Jun

22

An attractive woman feints and asks Grant who rescued her to lure Grant into a compromising position. Where have we seen that.

Jeff Watson writes: 

Or when Clews described an attempt to get President Grant out of the way so Jay Gould et al could corner the gold market without Grant selling government gold. It didn't work.

Stefan Jovanovich adds: 

Grant's first financial act as President in 1869 was to sign the Public Credit Act of 1869. His first choice for Treasurer had been Alexander Stewart, but Senator Sumner had blocked his nomination and offered his fellow abolitionist, George Boutwell, instead. Grant never wasted time fighting a losing battle so he accepted Boutwell. From the start Grant knew Boutwell would be too much of a financial Puritan. Boutwell accepted the Public Credit Act and shared Grant's understanding that the Congress and the United States Treasury had to return to the Constitutional pledge that the only U.S. money was gold and (for lesser denominations) silver coin. Grant was unshakeable in his determination that the Federal government would never again default on paying its obligations in international money. His own calculation was that the Treasury's deliberate default in the first year of the civil war had increased the total cost, through inflation and increased borrowing, by least a third.

What Grant could not get Boutwell to accept was the simple fact that the country was never going to return to its pre-war balance sheet. The abolitionist dream that the national debt could be largely wiped out if not totally eliminated through confiscation of Southern property was, in Grant's mind, illegal (the Confederate soldiers had been pardoned), immoral (the Constitution did not give Congress the authority to take people's property without compensation) and just plan stupid (it would destroy America's credit and property market for a generation). Boutwell and Sumner should accept the fact that the country now had a debt that would never be paid off. Hamilton's wish had finally been granted. The national debt would be there, in size, forever; and it would be the safe asset that speculators and investors, including foreign holders of dollars, would hold while they waited. In 1869 the interest alone on the Federal debt was TWICE the entire Federal budget in 1861: $130,694,000 vs. $66,547,000. In that period the debt itself has grown from $90,582,000 to $2,545,111,000. The debt could be reduced over time; but it would never again be calculated in millions as opposed to billions.

Black Friday is a big deal in the history books because Garfield and Congress had extensive hearings and the story of "the corner" fit everyone's favorite narrative: politicians were corrupt, the market was manipulated, Grant was a fool, etc. The numbers tell a different story. Jay Gould's bet, at its highest, was $60 million. For the 3 fiscal years since 1866 when the debt peaked at $2,755,764, the average net redemption of debt by the U.S. Treasury was $70 million annually - roughly $6 million a month. Through August 1869 Boutwell had bought in $50 million - the pace of regular redemption. The idea that bribing Grant to withhold $4 million in redemption in September was somehow the key to the corner is laughable. The key to the corner was the belief that Boutwell, Grant's sister's husband and others in the Grant administration could be bought. Boutwell could, in fact, be bought - by his fellow Massachusetts citizen, the King of Shovels, Oakes Ames. (Ames is a fascinating figure who deserves attention.)  Of course, the real story - the one that we will not know - is what were the positions and trades of the serious players on Wall Street during that week. The story Crews and others tell is the one Henry Adams wrote up in 1870; it is still the fundamental narrative that will become "history". That is, to my mind, the biggest laugh of all.

Jun

22

"Understanding Bayes Theory with Ratio"

In the old days we used to learn Bayes theorem in terms of odds ratios. I didn't pay much attention to it till recently until the odds of the invisible man winner reached 56 to 40, and the query is "Is he more likely to beat the incumbent than the incumbent is to beat the cattle trader?" The 40 to 1 in favor of incumbent is abut 25 times as likely as the invisible man is over the incumbent.

Jun

22

In essence, China now has a better fiscal position, a more conservative central bank, higher interest rates, and a relatively improved net international investment position."

This has some thought provoking charts and ideas.

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