Wednesday, June 29, 2016

History: The Year is 1819

I've uploaded year 1819 to the TSP Wiki...

Here are some one liners...

Dartmouth College and the Divine Right of Democracies -- The legislature thinks that a vote allows them to change a private contract to suit themselves. Well... no. Not really.

The Panic of 1819 -- The American economy goes down the crapper after easy money policies cause too many risky loans to be made.

In Other News -- Kiddie work hours reduced, the first steamship crosses the Atlantic and Singapore!

Dartmouth College and the Divine Right of Democracies

"It is... a small college. And yet there are those who love it!" -- Daniel Webster during oral arguments before the US Supreme Court. [1]
The legislature, by virtue of a vote, is not allowed to modify an existing contract between private parties. Dartmouth College was chartered by the King of England before the United States came into existence, but after a recent dismissal of the college president by the trustees of the college, the New Hampshire legislature decides to convert Dartmouth into a public institution. The legislature essentially "nationalizes" the college by altering its charter and appoints William Woodward as its new president. Dartmouth takes the state to court and Daniel Webster defends them. Webster argues that the charter of Dartmouth College constitutes a private contract between itself and the King of England. The US Supreme Court agrees and establishes the precedence that the state cannot alter a private contract or charter without a substantially good reason and such interference cannot harm the members of the charter. [2]
My Take by Alex Shrugged
Later rulings established that even when conditions to a charter allow the state to modify a charter later, the state is not allowed to do harm. The court admitted that the state had a right to revoke a charter, but "the power to destroy does not imply a right to cripple or to maim." I am reminded of a Congressman telling a reporter that the laws Congress passes are automatically constitutional. He was suggesting that a democratic vote conveyed an objective correctness to a law. In days gone by a king might argue the same thing by divine right. However, we are not divine, nor are our esteemed legislators sent to Washington, D.C. by God's divine will. They are sent by the voter's will and they should remember that their power is limited to the power that the people can wield. If I don't have a right to do something then neither does the legislature since they derive their power from the people. [3] [4]

The Panic of 1819

The world economy is still in chaos after the end of the Napoleonic Wars. After all... if governments are no longer spending millions on gunpowder, muskets and ships, those industries must cut back while they find new markets to exploit. Workers must find other things to do and it takes a considerable time to adjust. The American economy has been going down the crapper even faster due to the dubious help of government policy. Excessive land speculation fueled by the easy money policies of the 2nd Bank of the United States have set up the USA for a fall. When the Bank of the US pulls back and shrinks the money supply (and thus returns to more conservative lending practices) the state banks panic and call in their loans. Well... the investments those loans represent have not yet ripened (if they ever will). The loans fail, the banks fall and down it all comes. Americans look around and ask themselves what the heck the government has been up to lately. Apparently, nothing good. Trust in government has gone bye-bye. [5] [6] [7] [8]
My Take by Alex Shrugged
People trusted government quite a bit, but that all ended with the Panic of 1819. I remember when the reputation of President George H. W. Bush took a hit during the Savings and Loans crisis. In those days savings and loans (or thrifts) were limited in the kind of investments they could make. But with the economy on the upswing, and a bright future ahead, the thrifts were losing depositors to more risky investments... like money market funds. Many of the thrifts became technically insolvent which means they should have notified the regulators and transferred their remaining deposits to a solvent bank, but with changes in the banking laws and lax monitoring by regulators, some thrifts took a chance on riskier investments with a big payback in hope of turning their situation around. When the Federal Reserve began charging higher interest rates for their money, the thrifts were caught in a death spiral. Their risky investments could not make up for the higher cost of money AND the technical insolvency. Over 200 billion dollars was lost. What about depositor insurance? The insurance company was insolvent too. I blame Congress for easing up on bank regulations without considering the consequences and adjusting for them in the law. Most people blame President Bush the Elder since he was in the hot seat at the time. [9]

In Other News

  • A child's workday is reduced to 12-hours. No night work and no child under 9 may be hired. Enforcement remains a problem. [10] [11]
  • The SS Savannah is the 1st steamship to cross the Atlantic. It uses steam for a short while. Most of the trip uses wind-power. [12]
  • Singapore becomes a British colony. They are challenging the Dutch commercial presence in the same region. [13]

This Year in Wikipedia

Year 1819, Wikipedia.

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