What the 1819 Housing Bubble Can Teach Us

For those thinking that the most recent housing bubble has a historically unique role in flogging the U.S. economy, an article by C.J. Maloney published by the Ludwig Von Mises Institute is worth a read. Maloney looks at the historical foundations of the Panic of 1819 and finds, lo and behold, a real-estate bubble created by loose monetary policy rearing its ugly head.

Yet, despite Congressman Barney Frank’s blubbering insistence that our nation’s current financial mess is a “new phenomena,” today’s “housing/credit/confidence crisis” is anything but. Our ancestors had already seen all the broken dreams and ignorant greed surfing high on a wave of paper money and hollow credit — more than once before. The America of 1819 and the financial panic its citizens experienced was only the first of what is America’s true national pastime: speculative mania.

Examining how the men of 1819 responded to the crisis and, most importantly, what the results of their actions were, may give us an idea or two (or none) to help solve the current crisis. Should we solve it — and I have no doubt that we will — then we can write down our own warnings, born of harsh experience, so that generations not yet born may completely ignore them too.

The article is engaging and informative. Some of the details differ (e.g., money was printed by state chartered and local banks), but the fundamentals are similar enough to be relevant.