THE FORGOTTEN DEPRESSION 1920-1921

James Grant

James Grant is the publisher of the Interest Rate Observer, a highly-regarded Wall Street investment sheet.

Grant’s book adumbrates the Depression of 1920-1921, following the 18 month participation in World War One. From April 1917 to January 1922 is not five years. It was a boom and bust. In all of American history little supports this time as economically and socially significant, except war and peace their after effects and the advent of Prohibition. 

What were the United States like? It is a short book; Grant does not explain. He mentions 12 Regional Banks of the Federal Reserve, and in a few passages notes that interest rates vary among the Regions. Who knew that interest rates might vary that much, a half point or more, especially today when a decision is made centrally and that’s it. 

Grant’s book is written like many history books about economics, incidences which were separated by time and place. Each incident is not dispositive, and collectively it is difficult to know the interconnections, if there were any: Each seems power fading, misfortune and no loss in the departure. 

The only national effect was in the markets, where the stock market fell, commodities markets fell, real estate prices fell – all observable by some sort of national statistic.

The biggest historical fallacy in Grant’s book is his recounting, without correcting, Andrew Mellon, Secretary of the Treasury for Warren Harding and Coolidge. Mellon was a big fan of Alexander Hamilton because Mellon mistakingly believed (as does Grant) that Hamilton was a small government and smaller debt person. FALSE! Hamilton was a BIG DEBT, FAT GOVERNMENT MAN. While Secretary of the Treasury and until 1803 Hamilton tried to weaken the Constitution (using, inter alia, the Alien and Sedition Acts); he supported a monarchial government and he proposed war with France. Mellon and Grant should read history, especially Grant who wrote John Adams: Party of One. Apparently Grant does not know that Adams said Hamilton was of the British Faction, which outraged the former Treasury Secretary.

Mentioning Mellon and Hamilton together detracts from anything Mellon did on his own, in response to events and circumstances before him. Mellon was not Hamilton’s clone. He was more akin to Jefferson and Madison’s Secretary of the Treasury, Albert Gallatin.  

THE FORGOTTEN DEPRESSION indicates how loose was national sentiment and communication. Something might happen in New York City and only be known in Montana two weeks later. Indeed, communications into the exchanges and markets were weak and inadequate. The experience of there being too many market orders and not enough people to process them was not realized until October 1929. Nothing in the country seemed connected. Entertainment was a nationalizing and unifying force, but little mentioned in the text. Automobiles and roads were just beginning. Dwight Eisenhower’s cross-country trip in the Twenties gave him the experience to propose the Interstate Highway System, begun when he was President. 

It was a disjointed United States. Many points are raised but not well put. Despite the change within America the experience that the people may do something without the government is a message that may be discerned, not fully or well, from this history. 

THE SPANISH-AMERICAN FRONTIER; THE MISSISSIPPI QUESTION, 1783-1803

By Arthur Preston Whitaker

The historian, Arthur Whitaker, was an eminent fellow who wrote diplomatic and foreign relations history simply and well. He researched in Spain before the Spanish Civil War and next published these two volumes 80-90 years ago.

What are the stories? Governments of Spain, the United States, France and Britain all tried to exert influence and control west of the Appalachians. The targets were native Americans, who didn’t like any of the Europeans, and emigrants from the eastern States coming into the Ohio and the Tennessee Valleys. They wanted to use the Mississippi River to the sea. Movers and shakers were land spectators, commercial sharks and politicians, somewhat represented by John Wilkerson, US Army Brigadier General who negotiated with the Spanish to bring Kentucky under Spanish rule, had a Spanish pension (mostly unpaid), and had other intrigues with Spanish authorities in New Orleans. Wilkerson, of course, had been a friend of Benedict Arnold during the Revolutionary War.

Having no rules and less law and order west of the Appalachians between 1783-1803 was a boon to many, one being William Clark, brother of George Rogers Clark, Revolutionary War hero. Clark intrigued, tried to push the Spanish out, had a military unit, fought Native Americans in private wars, speculated in land and complained to the Spanish that the natives were restless. After the Louisiana Purchase (1803) he went west with Meriwether Lewis and came back to become governor of the Missouri Territory. Later he was Superintendent of Indian Affairs. Incidentally, having connived and intrigued for 20 years James Wilkerson survived the 1807 Treason Trial of Aaron Burr; with a few wrinkles he kept offices and rank.

The story begun in these books tell of New York interests, involving Aaron Burr and Alexander Hamilton. They were good friends, having vibrant conversations, dining together and partying. Hamilton’s fingerprints are all over plans and intrigues involving British-American plots to diminish Spanish contacts and push Spain from North America. Hamilton and Burr likely talked much about west of the Appalachian intrigues and filibustering. After 1804 Burr continued those activities but not enough to constitute treason. Note, at some time Aaron Burr moved his personal papers to North Carolina, a staging area for a move west. Americans now know of these papers because Burr has few: They were lost at sea along with the ship and Burr’s daughter.

Whatever happened west of the Appalachians involving Burr and Hamilton, was further obscured by The Louisiana Purchase, Burr killing Hamilton in a dual (1804) and the Burr Treason Trial judged by John Marshall(1807).

