Book titled "The History of Business Depressions", written in 1922, gives several reasons including copper. Author says primary causes were the weak financial system and unrestrained speculation. Volume of money increased from $1.5 Billion in 1896 to $2.8 Billion in 2007. Money rates were "unreasonably" low. "Unfavorable developments were completed ignored and favorable features long seemed to count, yet this year was marked by some very severe breaks subject, however, to almost immediate recovery." Rumors of mergers drove railroad stocks higher, though nothing came from these rumors and railroads collapsed by the end of the year. New York was hoarding money. Insiders were selling and holding the cash to buy back stocks at a cheaper price. Called the "Conspiracy of 1907". The panic came suddenly at the end of the year as described by Sylla. The panic has been called the "rich man's panic". Though often blamed on Roosevelt, the author explains that Roosevelt's strong actions saved the day. The earthquake did drain the financial system of $350 million to cover losses, it was commodities and stock speculation, scandals in the life insurance businesses, and the collapse of railroad stocks that drove the market down. While this book can delve into the numbers of the day, it is an interesting read from a 1922 perspective looking back at US depressions since the nation's founding. The common theme is that over-speculation in one or more asset classes due to easy money, and then a sudden turn in prices, drive business depressions. Other interesting item to note is that US downturns, even in the late 1800s, could be seeded in shocks that happen overseas first then spread to the US.

In my reply, correction on the dates for money expansion. 2007 should be 1907.

Not quite right. The money the bank loans out is created as a new deposit, so the banks deposits remain greater than the assets. They do create the money (credit) they loan, but it secured with the "promise to pay" loan contract, and real collateral. So they are more properly monetizing illquid assets: you can't use the deed to your house to buy quart of milk, but you can get mortgage, then spend the resulting deposit to get that or anything else. Banks do us favor by making credit (money) readily avialble. They only get into trouble when they loan too speculatively to people who can't pay them back.

Banks quite literally loan money into existence, at interest. Nice work if you can get it. Its worse than a borrow short (take on demand deposits)/lend long risk backstopped by infinite pocketed central banks. The BOE publicly acknowledged lending can and does precede deposits; there's not even a fractional reserve requirement.

We can all disagree about the causes of financial crises, etc. but Morgan had nothing to do with the beginning of the Panic of 1907. He was a hero of the recovery from the panic.

JP Morgan died in 1913. His death occurred 16 years before the Great Depression, well before FDR come to power. Teddy Roosevelt was the President in 1907. He and Morgan were not friends. TR let Morgan manage the crisis because he knew Morgan had the best interest of the country at heart even though they disagreed about much politically. Morgan was a hero of the 1907 panic.

Jim Grant is a self-righteous, self-interested, academic. He explains the facts to his liking rather than letting the facts explain reality.

It is impossible for "facts" to explain themselves. They are fodder for interpretations a la Nietzsche. DLS

Yes Victor I checked the numbers as well. I think "dead cat bounce" is still a possible explanation for that comeback (or an Elliot wave 2 3/3/5 correction, but it was an interesting perspective I hadn't heard before.

he tried too hard to say the stock market doesnt matter and twisted the facts

The marginal tax rate increasing 39% points from 24% to 63% would certainly make a huge difference. (Mathematically the percentage change from one percent to another does not work. It is better, although less dramatic.)

I agree and looked up the information also. The DOW did not recover the bubble top of 1929. Dr. Sylla would certainly have known this also - on the way to recovery would be reasonable. DLS

Indeed the financial system, backed by oil reserves or full faith and credit or the biggest military in the world all boils down to a confidence (con) game. Even the gold standard is not safe as he points out the 1930s bank failures and global contagion of gold runs, leading to interest rate rises and gold standard suspensions. This he says is what caused the great depression. In the face of this Sylla says the federal reserve was focused on protecting the gold standard, "using the wrong model" and should have been more proactive about bolstering the wider economic climate. Simply defending the gold standard did not sufficiently bolster confidence. This all begs the question "but is this confidence game a con?" A con as-in a scam where the mark is convinced to trust a person or thing long enough to become heavily invested, at which point the con is complete and the grifter/s cash out leaving you holding the bag (mostly empty). There are two major answers as far as I can tell. Looking from the historical perspective that Prof Sylla brings it is a given that the actors in the system though self-interested are better off collaborating (there is much game theory one could bring up here) and so the stability brought by a strong hand (J. P. Morgan / Central Bank) is essentially that of a beneficent overlord. In other words it's not a con if it's in everyone's interest for the con to work out, or another way to look at it, if there is no way out. This is the prevailing / accepted view. There is another widely held perspective that academics look down on and the mainstream will call a conspiracy theory. But it has been and is today a very large contingent that sees that strong hand not as a beneficent one alibet still self interested. No, it is the view that this is in-fact a very old game that few see being played out over the centuries. That of the old banking families projecting their influence around the world by, for example, funding both sides of wars, getting governments deep into debt thus gaining influence on them to then take on private central banks with secret board members who will have exclusive right to print the money. This is the crowd that will rightly point out that the Federal Reserve is neight Federal nor a Reserve.

Well said Andrew. I agree that our financial system is more than ever a Confidence Game and the implications of losing confidence today versus even back in 2001/2002 are just plain terrifying. The interconnectedness and instant information sharing are going to magnify what happened in 2008 by several times.......if not an order of magnitude.

I do the same thing and the runtime graphic goes away if I move my mouse off of the page. Or if you're on mobile you could take a screenshot?

@Brooks, you're a genius, thanks. I revisited this page and as you explain, moving the mouse off the page does what I need. Thanks.

How do you pause the video?

hover your mouse over the video and the countdown time appears. mouse click on the = iand the video stops. Click again on the > and it starts playing again

Tap the space bar to toggle pause/play (also no run time graphic).

Many thanks.

This is a good place to start: "The Creature from Jekyll Island: A Second Look at the Federal Reserve"

Didn't vote it down, but it seemed awfully elementary, approiate for college underclassmen.