"White Privilege" Hard to Find in U.S. Median Household Income Numbers

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3 MIN READ - The Cautious Optimism Correspondent for Economic Affairs and Other Egghead Stuff is looking for evidence of American “white privilege,” but sifting through U.S. median household income by ethnic group he’s having a hard time finding any.

(The Correspondent has added some statistical commentary below this list)

U.S. median household income by ethnicity (2019):

1. Indian $126,705

2. Taiwanese $102,405

3. Australian $100,856

4. Filipino $100,273

5. South African $98,212

6. Basque $94,091

7. Indonesian $93,501

8. Latvian $89,697

9. Macedonian $87,803

10. Pakistani $87,509

11. Iranian $87,288

12. Lebanese $87,099

13. Austrian $86,499

14. Russian $85,989

15. Lithuanian $85,812

16. Chinese $85,424

17. Japanese $85,007

18. Turkish $83,375

19. Swiss $82,974

20. Slovene $82,728

21. Italian $82,106

22. Greek $82,036

23. Israeli $81,901

24. Romanian $81,878

25. Ukrainian $81,603

26. Serbian $81,452

27. Croatian $80,683

28. Bulgarian $80,626

29. Slovak $80,388

30. Swedish $80,228

31. Czech $80,142

32. Norwegian $79,783

33. Scottish $79,544

34. Polish $79,503

35. Danish $79,500

36. Portuguese $79,050

37. Belgian $78,355

38. English $78,078

39. Welsh $77,949

40. Hungarian $77,611

41. Finnish $77,356

42. Armenian $77,110

43. Korean $76,674

44. Canadian $76,665

45. Irish $76,036

46. French Canadian $75,949

47. Argentine $75,810

48. German $75,583

49. Chilean $74,585

50. Syrian $74,047

51. Hmong $73,373

52. Scotch-Irish $72,745

53. Vietnamese $72,161

54. Albanian $72,043

55. Scottish $72,038

56. Spanish $71,903

57. French $71,407

58. Dutch $70,872

59. Ghanaian $69,021

2019 overall median household income: $68,703

60. Cajun $68,383

61. Bangladeshi $67,944

62. Guyanese $67,772

63. Samoan $67,573

64. Egyptian $67,187

65. Palestinian $67,157

66. Ecuadorian $66,971

67. Colombian $66,875

68. Peruvian $66,845

69. Thai $66,763

70. Laotian $66,117

71. Polynesian $65,968

72. Nigerian $65,672

73. West Indian $65,258

74. Barbadian $64,588

75. Brazilian $63,982

76. Nepalese $63,619

77. Assyrian/Chaldean/Syriac $63,301

78. Nicaraguan $63,073

79. Micronesian $62,659

80. Trinidadian and Tobagonian $62,120

81. Jamaican $62,044

82. Uruguayan $61,656

83. Jordanian $61,235

84. Salvadoran $58,898

85. American $57,761

86. Haitian $57,451

87. Pennsylvania Dutch $56,290

88. Cuban $56,005

89. Mexican $55,943

90. Cape Verdean $54,910

91. Venezuelan $54,496

92. Ethiopian $52,364

93. Puerto Rican $50,473

94. Moroccan $50,322

95. Guatemalan $49,584

96. Iraqi $49,315

97. Honduran $47,276

98. Dominican $47,170

99. Afghan $46,742

100. Burmese $45,903

101. Black $43,862

102. Somali $31,218

A few analytical notes:

1) The list contains several groups that could be considered “anglicized” such as English, Scottish, Welsh, Irish, etc. Averaging all their incomes produces an estimated median household income of about $76,500, placing anglicized “whites” in 45th place, lower than dozens of non-western groups including Indians, Taiwanese, Filipinos, Indonesians, Pakistanis, Iranians, Lebanese, Chinese, Japanese, Turks,  Israelis, Armenians, Koreans, and eastern Europeans such as Serbs, Croats, and Ukrainians (this is not a complete list).

