In this first part of a two-part piece, Richard Sylla, professor emeritus of economics at New York University, shares the true history of the Panic of 1907 panic and of the Great Depression. He explains the role that John Pierpont Morgan played in bolstering the economic system, and discusses how the 1907 crisis led to the creation of the Federal Reserve. He also shares his theory that the impact of the 1929 stock market crash has been badly overstated. Learn from the lessons of the past, and listen to the ideas of the future to become a great investor: https://rvtv.io/2qor1Bc
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When J.P. Morgan Saved The World (w/ Richard Sylla) | Expert View | Real Vision™
We had what's called then, what many have said, was a one man central bank. And the one man central bank was John Pierpont Morgan, JP Morgan, J Pierpont Morgan as he's known. He liked to go by Pierpont. he happened to be attending a convention of the Episcopal Church in Richmond, Virginia when he received a telegram in October 1907 from his partners in New York, saying Mr. Morgan, we have a real problem here. Maybe you should come home. And Morgan lived a pretty good lifestyle. So he had his own private railroad car that he traveled in. And what they did is, on a Saturday night in Richmond, Virginia, hooked Morgan's private railroad car to a locomotive and took him back to New York City, where he arrived on Sunday morning and took charge of the crisis. so Morgan had all these bright young partners, and he sent them out to inspect the books of all the trust companies that were suffering from these runs. And what he wanted to do was find out which of them were sound and which were not sound. And then once he knew which ones were sound, he would organize the resources to relieve them and let the unsound ones fail, and that would presumably bring an end to the crisis. So that was the first step.And they couldn't figure out the books of the Knickerbocker Trust Company, so it basically had to shut its doors or fail right after Morgan got back to New York. But he kept on working to find out which ones were salvageable and then organized relief from them, mostly not his own money but money from Chase and National City Bank, wherever he could raise the money. A lot of other things happened too. New York City, at that time, had trouble repaying a loan. It had to pay back a loan mostly held by European investors, and they didn't have the money to do it. It's an old story in New York City. They borrow too much and can't pay it back. So Morgan organized a bail out of the city so that it could meet its obligations. And then the stock exchange, while this panic is going on, takes a big tumble. And the head of the stock exchange says, we can't handle all this selling pressure. We want to shut it down. Morgan says, no, don't shut it down. That'll send a bad message. And so in the first week of the crisis, Morgan arranges an injection of cash so the brokers can stay solvent and the stock exchange can remain open. Then over the weekend, Morgan advises all the rabbis and ministers in New York to make soothing sermons, and that helps a little bit. And then they get news that a boatload of gold, which was considered the base of the-- it was coming from France. So Morgan tells all the newspapers to say money is on the way, and there's no problem here.