Thursday, August 29, 2013

Aug 29 (1991) The Soviet Union is Dead: Long live the Muscovite Billionaire!

"The former union has ceased to exist, and there is no return to it," said Leningrad Mayor Anatoly A. Sobchak on August 29, 1991.

Ten days prior, eight Communist Party hardliners led by Soviet Vice President Gennady Yanayev led a three day coup d'etat and ousted President Mikhail Gorbachev. Despite tanks in the streets of Moscow, thousands of people demonstrated against the takeover, including the democratically elected president of the Russian Federation, Boris Yeltsin. Mr Yeltsin ended the coup in dramatic fashion by climbing atop a tank outside the Russian parliament.

Time magazine called Mr. Yeltsin's resistance movement "a kind of miracle, the reversal of a thousand years of autocracy." Seven of the eight coup plotters were eventually arrested--one committed suicide.

Today, Russia (the USSR's successor) is the eighth largest economy in the world. Economic reforms after the fall of the Soviet Union privatized many sectors. The transition was controversial in part because ownership was transferred from the state to politically connected oligarchs, leaving wealth highly concentrated. As of 2011, Russia's capital, Moscow, had the highest number of billionaires of any city in the world.

Wednesday, August 28, 2013

The March on Washington: "The jobs part of it may be tougher than the freedom..."

Crowd gathers for Martin Luther King's "I Have a Dream" speech at the Lincoln Memorial National Memorial, August 28, 1963 from

Fifty years ago, near the end of a hot August day, Dr. King delivered his "I Have a Dream" speech during what is now known as "The Great March on Washington."

Writing in the New York Times on August 28, 1963 James Reston notes "the demonstration was not designed merely as political agitation for the passage of President Kennedy's civil rights legislation, but was officially a 'March on Washington for Jobs and Freedom.' The jobs part of it may be tougher in the end than the freedom..."

Today, Mr. Reston's words seem prescient.

Black unemployment is twice that of whites, just as it was in Mr Reston's 1963 article. And income disparity is growing. Citing a Pew Research study, the Economist reports that the bursting of the housing bubble took a greater toll on black families than whites, reducing their median wealth by 53% between 2005-2009 (when adjusted for inflation) compared to 16% for whites.

A question for you, dear reader. While there is much to celebrate in terms of political equality on this 50th anniversary, economic progress has lagged. Why do you think the economic fight has proven to be so much tougher than the political one?

Monday, August 26, 2013

Aug 26 (1791) Happy Bday Steamboat! "Many mistakes were made. Some of them may have been amusing at another time"

John Fitch's sketch and description of piston for steamboat propulsion, ca. 1795.

John Fitch was granted a patent for the steamboat on this day in 1791 (after a long fight with James Rumsey for the rights).

For most of the 19th and early 20th century, trade on the Mississippi River was dominated by paddle-wheel steamboats. Their use propelled the development of economies in port cities; facilitated the growth of agriculture by making it easier to transport to markets; and increased prosperity along the major rivers.

Steamboats were held in such high esteem (ha!) that they became state symbols. The Steamboat Iowa (1838) is incorporated in the Seal of Iowa because it represented speed, power, and progress.

Steamboat traffic--both passenger and freight--grew exponentially in the decades before the Civil War. So too did the economic and human losses inflicted by snags, shoals, boiler explosions, and human error. Not to mention fog, which caused two steamers to collide 200 miles off Sandy Hook in June 1880. Survivors told of the hysteria that ensued to reporters at The Sun, claiming:

"Many mistakes were made. Some of them may have been amusing at another time. One gentleman lost an elegant pair of slippers worked for him by a lady friend, and later found them on the feet of one of the cabin boys..."

Saturday, August 24, 2013

The Ship of Gold

SS Central America's recovered riches

This year, investors are abandoning gold like a sinking ship.  Bloomberg reports prices are down 28% since their high of $1,921 an ounce reached in September 2011.