2) One could argue “household” income is higher for Indians and other high-earning ethnic groups since their households tend to have more earners under the same roof, as opposed to single earner households. However, adjusting for household size can’t offset the vast income advantage Indians enjoy over, say, English-Americans at $126,705 vs $78,078 (+62.3%).

Census statistics reveal only a slight advantage for Indian households with 82% married vs 75% for white households, confirming that household size doesn’t come close to explaining the income advantage.

3) What does substantiate a distinct earning advantage is education. 74% of the Indian population in the U.S. has a bachelor’s or postgraduate degree. 55% of Chinese, 56% of Korean, 56% of Pakistani, 52% of Japanese, 50% of Filipinos, but only 29% of Vietnamese.

All Asians average 54% compared to 35% for whites, 21% for blacks, and 15% for Hispanics.

(sources below)

4) The median household income data was taken from calendar year 2019, by which point former President Donald Trump had nearly three years to implement his white supremacist economic policies, but they don't appear to have delivered much of that “white privilege.”

Evidently the earning power for many ethnic groups in the United States is far more resilient at overcoming “white privilege” than some in the media and progressive movement would like us to believe.

5) Some left-wing progressives complain about such income statistics, arguing they are misleading since immigrants from India, Taiwan, The Philippines, Indonesia, or Japan are already more educated or better off than their countrymen they left behind.

But even for those Indians, Taiwanese, and Filipinos who have recently come to the USA with education or better circumstances, wouldn’t the white-supremacist, racist United States discriminate against them and hold them down despite their excellent credentials and work ethic?

That’s the entire claim of “white privilege,” yet the gap between households of Indian ancestry and English ancestry is huge (+62.3%), placing median Indians in the top 21% for all of America—hardly the result one would expect of a blatantly racist society that elevates on-the-whole less educated whites above all nonwhite groups.

6) Finally, left-wing progressives complain that a median income of $126,705 isn't high enough to prove more educated Indian immigrants aren't being “held down” by white privilege and racism.

But they’ve never been able to objectively produce an income that would prove Indian households are no longer being oppressed. If Anglo-whites make $76,500, how much do ethnic households have to make before left progressives are satisfied? $150,000? Half a million dollars? A million?

They never provide a number. Only complaints.

Well the Economics Correspondent can provide a fairly close estimate. If we average the overall U.S. median household incomes for degreed households (bachelor's and higher = $108,646—2019) vs non degreed households (9th-12th grade, high school only, some college, associates degrees = $52,880—2019) and weigh them based on the percentages of Asian households that are degreed and not degreed, we can calculate the following adjusted household incomes for what more highly educated ethnic groups should make:

-Indian households should make $94,147. They really make $126,705.

-Chinese households should make $83,551. They really make $85,424.

-Japanese households should make $81,878. They really make $85,007.

-Filipino households should make $80,763. They really make $100,273.

-Vietnamese households (the Asian group with less college education than whites) should make $69,052. They really make $72,161.

-Pakistani households should make $84,108. They really make $87,509.

-The only laggard is Korean households. They should make $84,108. They really make "only" $76,654, still more than Anglicized whites.

Data sources:

Household income by ethnicity (2019):

https://en.wikipedia.org/wiki/List_of_ethnic_groups_in_the_United_States_by_household_income#Detailed_ancestry

Percent of households with bachelor’s degree or higher by ethnicity (2016, couldn’t find 2019 but suspect the percentages across all households haven't changed that much in three years):

https://nces.ed.gov/programs/raceindicators/indicator_rfa.asp

https://nces.ed.gov/programs/raceindicators/indicator_rfas.asp

Household income by education attainment (2019):

https://www2.census.gov/programs-surveys/cps/tables/hinc-01/2020/hinc01_1.xlsx

Anyone Noticed How Quiet MMT'ers Have Gotten Now That Inflation is at 8.5%?

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The Cautious Optimism Correspondent for Economic Affairs and Other Egghead Stuff has a question:

Has anyone else noticed how quiet most Modern Monetary Theory zealots have become since inflation took off?

