I’ve been reading The Richest Woman in America, a biography of Hetty Green and her money-centered life during the Gilded Age in America. I’m just about a third of the way in, and Ms. Green is already showing her true colors – and by that, I mean an extreme obsession with money.
This obsession is not unique to Ms. Green. In the latter half of the 19th century, there was a widespread American fascination with getting rich quick. The Gold Rush propelled people west to find their fortunes, and speculators were flooding the new and evolving financial market. I came across an 1887 article by Henry Clews, a notable financier of the era, where he writes that “every fool who has a few hundred dollars” tried their luck on the market, most without success (p. 415).
New Year’s Eve celebrations are all about traditions: champagne toasts, black-eyed peas, lofty resolutions that will (in my case) be abandoned by February. Champagne is synonymous with this and other celebrations, thanks in part to marketing tactics used by French wine merchants 150 years ago.
In the 19th century, wine was a finicky commodity. Champagne perhaps more so: it wasn’t until 1837 that Andre Francois figured out the appropriate amount of sugar for fermentation to prevent a flat wine or an exploding bottle (Simpson, 2004). Quality varied greatly. A bad year, or even a few lower quality grapes could ruin a wine. Infestations of phylloxera wiped out vines in the late 19th century, ruining entire vintages and devastating regional wine production in France – the Champagne region included (Campbell, 2006). Simpson notes that there were few economies of scale in wine production: increased sales did not translate to lower production costs per unit.
Thus, it is perhaps not surprising that champagne marketing focused on things that could be controlled: the name, the brands, and high society connections. Négociants (wine merchants) for champagne cultivated elite buyers to become devoted consumers and attempted to attract new clients from the growing middle class in France and abroad.
In 1939, Thanksgiving fell on the last day of November and Franklin Roosevelt worried that the delay of the Christmas shopping season would hurt the economy. He issued a Presidential Proclamation stating that Thanksgiving would be celebrated on the second to last Thursday of the month, a tactic aimed to boost retails sales and extend the holiday shopping period. However, some states adopted the new date and others did not, creating an odd mix of celebration dates. In 1941 Congress ended up passing legislation to have Thanksgiving on the fourth Thursday of the month to make sure the holiday shopping season could begin reasonably early.
Today it seems the holiday retail push begins earlier every year with candy canes and twinkle lights sitting next to Halloween masks and fun size bars in October. Retailers, which often heavily rely on the fourth quarter holiday shopping rush, were especially worried this year, with Thanksgiving on its latest date since 2002. And so they pushed the Black Friday sales up earlier, and many employees spent Thanksgiving not with their families but with strangers battling over discounted electronics.
I found it interesting that FDR had similar worries about the holiday retail season in the 1930s. It turns out that the department store spurred the creation of a mass consumption culture on both sides of the Atlantic much earlier than that.
Aldrich’s visits to Europe to study their central banking systems had a profound impact on him. Originally opposed to the idea of a central system, he returned from Europe an advocate for the same. However, the political climate was not one to accept such a system. American bankers did not want government interference, and politicians thought that the US was too large with too many diverse business practices to have the same set up (Whitehouse, 1989). E.R. Francher goes so far as to say that “throughout the history of the country, it is apparent that the people have been opposed to placing in one single institution the financial power which a central bank might exercise” (p 137). Aldrich’s conviction that the United States would benefit from a single central bank would be a tough sell.
On a personal level, Aldrich faced additional difficulties: with such a partisan Congress, no Democrat would vote for anything he proposed and, as discussed in Part Two, his personal connections to bankers could be strained if they didn’t like his proposal. Even Paul Warburg, a fervent advocate for reform and a central banking expert, thought Aldrich’s plan for central banking based on the European model would be defeated unless it could be crafted delicately and with modifications. Continue reading The Origins of the Federal Reserve System: Part Three
Part One of the series ended with the formation of the National Monetary Commission after the Panic of 1907 left the country’s banking system shaken up and in need of restructuring.
National Monetary Commission
Comprised of legislators from the House and Senate, the National Monetary Commission’s primary goal was to study central banking systems and make recommendations on banking reform for the United States. The commission is credited by many as guiding the US to the Federal Reserve Act of 1913. However, the connection between the commission and the final bill is not as clear-cut as one might imagine.
While the National Monetary Commission produced a lot of research, they took so long – their bill went to Congress four years after the commission’s creation – that “memories of how close the system came to imploding progressively dimmed and the momentum for reform stalled” (Ahamed, 2009).
There were a few factors that limited the success of the National Monetary Commission. At the time, the American political system was fraught with disagreement about what a central banking system should look like, if there even needed to be one at all. The leftover contempt for a central bank from the Jackson era still persisted, so a first step would be to convince legislators and the public that such a system was needed. There was contempt too, for the Republican party and especially for the Chairman of the National Monetary Commission, Republican Senator Nelson W. Aldrich. Continue reading The Origins of the Federal Reserve System: Part Two