Category Archives: financial crisis

The Sagging Book Market (of 1819)

Think the beating the book market is taking by a slumping economy is a new phenomenon?  Think again. 

Writing in the latest issue of the journal Common-Place, Fordham University professor Edward Cahill discusses how the rise of easy credit in the early nineteenth century led to a devaluing not only of paper money, but eventually of literary currency as well — culminating in the financial panic of 1819 and the collapse of countless booksellers.  Left standing among the debris was Washington Irving’s Sketch Book of Geoffrey Crayon. “But if the appearance of the Sketch Book marked the economic development of American literary culture,” Cahill says, “it was also haunted by widespread economic unrest.” 

Cahill goes on to explain why The Sketch Book was not only a survivor, but also provided elegant commentary on — and a bit of a eulogy for — the early 19th century publishing industry. Eventually, Cahill concludes, “elite literary culture would be inextricably tied to popular culture, despite many protests to the contrary.”   Well put.  Once again, almost in spite of himself, Washington Irving shaped our perceptions of popular culture.

Professor Cahill’s article,  “The Other Panic of 1819: Irving’s Sketch Book, Literary Overproduction, and the Politics of the ‘Purely Literary,'” can be found right here.  Go get it.

That’s What I Want…

U.S. Forces Nine Major Banks To Accept Partial Nationalization,” reads the front page, stacked-and-centered banner headline on today’s Washington Post — making this about the fifteenth day in a row we’ve seen an enormous banner headline in a newspaper that isn’t normally known for such drama above the fold.* And as I do every day, I shake my head at the headlines, make a quick scan through the lead stories, and eventually lose interest before the stories make their jumps to the inner pages. I just don’t get it.

As I tell my coworkers every day, I wish I understood all this stuff better, because I know it’s important. Yet, I feel completely lost.

Until now.

Today I was pointed toward this website: The Money Meltdown: Everything You Need To Know About the Global Money Crisis. Site creator Matt Thompson — an online journalist and blogger — says he established the site as a way of pulling together “useful, authoritative, and comprehensive information about our current financial crisis in an accessible way.”

As someone completely baffled by finance, banks, and stock markets, Matt’s page is just what I needed — and maybe you’ll find it of some use as well. Click here to go get it.

* Okay, I’ll amend that to add, “at least not when it comes to finance and the stock market.” We see our share of big headlines when it’s politics, not finance. We leave that to those snooty New York newspapers….

"A Time of Unexampled Prosperity"

From “The More Things Change…” Department, as we watch the financial drama unfurl on Wall Street and in Washington, DC, I thought I’d share with you a remarkably prescient essay Washington Irving published in 1855, as part of the collection of stories in Wolfert’s Roost.

In this particular essay, “A Time of Unexampled Prosperity,” Irving alludes to the Panic of 1837, a financial crash that was the result of unchecked speculation, and plunged the American economy into a rumbling pseudo-depression that lasted until 1843. Within two months, failures in New York alone totalled nearly $100,000,000 — the equivalent of about $2 billion today.

Sound familiar? Here’s Washington Irving’s essay, “A Time of Unexampled Prosperity,” in its entirety (it’ll take you no more than five minutes to read, and trust me, it’s worth every second):

In the course of a voyage from England, I once fell in with a convoy of merchant ships bound for the West Indies. The weather was uncommonly bland; and the ships vied with each other in spreading sail to catch a light, favoring breeze, until their hulls were almost hidden beneath a cloud of canvas. The breeze went down with the sun, and his last yellow rays shone upon a thousand sails, idly flapping against the masts.

I exulted in the beauty of the scene, and augured a prosperous voyage; but the veteran master of the ship shook his head, and pronounced this halcyon calm a “weather-breeder.” And so it proved. A storm burst forth in the night; the sea roared and raged; and when the day broke, I beheld the late gallant convoy scattered in every direction; some dismasted, others scudding under bare poles, and many firing signals of distress.

I have since been occasionally reminded of this scene, by those calm, sunny seasons in the commercial world, which are known by the name of “times of unexampled prosperity.” They are the sure weather-breeders of traffic. Every now and then the world is visited by one of these delusive seasons, when “the credit system,” as it is called, expands to full luxuriance, everybody trusts everybody; a bad debt is a thing unheard of; the broad way to certain and sudden wealth lies plain and open; and men are tempted to dash forward boldly, from the facility of borrowing.

Promissory notes, interchanged between scheming individuals, are liberally discounted at the banks, which become so many mints to coin words into cash; and as the supply of words is inexhaustible, it may readily be supposed what a vast amount of promissory capital is soon in circulation. Every one now talks in thousands; nothing is heard but gigantic operations in trade; great purchases and sales of real property, and immense sums made at every transfer. All, to be sure, as yet exists in promise; but the believer in promises calculates the aggregate as solid capital, and falls back in amazement at the amount of public wealth, the “unexampled state of public prosperity.”

Now is the time for speculative and dreaming or designing men. They relate their dreams and projects to the ignorant and credulous, dazzle them with golden visions, and set them madding after shadows. The example of one stimulates another; speculation rises on speculation; bubble rises on bubble; every one helps with his breath to swell the windy superstructure, and admires and wonders at the magnitude of the inflation he has contributed to produce.

Speculation is the romance of trade, and casts contempt upon all its sober realities. It renders the stock-jobber a magician, and the exchange a region of enchantment. It elevates the merchant into a kind of knight-errant, or rather a commercial Quixote. The slow but sure gains of snug percentage become despicable in his eyes; no “operation” is thought worthy of attention that does not double or treble the investment. No business is worth following that does not promise an immediate fortune. As he sits musing over his ledger, with pen behind his ear, he is like La Mancha’s hero in his study, dreaming over his books of chivalry. His dusty counting-house fades before his eyes, or changes into a Spanish mine; he gropes after diamonds, or dives after pearls. The subterranean garden of Aladdin is nothing to the realms of wealth that break upon his imagination.

Could this delusion always last, the life of a merchant would indeed be a golden dream; but it is as short as it is brilliant. Let but a doubt enter, and the “season of unexampled prosperity” is at end. The coinage of words is suddenly curtailed; the promissory capital begins to vanish into smoke; a panic succeeds, and the whole superstructure, built upon credit and reared by speculation, crumbles to the ground, leaving scarce a wreck behind:

“It is such stuff as dreams are made of.”

When a man of business, therefore, hears on every side rumors of fortunes suddenly acquired; when he finds banks liberal, and brokers busy; when he sees adventurers flush of paper capital, and full of scheme and enterprise; when he perceives a greater disposition to buy than to sell; when trade overflows its accustomed channels and deluges the country; when he hears of new regions of commercial adventure; of distant marts and distant mines, swallowing merchandise and disgorging gold; when he finds joint-stock companies of all kinds forming; railroads, canals, and locomotive engines, springing up on every side; when idlers suddenly become men of business, and dash into the game of commerce as they would into the hazards of the faro table; when he beholds the streets glittering with new equipages, palaces conjured up by the magic of speculation; tradesmen flushed with sudden success, and vying with each other in ostentatious expense; in a word, when he hears the whole community joining in the theme of “unexampled prosperity,” let him look upon the whole as a “weather-breeder,” and prepare for the impending storm.

Sounds like something right out of the op-ed pages of today’s New York Times, doesn’t it? Trust me, when Irving’s good, he’s very good. Click here to read Wolfert’s Roost in its entirety.