They promised the printing press would give us the Green New Deal, Medicare for All, Universal Basic Income, free college tuition, the jobs guarantee program, free daycare, racial reparations, and a huge reduction in poverty... all for free.

They haven't even started spending on any of those programs yet and all we've gotten is this lousy inflation.

Free vs Regulated Banking: The First Bank of the United States and the Panic of 1797 (Part 4 of 4)

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"The [debtors'] prison is full of the most reputable merchants, and it is understood that the scene is not yet got to its height.”

-Letter from Vice President Thomas Jefferson to President John Adams, 1798

8 MIN READ - The Cautious Optimism Correspondent for Economic Affairs and Other Egghead Stuff continues with the history of America’s very heavily regulated and very crisis-prone banking system—this time examining how its first privileged central bank—the Bank of the United States—precipitated the Panic of 1797.

Alexander Hamilton’s Bank of the United States produces
another banking panic and depression in 1797

As we discussed in the previous column on the Panic of 1792, U.S. Treasury Secretary Alexander Hamilton’s Bank of the United States (BUS) opened for business in 1791 and immediately began aggressive lending and moneyprinting operations to support a large federal debt and spur industry.

The inflation created a major speculative bubble in U.S. Treasury bonds and shares of the BUS itself that collapsed in 1792, bankrupting many speculators and forcing Hamilton to use government money to prop up bond market prices, make emergency bailout loans to distressed institutions, and guarantee loans made by solvent banks.

The Panic of 1792 subsided quickly and the U.S. avoided a protracted recession with growth returning in 1793.

One would hope Hamilton would have learned lessons in 1792 about the dangers of aggressive money creation, but he returned to inflation in 1793, his BUS raising prices for several years and blowing another speculative asset bubble that burst in 1797.

VIII. THE DANGER OF THE BUS’S LEGAL PRIVILEGES

To understand how the BUS alone could wreak so much havoc on the U.S. economy, it’s important to understand its unique structure at the time.

The BUS was not as powerful as modern central banks like the Federal Reserve. Under the nation’s bimetallic silver and gold standard it did not have the ability to issue fiat money without limit. It still had to make good on its pledge to redeem its banknotes in specie, and it did not have a monopoly on paper currency since America’s private banks were also issuers of banknotes.

But the BUS was by far the largest company in the country and its special connection to the federal government gave it far more influence over the economy than any other private bank.

Not only was the government a 20% owner in the Bank itself—aligning their mutual interests as Hamilton intended—it also bestowed certain unique legal privileges upon the BUS that contributed to its outsized influence.

1) Unlike other private banks, the federal government announced it would only accept BUS banknotes for payment of excise taxes, thus giving them a quasi-legal tender status and guaranteeing their ubiquitous circulation.

2) The BUS was selected as the federal government’s exclusive bank of deposit for Treasury funds, not surprising given Hamilton was Secretary of the Treasury. As caretaker of all federal funds the BUS was thus bestowed with outsized public prestige.

3) As sole bank of deposit for federal funds, the BUS gained an unofficial “too big to fail” status with the public. Everyone knew there was no way the federal government would allow its own bank to fail, taking its 20% stake and all federal deposits down with it. Hence the BUS attracted a large business for private retail and commercial deposits and enormous control over the nation’s money supply and credit policy.

4) Finally the BUS was given an exclusive monopoly on interstate branching. State-level unit banking laws, which we’ve discussed in previous articles on American banking, prohibited any private bank from branching outside its home state, and many states prohibited branching outside a small region or forbade branching at all. The federal government allowed the BUS to branch anywhere it wanted, hence spreading its reach and influence nationwide.

Given the dominant and nationwide circulation of its currency alongside the prestige of being the government’s bank of deposit, BUS banknotes were treated by private banks as a reserve asset themselves. Since a smaller share of its notes were submitted for redemption and instead held in reserve at other institutions, the BUS engaged in greater leverage and could issue far more currency than other private banks.

All these privileges granted to the BUS, and denied to competing private banks, made it an incredibly powerful institution posing an outsized risk to the economy.

