In the previous chapter (see full table of contents), we listed "metals" as one type of commodity. Yet the precious metals have a special historical significance -- for most of the history of civilization they weren't something bought with money. They were money.
That situation, their commodification: change came slowly, in many steps. In this chapter, I'd like to trace those steps, because they are critical to understanding the crisis that is our central topic. We have come back again and again to the idea of "hard money" versus "soft." How did money get so chronically soft? For simplicity's sake, this will be a US-centric account of what is in fact a multinational story.
1. Bimetallism and the Wizard(s) of oz
2. No-Metallism
3. Gold Returns: Bretton Woods system, 1944-1971.
4. US Hegemony Wanes
5. Johnson to Nixon. The end of the gold window.
6. A “Tobin tax” and other dubious notions arise.
7. Back to Chicago: Leo Melamed, and how the Merc outflanked the CBOT
8. Everything floats against everything. What could go wrong?
9. British pound in 1992, East Asian currencies later in the decade.
10. Staggering proliferation and complexity of financial derivatives.
11. Does the FX market constrain central banks? How well or poorly?
12. Another angle on the CME/CBOT merger
Showing posts with label Richard Nixon. Show all posts
Showing posts with label Richard Nixon. Show all posts
03 April 2011
08 October 2009
The Last Tycoons
I was skimming, recently, through a book off one of my shelves, called The Last Tycoons (2007) by William D. Cohan. The book takes us in an unexpectedly compelling way through the history of Lazard Freres & Co., the investment banking partnership founded back in the late 1840s, just in time to benefit from the flow of gold out of California -- and that continued as a partnership until 2005, when it succumbed to the logic of the corporate form and an IPO.
Anyway, I found a tidbit in this book that rather diverted the flow of my own stream of consciousness. Lazard was deeply involved in the ITT/Dita Beard scandal of the Nixon years, a matter discussed here in some detail.
When the SEC's investigation of that was finally resolved in a settlement, in October 1976, The New York Times took note of the fact in a brief inside story (p. 78) by Judith Miller.
Judith Miller? This appears to be the same Judith Miller whose more recent career is associated with "weapons of mass destruction" and imprisonment to protect Scooter Libby.
At any rate, back in '76 she wrote a 408 page story about a twenty-six page settlement agreement. Her story said that the document sheds "new light on one of the most complex and controversial mergers in corporate history," but her story doesn't say anything about what if anything that light revealed.
What that light revealed was a series of confusing machinations that apparently allowed Lazard to pull well over $4 million in fees out of this one transaction, by structuring it as several transactions and charging separately, so that the deal became as Cohan calls it "the gift that keeps on giving."
It is all under the bridge now, but Miller's involvement, and her much recent headline-worthiness in her own right, makes it intriguing.
Anyway, I found a tidbit in this book that rather diverted the flow of my own stream of consciousness. Lazard was deeply involved in the ITT/Dita Beard scandal of the Nixon years, a matter discussed here in some detail.
When the SEC's investigation of that was finally resolved in a settlement, in October 1976, The New York Times took note of the fact in a brief inside story (p. 78) by Judith Miller.
Judith Miller? This appears to be the same Judith Miller whose more recent career is associated with "weapons of mass destruction" and imprisonment to protect Scooter Libby.
At any rate, back in '76 she wrote a 408 page story about a twenty-six page settlement agreement. Her story said that the document sheds "new light on one of the most complex and controversial mergers in corporate history," but her story doesn't say anything about what if anything that light revealed.
What that light revealed was a series of confusing machinations that apparently allowed Lazard to pull well over $4 million in fees out of this one transaction, by structuring it as several transactions and charging separately, so that the deal became as Cohan calls it "the gift that keeps on giving."
It is all under the bridge now, but Miller's involvement, and her much recent headline-worthiness in her own right, makes it intriguing.
30 May 2009
Nixon's Economy: Booms, Busts, Dollars & Votes
I've been reading a book with the above title and subtitle, by Allen J. Matusow, a professor of history at Rice University.
The book, published by the University Press of Kansas in 1998, makes a number of intriguing points about the period it covers. I'll just quote a bit that fills me with a nothing-ever-changes sort of feeling given recent news from Detroit.
"If the economy really was tottering, the Penn Central Company just might bring it down. In February 1969, the mighty Pennsylvania Railroad had merged with the reluctant New York Central to form the seventh largest corporation in America. It was a bad marriage from the start. By the end of 1969, in a soft economy, the company's railroad operations were losing money, while its real estate subsidiary could not generate nearly enough cash to cover its losses. In 1970, to service its exploding debt, the company intended to roll over $200 million in commercial paper and float a $100 million bond issue. After the company reported big first-quarter losses, the bond issue was doomed. By mid-May, creditors had called in $50 million of the company's commercial paper, with $75 million due on June 30. Because the company did not have the cash, bankruptcy loomed, and the feared chain reaction in the commercial paper market might finally commence."
