North America has seen many financial crises

And will likely see many more

Despite a plethora of commissions, laws, studies, economic prognostications by such luminaries as John Maynard Keynes, Milton Friedman, John Kenneth Galbraith or more recently Larry Summers or Josef Stiglitz, North American economies continue to be led by parties and leaders devoid of both any real understanding of the economy and a virtual void of common sense. Senators have become part of the financial vernacular by sponsoring bills that bear their names - Dodd-Frank, Sarbones-Oxley for example. But banks continue to fail and economic booms and busts persist.

There are so many examples of the silliness in leadership of both governments and businesses where ideology or greed drive decisions society comes to regret. It is worthwhile to list a few and I am indebted to MSN for publishing an article that mentions many in a sentence or two, so I don’t have dig through many history books to create my list but can simply regurgitate the work therein published with minor editing.

The credit crisis of 1772 saw some 30 bank failures in Europe, all victims of a run on their deposits when the flight of a key banker triggered panic. The failure of Silicon Valley Bank (SVB) has a metaphoric similarity since its Chief Executive Officer, while he did not flee the United States, dumped his own shares of the company hardly days before the bank failed, an act which no doubt contributed to depositors losing faith in the bank.

The United States recession of 1802 was oddly triggered by Napoleon’s victory in the Napoleonic War and the emergence of Barbary Pirates interdiction of trade with North America at a time when America could no longer benefit from economic stimulation from France. On the other side of the coin, America recovered from another recession when mobilization of forces to fight the war of 1812 stimulated activity. Imagine, a war with Canada that benefited United States even though they lost the war and saw invaders from Canada burn down the White House. I am tempted to try and organize a similar invasion today after learning that America’s national guard and the capitol police were incapable of stemming the January 6, 2020 protests by a few thousand unarmed rioters. Burning down the White House again would put Canada back on the map of international prominence just as Prime Minister Trudeau’s inept handling of foreign affairs (excluding his own obvious affair with foreign affairs Minister Joly) has diminished Canada’s international standing and made our country more of a laughing stock than a serious world power.

Falling cotton prices were enough to push America into recession in 1837 damaging public confidence in the banking system with many pulling out their deposits, a situation exacerbated when the largest U.S. financial institution at the time, Jay Cooke & Co. Inc., closed its doors. The resulting six year depression was then called the “Great Depression” until the 1929 collapse claimed that honor.

Another financial crisis occurred in 1884 when Marine National Bank and the Grant & Ward company failed. You would think that by then American leaders would have had enough experience to take steps to prevent similar calamities, but you would be wrong. A more or less global panic erupted in 1907 and lasted long enough to spur the creation of the Federal Reserve by 1913.

Despite that advance, 1920 was a precursor of the Great Depression although the 1920 malaise was short lived. Followed by the “roaring twenties”, a period of unbridled excess, 1929 saw the outset of the Great Depression. Prices fell 37% in one year, a vivid demonstration that deflation is an undesirable outcome, and U.S. GDP fell a staggering 38% in one year. In many ways, the end of World War I led to the depression as war-related economic activity waned and there was no replacement of any significance. During the depression unemployment reached about 25% and some 4,000 banks failed.

A lot of economic theory developed on how to avoid depressions but that did not stop progressive President Roosevelt (F.D.R.) from enacting the New Deal (some analagous the the Green New Deal being promoted by progressives today) that gave rise to the 1937 recession, often considered the worst in U.S. history. The New Deal itself was not the cause. Congress enacted severe austerity measures to deal with the costs of the New Deal and the austerity crippled the economy.

Relative stability persisted until the 1973 oil embargo, as Mid-Eastern oil producer tired of being taken for granted banded together in what is today called OPEC and held world economies to ransom for oil they could find nowhere else (more from failing to look than from any absence of oil elsewhere). The situation today is somewhat similar - a deepening shortage of fossil fuels compelling higher inflation and leftist governments promoting climate change nonsense to make the shortage worse and pretending trillions of dollars spent on wind and solar energy would fill the gap, a preposterous concept that will not end well.

The now-labeled Global Financial Crisis resulted from inept handling of economic policies by U.S. governments and successful lobbying by U.S. financial institutions to permit them to make risky bets on housing related derivatives and make loans to people with poor credit to create a higher number of mortgages they could package up in to “collateralized debt obligations” and peddle for a fee all over the world. Loan quality was so bad some sizeable portion of American housing loans became known as “Ninja loans”, a depiction meant to signify the borrower lacked both any income or even a job. “Ninja” meant no-income, no job.

Dodd-Frank and Sarbanes-Oxley Acts followed, intended to prevent further silliness, but bank lobbyists for left leaning Silicon Valley entrepreneurs and venture capitalists persuaded the government to separate rules for Systemically Important Banks (SIBs) and “Regional Banks” permitting risky lending practices that saw the failure of SVB and Signature Bank and, in my opinion, more to follow. Borrowing short and lending long has never been a successful banking strategy and puts the bank at risk even if the credit quality of the loans is impeccable. Load up the bank with long-dated treasuries to widen the yield spread, watch as the Fed raises rates to fight inflation, and see the value of the “assets” tumble while the depositors can ask for their money back at will.

SVB lost its entire equity as its portfolio of treasuries fell in value, but did not “mark to market” by classifying the loans as “hold until maturity” but the scam impressed no one and deposits fled. The bank failed in just a few days. Signature Bank followed, a bank whose “signature” offering was banking services to the “crypto” industry (why is it called an “industry” when it makes nothing?), a toxic mess of 19,000 “tokens” each claiming to have created something of value despite the reality that there is no barrier to entry, the “tokens” they peddle are backed by nothing, and they have no more value than the popular tulip bulbs in the Netherlands in the early 1600’s.

History has many lessons. Few of them are learned by those in power.

Political leaders will never admit the obvious when it is in their interest to deny it. The current leftist regimes in Canada and the United States can be expected to continue to spend well beyond tax revenues, keep increasing the national debt despite higher borrowing costs, ignore the damage being done to wages and household budgets by inflation, keep pretending CO2 emissions affect climate, and become ever more strident in their zeal to control the population at the expense of reasoned debate, free speech and free will. It will only stop after it leads to economic catastrophe - as it has every time Trudeau, Biden and their historic predecessors have hung on to power and assured the citizenry of the righteousness of their policies until the bullshit cannot be sustained and the economy tanks.

The current situation in Argentina is an example of the kind of outcome these policies can create. One socialist government after another was elected and things turned down during the regime of Mauricio Macri and got worse under his successor Alberto Fernandez, both of whom attempted to control the economy with socialist edicts rather than free markets. Forty percent of Argentinians live in poverty and inflation has surpassed 100%. There was no material amount of inflation in Argentina 20 years ago.

This is our future if we don’t evict left wing governments from office in Canada and the U.S.