Passengers aboard the  SS Central America abandoned gold too, as their ship was sinking in 1857.

Later dubbed the "Ship of Gold,” the wooden vessel got caught in a hurricane off the coast of the Carolinas. Most of the 581 passengers and crew were lost as well as the more than $2 million in gold specie prospected from California intended to refill reserves of Eastern banks.

Over 128 years later, the gold was recovered by a diving team—the 
Columbus-America Discovery Group of Ohio. After a legal battle in which 39 insurance companies claimed that because they paid damages in the 19th century they had a right to the treasure in the 20th, the divers were awarded 92% of the riches arguing successfully that the gold had been abandoned.

Back in 1857, a survivor of the wreck told reporters from the New York Tribune what happened after all the women and children had boarded the life boats.

All discipline was at an end, as the fate of the ship was rapidly and surely approaching. It was every man from himself...

In that trying hour gold was valueless. The miner threw his hard-earned 'pile' into the sea, lest its weight might drag him down. I saw many men thus relieve themselves of their treasure, and hundreds of thousands of dollars were thrown away. Capt. Badger threw down $17,000 in gold in the Captain's cabin just before jumping into the boat and saved his life...

In regard to the specie, Mr. Jones says that it was stowed away in the run, right along the keelsons of the ship, and before anything could be done to get it up (even if there had been a chance at saving it) it was under water.

Friday, August 23, 2013

Economist Kenneth Arrow: "There's really no logical relation between employment and health care"

Kenneth Arrow

As healthcare makes headlines, I wish more people listened to Nobel Prize-winning economist Kenneth Joseph Arrow. Born in New York City in 1921, at 51, Mr. Arrow was the youngest person ever to receive the award. Famous for his "possibility theorem" which says it's impossible to construct a social welfare function out of individual preference, Mr. Arrow’s insights are why economists today are almost unanimously against price controls.

Applying his research to healthcare, however, Mr. Arrow found “the laissez-faire solution for medicine is intolerable,” Government must intervene to correct market deviations. A centralized system would be simpler (yeah!), and through economies of scale, cheaper.

In an 1995 interview with the Minneapolis Fed, Mr. Arrow said:

"There's really no logical relation whatever between employment and health care and the insurance that goes with that...

I think we need basically a single-payer system...The financing, as is known already from Medicare and certainly from Social Security payments from a centralized system, can be done much more cheaply than when you have many competitive insurance plans...The cost of administering the present plans is large and there are big economies of scale...

So I think that systems that are based on employment are illogical and attempts to meet them create all sorts of unnecessary complexities."

Thursday, August 22, 2013

T.R. Drives a Car

Pres. Theodore Roosevelt smiling from an automobile, 1902. From

On a beautiful August 22 in 1902,  President Theodore Roosevelt became the first sitting president to drive in an automobile (an electric one, no less). According to the San Francisco Call's reporting of the event, however, that fact was not the most interesting. In his remarks to the Connecticut crowd, President Roosevelt focused instead on the men who built the car.

"On being driven around your beautiful city I was taken through Pope Park and stopped at a platform, where I was presented with a great horseshoe of flowers by the great workingmen of Hartford to the President of the United States....It was a gift of welcome from the wage-workers, upon whom ultimately this government depends...

Gentlemen, I should be utterly unfit for the position that I occupy if I failed to do all that lies in me to act as light is given me--to act so as to represent the best thought and purpose of the wage-workers of the United States."

Wednesday, August 21, 2013

Aug 21 (1885) William S. Burroughs Patents Adding Machine: "Sure, I've seen them. Keys and handles that you pull"

Burroughs Adding Machine (Class 1 Style 5)

William Seward Burroughs I received a patent for his adding machine on August 21, 1885, a product he invented to ease the monotony of clerical work. His first job after graduation was as a clerk at the Cayuga County National Bank of Auburn, New York where he spent long hours adding numbers. He went on to found American Arithmometer Company, which became Burroughs Corporation which merged with Sperry to form Unisys.