In a free, competitive system with many private banks, if one bank errs and issues too much paper or deposit money it disproportionately suffers the consequences. But as we shall see Hamilton’s mistakes during the mid-1790’s inflicted injury upon the entire nation.

IX. THE BOOM OF THE 1790’S

After the Panic of 1792 subsided Hamilton restarted his issuances of loans, printed vast quantities of new BUS banknotes and expanded demand deposits. The result was a multiyear price boom with consumer price index inflation hitting double digits in 1794 and 1795 (Officer).

Wholesale prices rose 17-18% in 1793 and incredibly by over 50% in 1795 before collapsing in 1796 (U.S. Dept. of Commerce). Such inflation rates are astounding considering the U.S. was on a combined gold/silver standard at the time.

Furthermore BUS easy money and credit artificially drove down interest rates, fueling a craze of business startups and wild land speculation with many of the country’s top financiers joining in the frenzy.

Hamilton’s own mentor and former Bank of North America president Robert Morris raised $10 million with investment partners for business and land ventures, an enormous figure considering the federal government’s annual budget was only $8 million in 1795.

A mania for transportation (canal and turnpike) companies began with firms popping up such as the Lancaster Turnpike Company and Robert Morris’ Schuylkill & Susquehanna [Rivers] Company.

Hamilton’s father-in-law, American Revolution General and former New York Senator Philip Schulyer, used low-interest loans to found the Western Inland [Lock] Navigation and Northern Inland Lock Navigation Companies.

Both Morris’ and Schulyer’s companies would go bankrupt in the ensuing depression.

And with so much easy money circulating a wave of new bank startups began. The number of private American banks is estimated to have nearly doubled from 12 in 1792 to 22 in 1796.

Despite the dangerous buildup of asset bubbles, everyday Americans initially viewed the mid 1790’s as a benign boom period of riches, just as other central bank induced bubbles have cast similar illusions of perpetual prosperity. Real per capita GDP rose 5.7% annually from 1792 to 1795 and industrial production rose 8.1% per year.

X. THE PANIC AND DEPRESSION OF 1797

Unsurprisingly the boom proved to be illusory when the BUS was abruptly forced to stop issuing credit in 1796. Not only were its notes overextended leading to increasing domestic calls for specie redemption, but price inflation also produced a gold drain from America to Europe via the price-specie flow mechanism.

Under an international gold standard, if the U.S. produces too many paper money claims and prices rise, imports appear cheaper in gold terms and both its own and international consumers shift to buying cheaper overseas goods over inflated American ones. The inevitable result is a trade deficit for the U.S. resulting in net outflows of gold as the notes Americans use to buy imports are retuned from abroad for gold redemption.

The Economics Correspondent has written in more detail on the price-specie flow mechanism at:

http://www.cautiouseconomics.com/2018/11/the-great-depression-01.html

(see section II)

As the BUS saw its gold reserves dwindling due to overseas redemption calls, it quickly halted new loans and called in existing ones to save itself, effectively contracting the money supply in a classic credit crunch. Starved of new money, asset bubbles began to burst across the country ruining speculators, many of whom had leveraged themselves to join in the investment schemes.

By 1796 deflation had set in. Businesses could not obtain new loans while their revenues fell in concert with prices, and failures began en masse later that year. By early 1797 the United States was in full blown recession (called “depression” before World War II).

Incidentally some economists theorize that the Panic and Depression of 1797 were not endogenous events but rather the catalyst was the Bank of England’s suspension of gold payments at the onset of the Napoleonic Wars.

Undoubtedly Great Britain calling in gold redemption and then hoarding gold from the world would have made the depression worse, but the Bank of England suspension began on February 27, 1797 while deflation and mass business failures already plagued America by late 1796. It's therefore difficult to see how America’s 1797 slump could have originated with Britain’s suspension of the gold standard.

Nevertheless the best historical records available indicate U.S. GDP turned decisively negative from 1796 to 1797.

