“Those who cannot remember the past are condemned to repeat it.” – George Santayana
Political cartoon by J. Keppler showing Uncle Sam encouraging former VP Colfax to commit Hari-Kari for his involvement with the Credit Mobilier scandal, 1873.
These are the platform issues of the Presidential Election:
Equal pay for equal work
Regulation of and splitting up monopolies
Prevention of purchasing political influences
Eight hour workday with living wages
Direct taxation of the wealthiest
Abolition of the death penalty
Welfare and vocational training for the poor
The opportunity to elect the first woman President
Which election is this, 2016? Santayana’s quote has as much relevance to today’s election as it did to the election of 1872. What ensued after that election should serve as a cautionary tale. Do we learn from history, or are we doomed to repeat it?
In 1872, the Equal Rights Party adopted the platform above and officially nominated the first woman Presidential candidate, Victoria Claflin Woodhull. The party nominated Frederick Douglass, the escaped slave, eloquent orator, and statesman for Vice President. Women could not vote, but as one of the earliest suffragists, Victoria assailed societal conventions. Without her name on any ballots, the Party won no electoral votes. However, the campaign raised the national awareness of the cruel prejudices of gender, race, and economic class. Victoria’s audacity was punished as she and her family were arrested on false charges and spent election night in jail.
President Ulysses S. Grant won re-election, beating the newspaperman, Horace Greely of The New York Tribune. It is worth mentioning that Greely hired the first woman editor of a major paper, Margaret Fuller, in 1844. Grant served a calamitous second term during the Great Depression—renamed The Panic of 1873 after the 1930s. The original Great Depression ravaged the American economy from 1873 until 1879, and is also known in Economics as The Long Depression, which devastated European economies with stagnation for twenty years. We are on the brink of this happening again.
A precursor to the original Great Depression, The Gold Scandal of 1869, made Victoria Woodhull and her sister Tennessee Celeste Claflin, the paramour of the richest man in America and triple her age, Commodore Cornelius Vanderbilt, uncommonly wealthy. The 1869 abuses of insider information, collusion, and premeditated market manipulations parallel to an astonishing degree the Financial Crisis of 2008. Then as now, no effective reforms were instituted after the economy recovered to curtail future corruption.
After the re-election of Grant, the Crédit Mobilier scandal exposed Republican political influences that were purchased to authorize and fund the transcontinental railroad without any meaningful oversight or regulations (dramatized in the popular T.V. series, Hell on Wheels). Note: a U.S. firm with no ties to the French banking institution of the same name. The public exposure of the enormous boondoggle and staggering losses triggered a market panic and the infamous 1873 run on the banks.
Today, we are poised to repeat such folly. Financial institutions deemed “Too Big To Fail” have invested in huge short positions to the point that they need to collapse the stock and bond markets to cover their bets against the markets. This repeats the never corrected and unpunished precedent when these same investment firms as fiduciary advisors divested themselves of soon-to-be worthless Orange County bonds to their own customers. That violation of fiduciary responsibility went unpunished and unreformed. Insanity!
There is a growing chorus of unlikely Cassandras wailing on the parapets of the financial media. The prototype for the fictional character, Gordon Gekko, real life Asher Edelman, recently shocked the press when he suggested that the only way to avoid financial brinkmanship is to elect Bernie Sanders who “will accelerate the velocity of money,” i.e., increase liquidity through job programs to build a new middle class. The immensely successful capitalist, Nick Hanauer, decried over a decade ago for sagely advocating a $15 minimum wage as an economic stimulus, advised his fellow 1%ers in June 2014, “To my fellow filthy rich Americans: The pitchforks are coming.”
To the disbelief of the financial press, both extraordinarily successful capitalists accurately illuminate that we have effectively been in an undeclared recession (contraction of the economy) for over 15 years, highlighting a trending rise in consumer prices rapidly outgrowing stagnant incomes, thus lowering consumption.
To prevent the impending financial cataclysm we have to examine history and ask, what worked? Answer: we need a new New Deal. Rapid creation of 15+ million new jobs could stave off what is likely to become the third and Greatest Depression. Will we have to rename the “Great Depression” for a second time? The challenge is that the century old Keynesian economics two-pronged approach of lowering interest rates and government spending is no longer viable.
A new and effective stimulus can be achieved incentivizing liquidity of $1 trillion. The new New Deal will be fueled by a tried and true financial concept—credit funding—liquidity (bank loans) based on collateral pledges protected by insurances. Great merchant banks funded the commerce of sailing ships to new worlds bringing back goods and establishing trade, while protectively insuring the credit exposure of their collateral pledges against shipwreck. This same model raised $187.5 billion in WWII War Bonds, conservatively $2.25 trillion today, adjusted for inflation—the risk mitigation was the full faith and credit of the Unites States government.
Enacting a 10% federal tax credit will stimulate pledging dormant cash and/or fixed assets as collateral to facilitate risk mitigated credit funding—interim loans with built-in long term take out financing or repayment. Master Limited Partnerships could raise huge amounts of funds to be deposited into banks … think of the funding of the Bernie Sanders campaign! Yes, corporate and populous infusion of $1 trillion of capital liquidity without $1.00 of government spending or $1.00 of charitable donations.
As a writer of historical fiction, how about this scenario? The Democratic Party is unified by both Hillary Clinton and Bernie Sanders. Due to an 8% new voter/youth turnout in the general election, landslide majorities are elected to the House and the Senate. Washington enacts a business friendly 10% tax credit for posting cash or other assets as collateral to facilitate (risk mitigated) loans—credit funding—to finance job programs: infrastructure including utilities renewal, green energy deployment, vocational training, and traditionally charitable endeavors such as low income housing and microfinance.
The choice is ours to make. Do we learn the obvious lessons of the past, or do we repeat our mistakes, prepare for the worst, and accept that winter is coming? Should we start sharpening the tines?
Neal Katz is author of the five-time, International award winning historical novel, OUTRAGEOUS, The Victoria Woodhull Saga, Volume 1: Rise To Riches, and the soon to be released Volume 2, SCANDALOUS: Fame, Infamy, and Paradise Lost, which covers the 1872 election and aftermath. www.thevictoriawoodhullsaga.com
Mr. Katz is also founder of the Conscientious Credit Funding Organization based on a renewed paradigm of monetary liquidity—credit funding. Visit www.ccfoglobal.org