The grandson of the inventor is Beat author William S. Burroughs; a collection of his essays is called The Adding Machine.

And Elmer Rice first published his classic play "The Adding Machine" in 1923. It's the story of Mr. Zero, an accountant who is replaced by an adding machine. Excerpted below.

The fact is my efficiency experts have recommended the installation of adding machines.

Adding machines?

Yes, you've probably seen them. A mechanical device that adds automatically.

Sure, I've seen them. Keys and handles that you pull. [He goes through the motion in the air]

They do the work in half the time, and a high school girl can operate them. Now, of course, I'm sorry to lose an old and faithful employee--

Excuse me, but would you mind saying that again?

I say I'm sorry to lose an employee that's been with me for so many years. But of course an organization like this, efficiency must be the first consideration. You will draw your salary for a full month. And I'll direct my secretary to give you a letter of recommendation--

Wait a minute boss. Let me get this right. You mean I'm canned?

I'm sorry--no other alternative--greatly regret--old employee--efficiency--economy--business--BUSINESS!

Tuesday, August 20, 2013

Aug 20 (1866) National Labor Union Resolves to Fight for 8-hour Day: "Carry this hammer to my captain, tell him I'm gone"

On August 20, 1866 (the same day President Andrew Johnson restored habeas corpus and officially ended the Civil War) the newly organized National Labor Congress (aka National Labor Union) was formed. A week later, the Evening Star reported that the Union had passed a resolution "to never relax until a law is adopted whereby eight hours shall constitute a legal day's work in every state of the American union."

It was 72 years before a national law was passed with 1938 Fair Labor Standards Act.

 Hear Mississippi John Hurt sing of the laborer's struggles in his song Spike Driver Blues.

Monday, August 19, 2013

Aug 19 (1848) New York Herald Reports Gold in California; "In the days of old, in the days of gold"

Gold rush cartoon, showing dock crowded with men with picks and shovels, and men jumping from the dock to reach departing ship; a crowded airship and a man on a rocket fly overhead; and a man with a pick and shovel parachutes from the airship. From

On this day in 1848, the New York Herald broke the news to Easterners that California is a source of gold. Though seven months late, and probably lifted from the California Sun (which printed the news in April 1848), it was a big deal nonetheless. Within four years, more than one percent of the nation's population had moved to California.

The economic impact of the discovery was major. According to the Economic History Association, California’s gold production in 1849 alone exceeded  cumulative U.S. production of gold in the years 1792 to 1847 (37 tons). Annual production from 1848 to 1857 averaged 76 tons. During this decade California’s gold production equaled $550 million – about 1.8% of American GDP.

Here's an excerpt the letter printed in the Herald, purportedly from a "correspondent" (some argue said correspondent was the California Sun's owner Samuel Brannan).

"[California] has a mine of gold...and without allowing any golden hopes to puzzle my prophetic vision of the future, I would predict for California a Peruvian harvest of the precious metals, so soon as a sufficiency of miners, mineralogist, and metalogists find their way hither, and commence disbouging her hidden treasures."

Listen to Bob Dylan perform the folk classic "Days of '49"

Further Reading
Herald of the Gold Rush: Sam Brannan, Douglas S. Watson, California Historical Society Quarterly Vol. 10, No. 3 (Sep., 1931), pp. 298-301

A history of the Gold Rush from the Economic History Association (

Smithsonian Folkways: Songs of the Gold Rush

Saturday, August 17, 2013

Aug 18 (2013, 1918) Born: Songwriter Cisco Houston

Woody Guthrie (left) with Cisco Houston

On this day in 1918, folk singing legend Gilbert Vandine 'Cisco' Houston was born. Cisco performed frequently with Woody Guthrie, and was an inspiration to many other folk legends like Bob Dylan and Tom Paxton. Sometimes faulted for singing too well for his genre, he once said:

"There's always a form of theater that things take; even back in the Ozarks, as far as you want to go. People gravitate to the best singer...We have people today who go just the other way, and I don't agree with them. Some of our folksong exponents seem to think you have to go way back in the hills and drag out the worst singer in the world before it's authentic. Now, this is nonsense...Just because he's old and got three arthritic fingers and two strings left on the banjo doesn't prove anything."

