Golden Tears – A History of Credit Bubbles

Golden Tears
A History
of Credit Bubbles

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“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)

Praise for Golden Tears

“Here is everything that is known and that needs knowing about hard currency. Daniel Oliver Jr., has set the gold standard for explaining the gold standard. Golden Tears is the complete and authoritative study of why we say ‘worth its weight in gold’ and not‘ worth its weight in paper’ and how paper money always leaves us saying, ‘Well, it looked good on paper.’”

P. J. O’Rourke

/ political satirist and author of On the Wealth of Nations

“Formidable and well-wrought, full of learning and wisdom. An essential addition to the canon of money and banking—especially to that portion of the modern canon explaining how things went so badly wrong.”

James Grant

/ Grant’s Interest Rate Observer

“Dan Oliver has written a cornucopian history of American Credit Bubbles and informed it with a fascinating theory. It is full of valuable material, analysis, and fodder for debate.”

George Gilder

/ Gilder Publishing LLC and author of Wealth & Poverty

Golden Tears is beautifully written, jargon free, deeply researched, and gives the reader a aah-hah-now-I-understand moment on practically every page.

John Steele Gordon

/ Writer of the Business of America column for American Heritage for 15 years, The Long View column for Barron's for 10 years, and author of An Empire of Wealth: An Epic History of American Economic Power

“We may not know the future but we do know the past and it has much to tell us about where we may be heading. Golden Tears delivers countless insights that both investment professionals and regular readers will find invaluable. Exhaustively researched and cogently written, the book identifies and explains consistent patterns of how credit bubbles form, grow and, inevitably, burst. If you care about your savings, Golden Tears is a must read.”

Simon Mikhailovich

/ The Bullion Reserve

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.