans: the Northern Pacific Corner of 1901" resulted from speculation on the market that led to failures.
9) "The Knickerbocker Trust Panic of 1907" followed attempts to corner the copper market (p.309). Bank runs and bankruptcies resulted.
10) "The Year the Stock Market Closed: 1914" followed the start of the war in Europe and the withdrawal of cash from banks (p.335) and the loss of trade (p.339).
11) "1929: The Making of the Myth" marked a turning point in American history. The farm situation was weak (p.353), credit purchases increased, and stock prices were rising due to margin accounts (p.356). Some foresaw a terrific crash (p.367). The Federal Reserve raised its rate for borrowed money (p.368). The crash came in October 1929.
12) "The Kennedy Slide: 1962" tells how much money went into bonds rather than stocks because of low yields (p.407). A belief of lower returns affected stocks (p.411). There was a 27% loss in paper values.
Moreover, there really isn't a lot of competition to this book; feints at competition, including Michael Lewis' Panic (2009) are actually inferior (see my review for that book). So this is an example of a book that is problematic, but indispensable.
The problems are as follows:
1.Sobel figuratively wags his finger (or shakes his head) at the "folly" of people pursuing a killing on the market. In this, he seems to imitate Charles McKay, Extraordinary Popular Delusions (1856), in which a group of people behave in a way that is bad for the whole, but is perfectly sensible for the individual members. Lots of individuals get very rich in booms, and BECAUSE they sold out, someone else could buy in.
A panic necessarily is associated with an untenable run-up in asset values, and while the two put together are a setback for economic development, it makes perfect sense for participants in a bubble to do try their luck. Likewise, rational behavior (including illegal, but rational, behavior) is described as a form of collective madness. One is inclined to ask why Sobel didn't, therefore, anticipate what fools these mortals be and get rich on the stock market.
2. Sobel focuses (like most previous accounts of bubbles) on the fiduciary irregularities of the perpetrators, which (in my opinion) had a minor role in the phenomenon of the panic generally. In some cases, the panic took the form of a run on a particular liability, such as the early banks; owing to the newness of the institution at the time, there was inadequate oversight and excessive leverage. More generally, however, this was not a real cause of the panic.
This might seem harmless enough, but it perpetuates a dangerous delusion that flourished then and now: capitalism doesn't fail people, people fail capitalism.
Nevertheless, the book provides a lot of period detail that contextualizes the behavior of the principals. We learn, for example, of the great debate in the early days of the Republic over the legitimacy of trading shares in existing enterprises (as opposed to land speculation and venture capital). Later, we get to observe the rise of new investment vehicles that are totally accepted today.
Panics are extremely complex events, and multiple versions of the same crisis can focus on entirely different events (a good example of this is the 1997 Asian Currency Crisis). Your basic economic narrative will mold your selection of details, so that the most important events in your narrative may not even rate a mention in someone else's. *Panic on Wall Street*, however, remains almost unique as a survey of narratives, and the backstory it provides is probably one that any student of these episodes would need to include.
One thing I didn't expect, but came to understand through reading the book, was that fact that almost nothing was said about the great depression. Keeping on topic, the author's main discussion was about the panic of 1929 and not the depression that followed a couple years later. The book speaks rather narrowly about the relation (or lack thereof) between the panic and the depression and doesn't go much beyond this. All in all, it is a very good book.