garrett - a bubble that broke the world (1932)

[...]... OF THE BUBBLE The Lord giveth increase, but man devised credit Mass delusions are not rare They salt the human story The hallucinatory types are well known; so also is the sudden variation called mania, generally localized, like the tulip mania in Holland many years ago or the common-stock mania of a recent time in Wall Street But a delusion affecting the mentality of the entire world at one time was... always appeared at the bottom and read: "The information contained in this circular has been obtained partly from cable and other official sources While not guaranteed, it is accepted by us as accurate." Not even the accuracy of the information was guaranteed by the banker The Senate Committee on Finance learned a good deal about the merchant banker trade It learned how foreign bonds originate in Wall Street... benefited the sale of American goods in the foreign trade Certainly a loan of American credit to a Latin-American republic to pay a debt it owed in Europe for armament had no beneficial trace in the American foreign trade Or fancy any benefit to the American export trade from a loan of twenty millions to a German bank for the specific purpose, as stated by the bankers, "to finance German exporting corporations."... the FrancoGerman potash monopoly The reasons were obvious to all but the bankers Before the war this had been a Prussian monopoly The whole world was dependent upon Germany for an indispensable plant food, a fact which entered deeply into the calculations of the German militarists as to how they should run the world after the German victory But after the war France had the potash beds of Alsace, by... the other side of the earth, and they receive in exchange for it a 1 A BUBBLE THAT BROKE THE WORLD 6 promise The question may be asked: Nothing more than a promise? To which the answer may be made: Nothing less than a promise Those nations who are borrowing in America because they actually need the money for a constructive purpose, who have a solidarity of national feeling and a sense of the meaning... holding the bankers responsible for the wide speculative craze that worked through the country I think they were trying to supply what the customers wanted I think the banker is like the grocer He supplies what his customer wants." And to that committee the head again of the second largest national bank in Wall Street, who appeared twice 18 A BUBBLE THAT BROKE THE WORLD in Washington—looking at the same... Two years later the crystal burst Within four years the loss upon American investments abroad was incalculable Of the new Latin-American bond issues that had been recommended to investors by the very best Wall Street banks and their bond-selling affiliates—of these alone, fifty-six issues, aggregating more than eight hundred millions of dollars, were in default; and the fate of others not actually in... bonds generally, we are merchants." A member of the most powerful private international banking house said to the same committee: "We are merchants That is what we are, just like any merchant, in the grain business, in the cotton business, or anything else." The head of the largest national bank in Wall Street, one that owns also a very powerful bond-selling organization, appeared before the Senate Committee... in a grand way from a far country to dazzle and reward the indigent ancestor And whether it was that some of the sentiment discovered by Mr Morrow in his small investors worked itself up to the Wall Street mind, or that Wall Street itself needed emotional reasons and naturally acquired them, the fact is that bankers themselves became assertively sentimental about Germany It is true that thinking of the. .. an argument within itself." If at any time you had asked an international banker to say whether or not there was an American policy to govern foreign loans he would have said yes, and if you had asked what it was, he would have said: "More and 26 A BUBBLE THAT BROKE THE WORLD more our prosperity is and will be dependent on foreign trade American loans abroad represent an investment in foreign trade." . rare. They salt the human story. The hallucinatory types are well known; so also is the sudden variation called mania, generally localized, like the tulip mania in Holland many years ago or the. so that the view is from the present backward. Magazine articles that have been written to stand alone do not as a rule make a coherent whole for purposes of a book; on the other hand, pieces that. case is that for more than ten years debtors and creditors together have pursued the same de- ceptions. In many ways, as will appear, the folly of the lender has exceeded the extravagance of the