Hear Cisco Houston perform St. James Infirmary.

Aug 17 (1969) Hurricane Camille reaches landfall: "Like any lady, she's perfectly capable of changing her mind"

Hurricane Camille, the third most powerful hurricane of the 20th century, reached landfall. It was also the first Category 5 hurricane to be given a name. Camille killed 259 people and caused $1.42 billion in damages, in 1969 dollars ($8.89 billion today).

Listen here to Bela Fleck and Flecktones perform their song entitled Hurricane Camille.

View a video of the devastation in the short film entitled "A Lady Called Camille" (or at this link):

Aug 16 (2007) Mortgage Lender Countrywide Needs a Loan: "to supplement its funding position"

Countrywide Financial, then the nation's largest mortgage lender, had to "draw upon (its) entire (line of credit) to supplement its funding liquidity position." At the same time, SEC filings showed the company's chairman--Angelo Mozilo--was earning millions by selling Countrywide stock as it declined.

In 2010, Mozilo reached a settlement with the SEC, in which he agreed to pay $67.5 million in fines for fraud and insider trading charges, the largest individual fine levied during the financial crises. He also accepted a lifetime ban from serving as a officer of director of a company.

The line of credit was supposed to stave off bankruptcy. Over six years later, even after Bank of America bought the troubled lender in 2008, Countrywide is still on the brink of bankruptcy. In June of this year, BofA said they may have to put the Countrywide home loan division into bankruptcy protection, if they can't reach a settlement with investors seeking $8.5 billion in damages.

Aug 15 (1971) Nixon officially ends the gold standard: "What a tragedy for mankind!"

On this day in 1971, Richard Nixon officially ended the gold standard monetary policy. Upon hearing of Nixon's decision, then Federal Reserve Chairman Arthur Burns exclaimed “What a tragedy for mankind!” A 2011 article in Forbes called August 15, 1971 "a date which has lived in infamy."

Read the Arthur Burns 1970 Time Magazine cover story in which he discusses the state of the economy, and his concern over the high 4.8% (!) unemployment rate.

Aug 14 (1947) NBA Hall of Famer and Bank Owner Magic Johnson is born: "Money has changed"

Today, in 1947 Earvin "Magic" Johnson, Jr was born. Not just an NBA hall of famer, Magic is a also bank owner and financier. In the early 1990s, he purchased a major stake in Founders National Bank, which merged with OneUnited Bank in 2001.  A certified Community Development Financial Institution (CDFI) with over $600 million in assets, OneUnited Bank is the largest African-American-owned-bank in the US.

Magic also created the MAGIC card, a prepaid debit card designed for underserved populations, specifically those without a traditional banking relationship, as an alternative to credit cards (and credit card debt).  Magic says:

"Money has change. Cash is no longer king. I want people to know this is my card, I'm not some paid celebrity. This is my business, and it's a good business."

Ad Man Bell Bernbach: "The truth isn't the truth until people believe you"

William (Bill) Bernbach was born on this day in 1911.  He was the advertising creative director at DDB, and is responsible for the such classic ads as Mikey (Life Cereal) and Lemon (Volkswagon). Mr. Bernbach once said:

"The truth isn't the truth until people believe you, and they can't believe you if they don't know what you're saying, and they can't know what you're saying if they don't listen to you, and they won't listen to you if you're not interesting, and you won't be interesting unless you say things imaginatively, originally, freshly."

More about the history of advertising in the book Hey, Whipple, Squeeze This: A Guide to Creating Great Ads, Second Edition.

Flannery O'Connor

You shall know the truth and the truth shall make you odd.