Retail CPI fell approximately 3% from 1796 to 1797 and again the following year.

Wholesale prices fell an astounding 30% from 1796 to 1797, reflecting a particularly harsh retrenchment in industry.

The index of industrial production fell approximately 7.3% from 1796 to 1798 which is somewhat comparable to the 8.3% decline America endured during the Paul Volcker Fed recession of 1981-1983.

On the ground widespread business foreclosures and factories that had sprung up only a few short years prior now lay empty ghost towns dotted throughout America’s largest cities.

And speculators were ruined. Robert Morris and his partner John Nicholson—two of America’s wealthiest men—went to debtors’ prison.

Supreme Court Justice James Wilson was brought down by bad land deals and spent time in debtors’ prison. From jail he continued his legal duties as bad debts were not among the criteria listed for removal from the Court.

They were hardly alone as financiers across the nation lost fortunes. Vice President Thomas Jefferson noted in an early 1798 letter to President John Adams that “the prison is full of the most reputable merchants, and it is understood that the scene is not yet got to its height.”

In fact so many investors were ruined that the depression led to creation of the Federal Bankruptcy Act of 1800 to give petition to insolvent debtors.

1797 delivered the young republic its first truly nationwide depression, and its roots can be traced to the late 18th century version of what economists today recognize as a central bank-induced easy money speculative bubble.

Economic conditions bottomed out in 1798 and growth resumed late in the year. However, the damage to the BUS’s reputation was already done. Americans adopted a suspicious view of the bank, and the anguish of two financial panics in a single decade triggered the creation of a new political party, the Jeffersonian Democratic Republican Party, serving as a counterweight to the power of the Hamiltonian Federalists.

It was, after all, Thomas Jefferson himself who opposed the Bank of the United States and warned of its dangers back in 1791.

Alexander Hamilton had already resigned as Treasury Secretary in 1795 to focus on private law and finance including BUS operations. After weathering America’s first political sex scandal in 1797 he attempted to exert influence during the John Adams presidency of 1797-1801 and was later killed in the famous duel with Aaron Burr.

His Bank of the United States would not get another chance to create more asset bubbles and depressions before failing to win renewal of its charter in 1811. The Senate vote deadlocked in a tie and Vice President George Clinton voted against renewing the charter.

But the BUS would have a successor, the Second Bank of the United States, which picked up where Hamilton left off with a new charter in 1816.

For those who wish to know more about the Panic and Depression of 1797, Curott and Watts have an excellent Johns Hopkins paper available at:

https://sites.krieger.jhu.edu/iae/files/2017/04/Curott_Watts_Recession_of_1797.pdf

Free vs Regulated Banking: The First Bank of the United States and the Panic of 1792 (Part 3 of 4)

 Click here to read the original Cautious Optimism Facebook post with comments

7 MIN READ - The Cautious Optimism Correspondent for Economic Affairs and Other Egghead Stuff continues with the history of America’s heavily regulated and very crisis-prone banking system, this time examining how its first central bank—the Bank of the United States—precipitated the young nation’s first financial crisis: the Panic of 1792.

As we discussed in a previous column, America’s first Treasury Secretary Alexander Hamilton was a huge admirer of the British mercantilist economic system and wished to recreate it in the new United States.

After a fierce debate with Thomas Jefferson over the constitutionality of a government-connected central bank, Hamilton convinced President George Washington to sign a Congressional bill establishing the Bank of the United States (BUS) with a twenty-year charter.

Although Hamilton was Secretary of the Treasury, he unofficially ran the BUS out of its Philadelphia headquarters which was also the U.S. capital at the time—the equivalent of one man today serving both as Treasury Secretary and Federal Reserve Chairman.

In 1791 the BUS raised $10 million in a stock subscription, a huge sum at the time, and loaned out a multiple of its paid-in capital as BUS banknotes and deposits, its notes redeemable on demand in gold and silver coin (ie. specie).