More history needs researching, but these two volumes provide a solid foundation on which to begin. 

EMPIRE OF LIBERTY

By Gordon Wood

The chapters and passages in Empire of Liberty about unpolitical, business affairs, social events and participating individuals are the strongest: Education, the arts, society, sociologies and cultural anthropologies of business, and the general thinking of Americans and their temper and mood. On that score the book is invaluable.

Exposition about the government, politics and the men is flawed. I observe in one Amazon criticism, the commentator states the book is episodic. To describe business and social activities, arrangements and the men by episode can make an accurate presentation. The actions and the individuals are usually isolated from one another.

Telling of national politics and the men in episodes tells nothing, no story and little about the men and the issues that were changing. This approach weakens Empire. These men – Madison, Jefferson, Hamilton, Washington and others – knew one another well. They acted and reacted, playing games against strengths and weaknesses of the others. Madison excelled at the game playing. He set things up, stepped back and watched.

He may have been the Father of the Constitution, and the Father of American Politics and the Father of the Bill of Rights, but for eight years 1815-1823, there was little or no political opposition in the United States. That was Madison.

All historians, political scientists and others rely on Madison’s Notes of the Constitutional Convention, 1787. Yet in 1789 and after when Madison was in Congress guiding Revenue Bills though, establishing Cabinet offices, advancing the Bill of Rights, setting the Capital site, working on the debt, Empire inaccurately describes the proceedings and a culminating result in the Grand Compromise of 1790. No one believes or relies on Madison. Empire is remiss in this omission.

Consider corporations [Charters of Incorporation], an issue of 1791. The American colonial experience was the king’s granting charters, thereby setting up monopolies. The East India Company of Tea Party fame was one such entity. Americans disfavored corporations. When Madison proposed during the Constitutional Convention to give Congress the power to grant charters(1787), it was rejected.

Empire presents the impression that charters of incorporation were well know and working in America. Its view is anachronistic, using law and facts of the 1880s. Two excellent attorneys/justices of the early Republic, James Wilson and John Marshall, dismissed the business form in the 1790s. A real go at incorporation was made by John Jacob Astor in 1807; it does not resemble anything presented in Empire. (See David Lavender, Fist In The Wilderness) [Note Abraham Lincoln studying law in Illinois during the 1830s found the corporate form new and interesting,
(David Herbert Donald, Lincoln)]

Note in Empire the text relies on the Dartmouth case (1819), 30 years after the first Congress. Chief Justice Marshall wrote the opinion but did not discuss the power to incorporate, or who had it. He interpreted the law, documents and contracts, and the Constitution.

Other errors in Empire suggest the author did not research and write the text, or he was exceedingly careless.
Page 446. George Mason, according to Madison’s Notes of the Constitutional Convention, 1787, said almost nothing during debates. He did not favor the Council of Revision; James Wilson and James Madison vociferously supported this issue and suffered repeated defeats. George Mason wanted a Council of the Executive like the one existing in Virginia, to control the Governor. Mason had written the Virginia Constitution. At the national level such a Council would control the President.
After William Haller’s books about Puritanism, no historian should ever call anyone in New England a Calvinist, a European term. In Empire the text does. However, the text reveals Presbyterians and Independents (Cromwell’s sect) in the Dartmouth case. (Pilgrims were separatists.) Almost everyone else in the settling of New England was an Independent, to become known in the eighteenth century as Congregationalists.
Misquotes misrepresent Jefferson and Madison’s opinions of the Constitution. Empire uses early quotes. Both men evolved in their thinking, leaving earlier opinions, like Hamilton’s statements, historical additives and eccentricities. Indeed both Jefferson and Madison were willing to use precedent to sidestep Constitutional rigors. During the legislation and ratification of the Louisiana Purchase (1803), Rufus King wondered how they could change governmental power defined by the Constitution by using the Treaty Power. Jefferson and Madison merely used the same processes employed by the Federalists when they passed the Jay Treaty(1796). The same procedures were used at the end of the Mexican-American war (1848).
John Taylor of Caroline County (Virginia) is misrepresented. He is hardly the philosopher of the Republican Party. He had a father figure who lived close by, Edmund Pendleton, perhaps the best judge of the eighteenth century English world. Pendleton was known, respected and loved by everyone – Henry, Washington, Jefferson, Marshall. He was a confident of Madison’s. How prominent was Pendleton, other than being on Virginia’s highest court? In 1765 after it was discovered that John Robinson, Speaker of the House of Burgesses, had embezzled public funds, mostly giving the money to prominent Virginians, Pendleton undertook the task of getting the money back. By 1803 the job was not complete; he died. He left the work to John Marshall. In 1798 Pendleton published in newspapers a letter critical of President Adams, his administration and the Federalists. No one came down the lane to arrest Pendleton for violation of the Sedition Act. This is all to say that at best, John Taylor was a puppet for the men (Pendleton and Madison) pulling the strings in the backroom.
It is anachronistic as Empire does to view “null and void” as Southerners did in 1830-1865. Jefferson’s draft of the Kentucky Resolutions, originally intended for North Carolina, was greatly changed by Wilson Cary Nicholas and the Kentucky Legislature. Jefferson proposed Committees of Correspondence in each state to communicate and to react to the Alien and Sedition Acts. (1798) What did Jefferson mean by “null and void?” He likely relied on the same definition used by that infamous radical/revolutionary, James Otis of Massachusetts (1764): “As the Acts of Parliament, An Act against the Constitution is void: An Act against natural Equity, it should be void; and if the Act of Parliament be made, in the very words of the Petition, it should be void.” The word, null, has no legal impact without its mate void.
P. 184. Empire praises Hamilton’s Pacificus essays, but they are difficult to defend. Facts deleted from Empire manifest Madison’s response (Helvidius Essays) destroyed Hamilton’s essays by citing The Federalist Papers, written by Hamilton, against assertions Pacificus.

