Echoes Dispatches From Economic History

Fashion Ad, 1927

The U.S. Supreme Court effectively told Amazon.com Inc. this week to become a tax collector.

The case originated with a New York law that forced the online retail giant to collect sales taxes from customers living in that state. Amazon, which understandably wished to maintain its tax-free competitive advantage, initially challenged the law in the state court. When the New York Court of Appeals ruled against the company in March, it appealed to the Supreme Court. On Monday, the nation’s highest court refused to hear the case, effectively validating the lower court’s decision and signaling that the days of tax-free shopping on the Internet may be coming to a close in New York and beyond.

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Stephen Mihm

Are Bitcoins the Criminal's Best Friend? 

8 months ago
Bitcoins

Until very recently, the virtual currency known as bitcoins could be mistaken for just another Internet fad (the Winkelvoss twins of Facebook fame even had a role). But when federal law enforcement closed the “Silk Road,” the wildly popular online illegal-drug emporium that used Bitcoin as a medium of exchange, politicians and policy makers took notice. Criminals, it turns out, really like bitcoins, which can be exchanged for nefarious purposes on the "Dark Web," with complete anonymity and, it seems, impunity.

The shift to a virtual currency signals a huge -- and worrisome -- shift in behavior for criminals, who for decades have favored cold, hard cash, with the dollar the preferred medium of exchange. Just how alarmed we should be is one of the topics of a hearing today in the Senate Committee on Homeland Security and Governmental Affairs.

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Stephen Mihm

Ted Cruz Is an Amateur

9 months ago
John Quincy Adams & Ted Cruz

Much to the consternation of moderates in both parties, Republican Senator Ted Cruz and his Tea Party band are gearing up for another showdown over President Barack Obama’s health-care law, guaranteeing that Congress will remain captive to their agenda.

But when it comes to throwing sand into the gears of the legislative process, the radicals in today’s Congress are rank amateurs. History is replete with senators and representatives who have, against all odds, forced their colleagues to revisit matters that the majority wished to avoid. Like slavery, for example.

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Stephen Mihm

A Century of International Potash Intrigue

11 months ago
Uploaded by UUID:7806428 at 8/6/2013 3:43 PM

In case you didn’t notice, the world’s potash markets went haywire last week, after the announcement that Russia's OAO Uralkali, the world’s largest producer of this crucial ingredient in fertilizer, suspended its participation in an alleged cartel with its long-time Belarus partner Belaruskali. Their joint marketing venture, the Belarusian Potash Co., produced at its peak 40 percent of the world’s potash, with much of the balance coming from Canpotex Ltd., another syndicate based in North America. Together these two set production quotas and divided global markets, ensuring stable prices and steady profits.

Uralkali’s motives for pulling out remain murky: It’s possible the company wants to coax Belaruskali into stricter compliance with their agreement's terms. More likely, by letting potash prices bottom out, Russia hopes to gain influence over Belarus and its autocratic leader, Aleksandr Lukashenko. Belaruskali is the most profitable company in Belarus, accounting for almost 6 percent of total exports. Should potash prices plummet, Belaruskali will become susceptible to a Russian takeover bid. That Uralkali’s majority shareholder, billionaire Suleiman Kerimov, is a reputed front man for the Kremlin increases the likelihood of this scenario.

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Philip Scranton

How Roosevelt Harnessed Economic Recovery

12 months ago
NRA

As in earlier economic recoveries, in 1933, U.S. production began increasing more quickly than workers could find jobs. A 50 percent increase in industrial output from March to July generated just 14 percent more factory employment. With orders rising, manufacturers commonly extended current employees’ weekly hours instead of rehiring those who had been laid off.

Hugh "Iron Pants" Johnson, director of the National Recovery Administration, focused on closing this gap as President Franklin D. Roosevelt's first 100 days in office came to an end in June. The purpose of the National Industrial Recovery Act was simple: "Wages are to be increased and hours of work curtailed in order to distribute more widely the available employment," according to the Economist.

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Bretton Woods Conference

At the founding of the Bretton Woods international monetary system in 1944, the world’s dominant creditor nation, the U.S., set out to revive a fixed exchange-rate system by offering a war-torn, debt-ridden world a new deal in monetary relations, one to be supported by concessionary dollar loans from a new International Monetary Fund.

Today, Germany is trying to resuscitate the periphery of the crisis-stricken euro area in much the same way, and it is worth looking back at the formation of Bretton Woods for clues as to how this will play out.

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Eagle

What if the economy were organized in corporations, one for each trade and industry, each including owners and workers? Would capitalism’s fierce competition and wasteful failures be replaced by a cooperatively managed system?

As world economies struggled to recover from the Great Depression in the summer of 1933, politicians looked for alternatives to free-market capitalism.

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Kirsten Salyer

Economic History Roundup

about 1 year ago
Echoes: Weekly Links

Here are our picks for economic-history reads of the week:

(Kirsten Salyer is social media editor for Bloomberg View. Follow her on Twitter.)

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Melissa S. Fisher

How Women Rose and Took the Fall on Wall Street

about 1 year ago
Women at Work

When Ina Drew resigned as JPMorgan Chase & Co. (JPM)’s chief investment officer last year after reports the bank lost more than $6 billion, the New York Times referred to her as “the woman who took the fall.”

It is up for debate whether financial companies have scapegoated women such as Drew in the aftermath of the financial crisis. What is certain is that just half a century ago it was unimaginable that women might make it high enough in the ranks of Wall Street to take the fall for anything.

