“Under the Federal Reserve System we shall have no more financial panics.”

Charles Hamlin (first chairman of the Federal Reserve, 1915)

“It has been a theory held by many in the last few years that we had outgrown the liability to panics in this country.”

Wall Street Journal (1904)

“Severe depressions in economic activity, which earlier generations knew and feared, are no longer a serious threat.”

Arthur Burns (chairman of the Federal Reserve, 1972)

“Welcome to the Great Moderation. Historians will marvel at the stability of our era.”

Gerard Baker (Times of London, 2007)

“Recessions are now considered to be fundamentally preventable, like airplane crashes and unlike hurricanes.”

Arthur Okun (chairman of the Council of Economic Advisors, 1970)

“[The] central problem of depression prevention has been solved, for all practical purposes, and has in fact been solved for many decades.”

Professor Robert Lucas (Nobel Prize winner, 2003)

“If recession should threaten serious consequences for business (as is not indicated at present) there is little doubt that the Reserve System would take steps to ease the money market and so check the movement.”

Harvard Economic Society (1929)

“True, some great event may prick the commercial bubble of the hour, and create convulsions; but while the Secretary of the Treasury plays the role of banker for the entire United States it is difficult to conceive of any condition of circumstances which he cannot control.”

The New York Herald (1873)

“When you look at the mistakes of the 1920s and 1930s, they were clearly amateurish… It is hard to imagine that happening again—we understand the business cycle better.”

Professor N. Gregory Mankiw (Professor of Economics, Harvard University, 2007)

“Panics—the recurring phenomena of disaster which the Republican party could neither control or explain—are now but a memory.”

Democratic Party Campaign Literature (1920)

“‘Credit crunches’ of the sort that periodically shut off the supply of funds to home buyers, and crushed the homebuilding industry between 1966 and 1982, are a thing of the past.”

William C. Dudley (Chief Economist, Goldman Sachs, 2004)

‘ALL WELL,’ IS VIEW OF BUSINESS CHIEFS; Reassuring Statements From Leaders Help Wall St. to Regain Composure.

New York Times (1929)

“I guess I don’t buy your premise [that housing prices could crash]. It’s a pretty unlikely possibility. We’ve never had a decline in house prices on a nationwide basis.”

Ben Bernanke (chairman of the Federal Reserve, 2005)

“Would I say there will never, ever be another financial crisis? You know probably that would be going too far but I do think we’re much safer, and I hope that it will not be in our lifetimes, and I don’t believe it will be.”

Janet Yellen (chairman of the Federal Reserve, 2017)

“We are no longer the victims of the vagaries of business cycles. The Federal Reserve System is the antidote for money contraction and credit shortage.”

Andrew Mellon (Secretary of the Treasury, 1928)

Praise for Golden Tears

About Golden Tears

“Why did we have a depression in the nineteen thirties?” inquired an author in 1933. “We had just the same amount of property, things, goods, and all that in 1928 and ’29 as in 1933, so what makes the difference?” Many pondered the same question in 2008 (and will again soon).
Golden Tears answers this question through a study of credit bubbles: on the evolution of markets and money; on the origins and development and corruption of banking; on state interference in the market, the base cause of boom and bust; on authoritarianism, which always follows the bursting of a bubble; on the social mis-coordination and economic collapse authoritarianism inevitably brings.
Anyone familiar with current affairs will recognize the facts of past credit cycles—it is the resonance of words written long ago into modern times that brings intimacy and knowledge.
“During the last few years large numbers of our population … have abandoned employments directly productive of national wealth, and sought employments connected with commerce, trading, or speculation.” These lines are, in fact, from 1867.
“No one is known ever to have lost anything by a purchase and sale of real estate,” gloated a speculator in 1836, to which Federal Reserve Chairman Bernanke would echo back in 2005: “We’ve never had a decline in house prices on a nationwide basis,” right before the crash.
“Most men thought it wou’d come,” reflected Alexander Pope after the South Sea Bubble burst, “but no man prepar’d for it; no man considered it would come like a Thief in the night.” Nor did internet and real estate bubble speculators. “They have dreamed out their dream, and awakening have found nothing in their hands.”
An author writing during the Great Depression observed that: “this unending procession from boom to crash and from crash to boom is one of the most constant of the phenomena associated with social man.”
Golden Tears traces this procession through American history, demonstrating that each major bubble followed precisely the same pattern ordained by “very definite rules that produce, from identical causes, identical results over two thousand years of written history.” The accounts are accessible, relevant, entertaining, real, and terrifying.
The world today is in the grip of the largest credit bubble ever constructed and rapidly approaches what will be the greatest financial apocalypse. Those who control capital ignore the lessons of history at their peril.

Read the Prologue

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