Other issues of error and misrepresentation appear in Empire. One chapter is a mundane discussion of points of Judicial Review, a power given the Courts by the sovereign. In the 1780s Massachusetts abolished slavery within the state by Judicial Review (opinion and judgment). In Virginia the Court of Blair, Wythe, and Pendleton accepted the power; it was taught in law courses. John Marshall grew up knowing it, read the Constitution and participated in the Virginia Convention (1788). He further discussed all legal issues with Madison and Pendleton and others and was influenced long before the opinions of Marbury vs. Madison and other cases.

Err in Empire of Liberty distorts the politics and the economics, and a complete view of the 1789-1815 period; each wrong has not been set forth. In Empire men of the Early Republic are unknown to one another. Legislation and proposals are isolated and presented as surprises, oddities and ineffective efforts to accomplish their purposes. No man was correct all the time, but the sense that Hamilton is correct, is wrong. e.g. He was instrumental in his party’s loss in the election of 1800, once again those facts being omitted from Empire.

IF BY SEA

By George C. Daughan

This book tells of sea and lake battles and other activities of the United States Navy through 1815. The best chapters are of navel efforts during the American Revolutionary War. The author mentions but lacks detail about the ships and the weaponry: American ships were better constructed, why? They carried more cannons, and had better cannons than the British, French or Spanish. He also mentioned that the American sailor was well treated, although that policy did not last. (See Two Years Before the Mast)

The book is woefully short when it enters the fields of finance and politics. The author’s reading of sources after 1789 is painfully incomplete. The United States had a huge debt which all the country wanted to pay or remove; Hamilton’s initial effort to make all debt obligations of the federal govcrnment – like what happened after 2008 – failed. The Great Compromise of 1790 is partially relayed.

The author overlooks Hamilton’s close relationship with a British espionage agent, Colonel Beckwith. He laments that Madison and Jefferson (Republicans) wanted to set and follow Constitutional rules and procedures. In 1795 Hamilton arranged for John Jay to negotiate the Jay Treaty (about trade) with Britain, yet Hamilton later called Jay “an old woman” for delivering such a lame treaty. The author also seems to approve of the Alien and Sedition Acts, despite the direct conflict with the First Amendment of the Constitution.

Much of what John Adams did as President is approved, although he was away from the seat of government for two years. Adams began building frigates, yet when war came 15 years later, those ships were bottled up in harbors or defeated on the seas, just as the Republicans said would happen during any war with the British. Adams did successfully negotiate a peace treaty with the French (1800).

In the meanwhile throughout Adam’s administration, Hamilton was a war monger. He wanted to lead American forces to remove French and Spanish rule from North America with British backing. No American wanted that: Too much debt; too much military and war; too British – no American wanted the British close to American borders. Americans did not want to resume a political relationship with the British. Hamilton failed in his military ventures by 1800, and later that year he accused Adams of incompetence. [ Note that Aaron Burr took the plans of his good friend, Hamilton, and tried to make them work. He was accused of treason and put on trial, 1807.]

The Republicans willingness to favor peace and not increase the Navy or to finance campaigns left the waters calm. Diplomacy worked during the peace. The United States seemed a pacific nation. Napolean likely believed he would sell Louisiana to America and in the future reconquer it. For the price of the military budget for less than 20 years, the Republicans bought Louisiana and doubled the size of the country. The author of If By Sea pooh-poohs this second greatest accomplishment by American diplomats. Even Hamilton approved, and American finances did withstand the increase of debt.

The author is entirely correct that the Embargo of 1807 was ineffective and likely the wrong policy. As happens embargos were used and threatened (1794), and they were widely and popularly supported before and during the American Revolution. (see histories by T.H. Breen) There is no mention of this historical context in If By Sea, and the applicability of the policy, earlier, and other effects later.

A primary fact which allowed Americans to prevail on America’s lakes during the War of 1812 was the British blockade. American shipping was at a standstill; no ships in, or out. Sailors went to the lakes. On the other hand the British were far from the ocean up a river frozen for half the year. They did not their Navy ships and sailors trapped, so the British were using trappers, farmers and fur traders as sailors. If the war had lasted into 1815, the British would have had a difficult time on the lakes.