There's a lot of food for thought there, such as in the quick allusion to the Penn Central's real estate subsidiary. In more recent times, too, there have been many examples of corporations that found that their "operational" lines weren't pulling the load, that their real estate holdings were (and are) the engine of whatever progress they're actually making. (See what I did there? Cute RR metaphor.)
One example of this played out in the lead-up to the K-Mart/Sears merger. It was generally understood both that K-Mart's real estate holdings were the key to its abiluity to drive for such a merger and that Sear's real estate holdings were the main attraction.
But one also has to reflect, in thinking about the Penn Central debacle of 1969-70, on the real problem the railroad (as an operational entity) faced: the post-Eisenhower highway system had made it largely obsolete in the northeast of the country. Railroads in the rest of the country had long-haul commodity delivery as a bread-and-butter business. But the railroads in the northeast were largely a commuter-and-passenger business, and that ceased to be economical with the shift to federally subsidized highways.
I think in this context of Ford Motor Co., which has (commendably IMHO) declined public assistance and which is not facing bankruptcy. That means that it will still bear the sort of burdens that the bankruptcy process will allow a revived Fiat-dominated Chrysler, and a new General Motors, to shed. I hope Ford does well in years to come, but it faces competitors doubly subsidized: directly and indirectly through the bankruptcy process.
The book, published by the University Press of Kansas in 1998, makes a number of intriguing points about the period it covers. I'll just quote a bit that fills me with a nothing-ever-changes sort of feeling given recent news from Detroit.
"If the economy really was tottering, the Penn Central Company just might bring it down. In February 1969, the mighty Pennsylvania Railroad had merged with the reluctant New York Central to form the seventh largest corporation in America. It was a bad marriage from the start. By the end of 1969, in a soft economy, the company's railroad operations were losing money, while its real estate subsidiary could not generate nearly enough cash to cover its losses. In 1970, to service its exploding debt, the company intended to roll over $200 million in commercial paper and float a $100 million bond issue. After the company reported big first-quarter losses, the bond issue was doomed. By mid-May, creditors had called in $50 million of the company's commercial paper, with $75 million due on June 30. Because the company did not have the cash, bankruptcy loomed, and the feared chain reaction in the commercial paper market might finally commence."
There's a lot of food for thought there, such as in the quick allusion to the Penn Central's real estate subsidiary. In more recent times, too, there have been many examples of corporations that found that their "operational" lines weren't pulling the load, that their real estate holdings were (and are) the engine of whatever progress they're actually making. (See what I did there? Cute RR metaphor.)
One example of this played out in the lead-up to the K-Mart/Sears merger. It was generally understood both that K-Mart's real estate holdings were the key to its abiluity to drive for such a merger and that Sear's real estate holdings were the main attraction.
But one also has to reflect, in thinking about the Penn Central debacle of 1969-70, on the real problem the railroad (as an operational entity) faced: the post-Eisenhower highway system had made it largely obsolete in the northeast of the country. Railroads in the rest of the country had long-haul commodity delivery as a bread-and-butter business. But the railroads in the northeast were largely a commuter-and-passenger business, and that ceased to be economical with the shift to federally subsidized highways.
I think in this context of Ford Motor Co., which has (commendably IMHO) declined public assistance and which is not facing bankruptcy. That means that it will still bear the sort of burdens that the bankruptcy process will allow a revived Fiat-dominated Chrysler, and a new General Motors, to shed. I hope Ford does well in years to come, but it faces competitors doubly subsidized: directly and indirectly through the bankruptcy process.
08 August 2008
Nixon's resignation
It was thirty-four years ago today that Richard Milhous Nixon, the 37th president of the United States, spoke to the nation and explained that he was resigning that office effective noon the following day.
It is sometimes said, vacuously, that there are no second acts in American lives. That is nonsense. The example of Richard Nixon shows that American lives can and do have a multiplicity of acts. Ineed, the "first act" might well be said to have been over by 1962, when he lost his campaign to become Governor of California and angrily told the press that it wouldn't have Dick Nixon to kick around any more.
But of course he couldn't stay out of the limelight, and made a comeback within a party that was shellshocked by finding itself on the losing side of a landslide just two years after that outburst. Nixon became President -- a heck of a second Act.
The Watergate scandal, the Judiciary Committee vote, the decision by a Supreme Court largely consisting of his own appointees yet unanimous against him -- all these facts brought down the curtain on that second act.
Yet there was a third. Nixon returned to public life, and was playing the traditional elder statesman by 1981, when he attended Anwar Sadat's funeral.
Reagan had just survived an assassination attempt when Sadat was killed. So Reagan understandably didn't go on that trip himself. He sent all the living ex-Presidents inhis stead.
Nixon was very much in the public eye, usually in terms he was able to structure himself, from that time until his death in 1994.
Lesson: only death determines when there will be no additional "acts" in an American life.
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