V. SUPPRORTING THE NATIONAL DEBT

Although Hamilton preferred for the BUS to lend directly to the Treasury, Congress was still very suspicious of the central bank’s capacity to directly monetize government debt. Many legislators remembered their own experiences fighting a British army funded by Bank of England lending to Parliament, and they cautiously inserted a clause in the BUS charter prohibiting it from buying U.S. Treasury securities outright.

Nevertheless, Hamilton quickly employed methods to use the Bank’s powers to support the national debt by indirect means.

First, under the terms of the BUS stock offering, investors who bought initial shares at $400 apiece only had to pay the first $25 of their subscription in gold/silver specie and the rest later in four installments: $75 by December 1791, $100 by July 1792, $100 by December 1792, and the last $100 by July 1793.

However, the last three payments—totaling $300 of the $400 share price—were to be made with U.S. Treasury bonds that paid 6% interest.

Investors accordingly rushed to buy Treasuries, extending credit to the U.S. government, and bid bond prices up while the BUS subsequently stockpiled millions of dollars of government securities in its portfolio. The U.S. taxpayer was now financing the interest payments that funded the Bank’s profits.

Hamilton also used the BUS to lend heavily, mostly to his friends and contacts in the financial circles of New York, Philadelphia, and Boston. As we learned in Part 1, the new money Hamilton’s BUS created inflated the money supply measured by M1 by anywhere from 20% (Friedman/Schwartz) to 33% (Rousseau/Sylla) from 1791 to 1792.

But most importantly, Hamilton loaned selectively to financier friends who pledged to invest the proceeds into more U.S. Treasury securities. The entire BUS credit strategy supported Hamilton’s scheme to finance a large national debt, establish the new country’s credit, and provide the need for federal taxation.

“A national debt if it is not excessive will be to us a national blessing; it will be powerful cement of our union. It will also create a necessity for keeping up taxation to a degree which without being oppressive, will be a spur to industry.”

-Hamilton letter to financier Robert Morris, 1781

VI. DUER, MACOMB, AND THE DEBT BUBBLE

Hamilton’s plan to steer private investment into government borrowing was not a surprise to everyone. As previously mentioned, many of Hamilton’s financial contacts in the large cities borrowed from the BUS on the condition they invest the loans in the national debt.

Of particular interest was Hamilton’s associate and personal friend William Duer. 

Duer was an attorney, speculator, and member of the first New York Legislature and the Continental Congress. Through his friendship and a Hamilton family connection he was appointed America’s first Assistant Treasury Secretary in late 1789.

Upon learning of Hamilton’s plans for the national bank to create a market for federal government debt Duer devised a plan to profit from his inside information. However, he was discovered trading in federal bonds (prohibited by Congress) and attempting to sell land in the American Northwest Territory that he technically didn't own. Duer was subsequently sued by the federal government, resigned in scandal and moved back to New York.

In New York he partnered with Alexander Macomb, a landowner and speculator rumored to be the wealthiest man in New York State. Still wise to Hamilton's plan, the two borrowed every dollar they could find—from banks, merchants, widows, family members and friends—investing in U.S. Treasuries as well as shares of the Bank of New York (a private bank founded by Alexander Hamilton in 1784). 

Other financiers joined in the frenzy forming a clique known as the “Six Percent Club,” named such because U.S. bonds paid 6% interest. Armed with the knowledge of the BUS’s plan to divert vast sums of money into Treasuries they hoped to profit from their privileged information and even attempted to corner the entire government bond market.

Needless to say this policy of deliberately shoehorning newly created BUS money into federal debt sent government bond prices soaring: from an index of 25 at the founding of the BUS to 129 by March of 1792. Shares of the BUS itself rose from an index of 530 in August 1791 to 712 by January 1792.

BUS “scrip” (not yet fully paid-in shares of stock) went on the wildest ride of all, rising from an index of 25 to 207 in the month of August 1791 alone.

VII. THE PANIC OF 1792

Unfortunately for the financial system Hamilton’s knowledge of monetary economics left much to be desired, and by the spring of 1792 redemption of the BUS’s vast issuance of banknotes was draining its gold and silver reserves at an alarming rate. 

