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Jul 28 24 tweets 7 min read
The Panic of 1873: Your money is not money anymore (USA edition)

A Thread 🧵

Also, #bitcoin
The Panic of 1873 was a financial crisis that triggered an economic depression in Europe and North America that lasted from 1873 to 1877 or 1879 in France and in Britain.
The Panic of 1873 and the subsequent depression had several underlying causes for which economic historians debate the relative importance. American inflation, rampant speculative investments (overwhelmingly in railroads), the demonetization of silver in Germany
and the United States, ripples from economic dislocation in Europe resulting from the Franco-Prussian War (1870–1871), and major property losses in the Great Chicago Fire (1871) and the Great Boston Fire (1872)
All of this helped to place massive strain on bank reserves, which, in New York City, plummeted from $50 million to $17 million between September and October 1873. (Where my money at? yo!)
A period of economic overexpansion arose from the northern railroad boom before a series of economic setbacks: the Black Friday panic of 1869, the Chicago fire of 1871, an outbreak of equine influenza and the Boston fire of 1872, and the demonetization of silver in 1873.
The Coinage Act of 1873 or Mint Act of 1873, ended the right of holders of silver bullion to have it coined into standard silver dollars, while allowing holders of gold to continue to have their bullion made into money, the act created a gold standard by default.
Sorry #Silver holders, your money is no longer money! Back on the #Gold standard baby!
The decision of the German Empire to cease minting silver thaler coins in 1871 caused a drop in demand and downward pressure on the value of silver, which, in turn, affected the US since much of the supply of silver was mined there.
The Act had the immediate effect of depressing silver prices, hurting Western mining interests, who labelled the Act "The Crime of '73", but its effect was offset somewhat by the introduction of a silver trade dollar for use in Asia and the discovery of new silver deposits .
The Act also reduced the domestic money supply, raising interest rates and hurting farmers and others who normally carried heavy debt loads. The resulting outcry raised serious questions about how long the new policy would last.
The perception of US instability in its monetary policy caused investors to shy away from long-term obligations, particularly long-term bonds.

In September 1873, the US economy entered a crisis.
The failure of several banks set off a chain reaction of bank failures and temporarily closed the New York Stock Exchange. Factories began to lay off workers as the country slipped into depression. The effects of the panic were quickly felt in New York.
The New York Stock Exchange closed for ten days starting on 20 September. By November 1873, some 55 of the nation's railroads had failed, and another 60 had gone bankrupt by the first anniversary of the crisis
18,000 businesses failed between 1873 and 1875. Unemployment peaked in 1878 at 8.25%. Building construction was halted, wages were cut, real estate values fell, and corporate profits vanished.
In 1874, Congress passed "the Ferry Bill" to allow for the printing of currency, increasing inflation and reducing the value of debts. The bill was vetoed by President Grant.
The following year, Congress passed the Specie Resumption Act, which would back United States currency with gold. Backing American currency with gold helped curb inflation and stabilize the dollar.
The depression ended in the spring of 1879, but tension between workers and the leaders of banking and manufacturing interests lingered on. Poor economic conditions also caused voters to turn against the Republican Party.
So what did we learn from this and how does it apply to #bitcoin ?

The demonetization of a hard asset as money on the early global economy crashed silver markets and collapsed banks and businesses
This was due to the refusal of the Gov to strike #silver coins from bullion.

Whilst we still have to cross the 'legal tender' bridge in a lot of places #bitcoin avoids this specific issue.

It is both the underlying asset, and the money. All rolled into one.
#Bitcoin, it's not just better money, it's the only money. Everything else is just credit.
Thanks for reading, I am neither an economist nor a historian so I apologise in advance for any spectacularly bad takes.
Should have tagged my favourite #gold bug @LawrenceLepard in this one.

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More from @wasrichnowbroke

Jul 29
The Bland-Allison Act: Limping bimetallism in a Gold Standard age

A thread 🧵

Also #Bitcoin Image
The Bland–Allison Act, also referred to as the Grand Bland Plan of 1878, was an act of United States Congress requiring the U.S. Treasury to buy a certain amount of silver and put it into circulation as silver dollars.
The five-year depression following the Panic of 1873 caused cheap-money advocates (led by Representative Richard P. Bland, a Democrat of Missouri), to join with silver-producing interests in urging a return to bimetallism, the use of both silver and gold as a standard Image
Read 19 tweets
Jul 26
The Panic of 1857: The Railroad Bubble - and why deflationary issuance of money supply is good.

A thread 🧵

Also, #Bitcoin Image
The Panic of 1857 was a financial panic in the United States caused by the declining international economy and over-expansion of the domestic economy. Because of the invention of the telegraph in 1844, this was the first financial crisis to spread rapidly throughout the US.
The years immediately preceding the Panic of 1857 were prosperous, many banks, merchants, and farmers had seized the opportunity to take risks with their investments, and, as soon as market prices began to fall, they quickly began to experience the effects of financial panic.
Read 25 tweets
Jul 25
The Panic of 1837: Why inflationary money and fractional reserve lending cause boom / bust cycles.

"History doesn't repeat, but it does rhyme."

@LawrenceLepard

A Thread 🧵

Also, #Bitcoin Image
The Panic of 1837 was a financial crisis in the United States that touched off a major depression, which lasted until the mid-1840s. Profits, prices, and wages went down, westward expansion was stalled, unemployment went up, and pessimism abounded. Familiar yet?
The panic had both domestic and foreign origins. Speculative lending practices in the West, a sharp decline in cotton prices, a collapsing land bubble, international specie flows, and restrictive lending policies in Britain were all factors.
Read 23 tweets
Jul 24
The rise of the Neo-Malthusian Technocracy and why Food Scarcity is a manufactured threat.

A Thread: 🧵

Also #Bitcoin Image
Malthusianism is the idea that population growth is potentially exponential while the growth of the food supply or other resources is linear, which eventually reduces living standards to the point of triggering a population die off. This event, called a Malthusian catastrophe. Image
Such a catastrophe inevitably has the effect of forcing the population to "correct" back to a lower, more easily sustainable level. Rapidly, due to the potential severity and unpredictable results of the mitigating factors.
Read 19 tweets
Jul 23
The Social Contract - In the absence of political order and law, everyone would have unlimited natural freedoms, including the "right to all things" and thus the freedom to plunder, rape and murder; there would be an endless "war of all against all" (bellum omnium contra omnes)
To avoid this, free men contract with each other to establish political community (civil society) through a social contract in which they all gain security in return for subjecting themselves to an absolute sovereign, one man or an assembly of men.
Though the sovereign's edicts may well be arbitrary and tyrannical, you could argue absolute government is the only alternative to the terrifying anarchy of a state of nature.
Read 8 tweets

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