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Philip Scranton

Why John Maynard Keynes Supported the New Deal

about 1 year ago
BE052226

The economist John Maynard Keynes advocated real-world implementation of economic ideas. His predictions and policy recommendations would become increasingly relevant as government leaders struggled to revive their economies during the Great Depression.

Having skillfully managed the U.K.'s finances during World War I, Keynes became the Treasury’s representative to the Paris Peace Conference in 1919. As the victors dictated a grossly punitive "Carthaginian Peace" to cripple Germany, Keynes resigned from the discussions and publicly denounced the Versailles Treaty.

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Kirsten Salyer

Economic History Roundup

about 1 year ago
Echoes: Weekly Links

Here are our picks for economic-history reads of the week:

(Kirsten Salyer is social media editor for Bloomberg View. Follow her on Twitter.)

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Alasdair Roberts

Fourth of July a Day of Bloody Protest in U.S. History

about 1 year ago
Independence Day

On July 4, 1934, the U.S. was in the fourth year of an economic crisis. On the West Coast, longshoremen had taken advantage of their newly acquired unionization rights and were on strike. In San Francisco, there was an uneasy calm on the waterfront after a vicious battle between police and strikers the day before.

The peace lasted only for a few hours. San Francisco’s police were planning another attempt to open the port. On the morning of July 5, they fired tear gas and charged the picket lines. The struggle lasted for hours. “It was a Gettysburg in the miniature,” the San Francisco Chronicle reported. By evening, two strikers were dead and the National Guard had set up machine-gun nests to guard the port.

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Lawrence Bowdish

How Student Loans Subsidized the American Dream

about 1 year ago
Commencement, University of Michigan 1903

On July 1, the rate of a subsidized Stafford student loan doubled to 6.8 percent from 3.4 percent, after Congress shut down for the Independence Day holiday without taking action to prevent a scheduled increase. If lawmakers fail to reach a retroactive agreement before the August recess, the average Stafford borrower will have to pay back about $800 more than under the previous rate for every year of loans.

Today, about 66 percent of students borrow to attend college. For 2011-2012, 10.4 million borrowers took out $85.9 billion in Stafford loans, for an average of about $8,200 per borrower. In the past 50 years, more than 60 million Americans have used student loans to pay for college.

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Philip Scranton

When the Senate Turned Up the Heat on Wall Street 

about 1 year ago
Senate Inquiry

The U.S. Senate Banking and Currency Committee resumed its investigation of Wall Street financial practices on June 27, 1933, after a few weeks' break. Congress had increased its scrutiny of Wall Street and was looking into its role in causing the Great Depression.

The panel's chief counsel, Ferdinand Pecora, who targeted J.P. Morgan in the first round, opened by questioning Otto Kahn, senior partner at Kuhn, Loeb & Co., "a house that stands next to Morgan in reputation," Time magazine wrote.

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Stephen Bell & Hui Feng

What China Central Bank Learned From Past Credit Crunches

about 1 year ago
Den Xiaoping and Jimmy Carter

In signaling this week that it was prepared to inject liquidity into the markets, the People’s Bank of China brought the country’s financial system much needed relief that a “Lehman moment” might be avoided.

The current credit crunch, in which the central bank has refused to act as the lender of last resort, differs markedly from two previous episodes, in the late 1980s and early 1990s. It also shows that China’s approach to macroeconomic governance has evolved: Its leadership no longer relies solely on political and administrative controls, and is allowing market forces take a greater role.

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Kirsten Salyer

Economic History Roundup

about 1 year ago
Weekly Links

(Kirsten Salyer is social media editor for Bloomberg View. Follow her on Twitter.)

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Beer Meter

The Brewers Association, the main trade group for U.S. beer-makers, announced June 20 that the number of American breweries had surpassed 2,500, more than at any time since at least the 1880s and more than in any other nation.

The vast majority (more than 2,300) are craft breweries, independently owned companies that make beer on a small scale using traditional ingredients. There are also, according to the association, as many as 1,559 breweries in the planning stages, most of them craft.

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Polling Station

The Supreme Court’s rejection yesterday of a central element of the 1965 Voting Rights Act took aim at a measure that not only broke down barriers to political participation in the South but also made significant contributions to the economic wellbeing of black southerners and to the region as a whole.

Some of the economic benefits were apparent almost immediately after enactment. Surveys reported more paved roads and streetlights in black residential areas, better access to city and county services, and increased black hiring in public-sector jobs, including police and fire departments.

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Daniel Levinson Wilk

Paula Deen’s Racist Wedding Fantasy Was Once Reality

about 1 year ago
Waiters Unions

Paula Deen is in trouble. Last month, in a deposition for a discrimination suit brought by an employee, the Food Network star blithely admitted to using racial slurs. Perhaps equally disturbing, she also said she had fantasized about throwing a slavery-themed wedding for her brother, an idea that came to her after eating at a restaurant with an all-black staff.

Deen has apologized, though the Food Network has announced that it won’t renew her contract. Whatever her motivations, she tapped into a long history of slavery fantasy in the U.S.

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Beveridge

In June 1933, William Beveridge, the director of the London School of Economics, organized a mock trial of economists to benefit the King Edward’s Hospital Fund.

With the world mired in the Great Depression, the seriocomic proceedings illuminated a fierce and deepening public anxiety over the role economists had played in shaping government policy.

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About Echoes

Echoes is Bloomberg View's economic history blog. It is edited by Stephen Mihm, an associate professor of history at the University of Georgia and the author, with Nouriel Roubini, of "Crisis Economics: A Crash Course in the Future of Finance," and of "A Nation of Counterfeiters: Capitalists, Con Men and the Making of the United States."