Hamilton had loaned too much, too fast and issued too much paper money, inflating not only a sovereign debt and stock market bubble, but also outpacing the BUS’s capacity to fulfill its redemption calls.

In just three months from December 1791 to March 1792 the BUS’s metallic reserves plummeted by a precarious 34% and Hamilton quickly contracted credit. He refused to renew short term loans and rapidly choked off the growth of the money supply, pricking America’s first securities bubble.

As Treasury and stock prices collapsed, the problem was further compounded by the BUS’s sudden refusal to lend to businesses. Firms that had relied on revolving lines of credit from the BUS found the lending window promptly closed and were forced to sell what securities they held to raise cash, further adding downward pressure on bond prices.

The Panic of 1792 was underway.

With America in the throes of its first financial crisis, Hamilton rushed to establish a federal emergency “sinking fund”—headed by himself, Vice President John Adams, Secretary of State Thomas Jefferson, Attorney General Edmund Randolph, and Chief Justice John Jay—to buy back $100,000 in government bonds in a bid to force prices back up. 

Jefferson, who had warned of the dangers of establishing the BUS just a year prior, was the only dissenting vote.

Hamilton urged the Bank of New York to lend $500,000 to private distressed banks collateralized by U.S. Treasuries. To convince the Bank of New York directors to lend into such uncertain markets he arranged federal government loan guarantees, promising to buy up to $500,000 of the collateral should the loans go sour.

Hamilton also convinced the Bank of New York to engage in $150,000 of open market purchases and he guaranteed additional emergency lending support by the private Bank of Maryland.

Indeed, economic historians have credited Hamilton with anticipating Walter Bagehot’s famous “lender of last resort” dictum a full 81 years before Bagehot wrote “Lombard Street” in 1873.

All the bailout loans, guarantees, and combined government/private open market purchases support worked. The panic was mitigated and the country suffered only a mild recession, most of the pain being felt in the financial sector.

If Hamilton’s emergency lending and open market purchases facilities sound familiar, it’s because he employed methods similar to those of the Federal Reserve during the 2008 financial crisis. It should come as no surprise then that modern day central bankers praise Hamilton for pioneering the rapid rescue of banks from the ravages of a major crisis. 

What they rarely mention in their praise is that it was Hamilton and his central bank that created the crisis in the first place, much as we hear praise heaped upon the Federal Reserve for mitigating the 2008 Great Financial Crisis without mentioning the Fed’s role in starting it.

Hence when the idea of removing Hamilton’s portrait from the U.S. ten-dollar bill was floated in 2015, former Federal Reserve Chairman Ben Bernanke rushed to his defense, arguing:

“Hamilton was without doubt the best and most foresighted economic policymaker in U.S. history… …as Treasury Secretary Hamilton put in place the institutional basis for the modern U.S. economy. Critically, he helped put U.S. government finances on a sound footing, consolidating the debts of the states and setting up a strong federal fiscal system…”

“…Importantly, over the objections of Thomas Jefferson and James Madison, Hamilton also oversaw the chartering in 1791 of the First Bank of the United States, which was to serve as a central bank and would be a precursor of the Federal Reserve System… …As many have pointed out, a better solution is available: Replace Andrew Jackson, a man of many unattractive qualities and a poor president, on the twenty-dollar bill.”

-“Say it Ain’t So, Jack,” Ben Bernanke’s Brookings Institute blog

Within a year of the recession the economy was growing again, but Hamilton evidently failed to learn lessons from the experience. He returned the BUS to even more spectacular lending and money creation again in 1793 leading to another runup of speculation and prices that collapsed in the much larger Panic and Depression of 1797.

Hamilton’s former Assistant Treasury Secretary William Duer, Alexander Macomb, and several members of the Six Percent Club were bankrupted by the Panic of 1792. Duer’s losses are estimated at an astounding $3 million, four-fifths the entire federal government’s revenues in 1792. 

He died in debtors’ prison in 1799 at the age of 56.