Friday, February 15, 2008

David Ames Wells on the Depression of 1873, George W. Bush and Today's Fed Policy

David Ames Wells, whom Abraham Lincoln first appointed to public office, was commissioner of revenue in the late 1860s and was a consultant to the nascent railroad industry. He became an advocate of free trade, a Mugwump supporter of President Grover Cleveland and an advocate of hard money.

In 1889 he copyrighted Recent Economic Changes. In the introduction he notes:

"The existence of a most curious and in many respects unprecedented disturbance and depression of trade, commerce and industry, which, first manifesting itself in a marked degree in 1873, has prevailed with fluctuations of intensity up to the present time (1889), is an economic and social phenomenon that has been everywhere recognized. Its most noteworthy peculiarity has been its universality...the maximum of economic disturbance has been experienced in those countries in which the employment of machinery, the efficiency of labor, the cost and standard of living and the extent of popular education are the greatest...It is also universally admitted that the years immediately precedent to 1873--i.e., from 1869 to 1872--constituted a period of most extraordinary and almost universal inflation of prices, credits and business; which in turn has been attributed to a variety or sequence of influences, such as excessive speculation; excessive and injudicious construction of railroads...the opening of the Suez Canal...the Franco-German War; and the payment of the war indemnity which Germany extracted from France...Under date of March 1873, the London Economist in its review of the commercial history of the preceding year, says:

"'Of all events of the year 1872, the profound economic changes generated by the rise of prices and wages in this country, in Central and Western Europe, and in the United States, have been the most full of moment.'"

And the London Engineer under date of February 1873 thus further comments on the situation:

'...In 1872 scarcely a single step in advance was made in the science or practice of mechanical engineering. No one had time to invent, or improve, or try new things...'" (emphasis in the original).

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