The Driver - Part X - Panic of 1893; Grover Cleveland; Gold; the recovery.

Click here for Parts 1, 2, 3, 4, 5, 6, 7, 8 and 9 of my review of The Driver.

Pages 136 - 225 [original edition] of The Driver focused less on the Panic of 1893 and focused more the individuals and their fight to overcome the Panic and its consequences.

This portion of the book begins with a brief explanation of steps taken by President Cleveland to stop the run on gold. pp. 136-137. These steps occurred prior to the election of 1896 and the administration of President McKinley, events that I have credited with restoring the gold standard and putting the crisis to its final rest.

Much of the plot that follows in the next 90 pages describes the actions one man takes to reinvigorate one business following the Panic. If we are to benefit from any lesson of The Driver [and these 90 pages in particular], it is the lesson that panics are not resolved by government spending. They are resolved by the entrepreneurship of individuals. Individuals lead us out of hard economic times. Individuals rescue depressed businesses, take risks and buy into down markets. The individual is the true "driver" of the free economy. The individual is the driver of freedom itself. As a result, the individual is often also made the victim of those he has benefitted/liberated - as we shall see in upcoming parts of The Driver.

See part 11 of my review here.

The Driver - Part IX - a run on the U.S. Treasury - Panic of 1893

Click here for Parts 1, 2, 3, 4, 5, 6, 7 and 8 of my review of The Driver.














Late in Chapter VI, Garrett describes a run on gold at the U.S. Treasury. In Part 7 of my review, I described the causes of the Panic of 1893:

A main factor in precipitating that crisis was the federal government's decree that Gold and Silver trade at parity with each other. The two metals were treated by Congress as equal in value, the laws of economics notwithstanding. "Naive trust in the power of words to command reality is found in all mass delusions." [p. 89].

The forced parity between the metals caused a run on gold, leading to a general credit collapse.

Garrett creates a fictionalized account of this run:

For several weeks uninterruptedly there had been a run on the government's gold fund. People were frantic to exchange white money [silver] for gold. They waited in a writhing line that kept its insatiable head inside the doors of the sub-Treasury. Its body flowed down the long steps, lay along the north side of Wall Street and terminated in a wriggling tail around the corner in William Street, five minutes' walk away. It moved steadily forward by successive movements of contraction and elongation. Each day at 3 o'clock the sub-Treasury, slamming its doors, cut off the monster's head. Each morning at 10 o'clock there was a new and hungrier head waiting to push its way in the instant the doors opened. Its food was gold and nothing else, for it lived there night and day. . . . . . It grew. Steadily it ate its way deeper into the nation's gold reserve, and there was no controlling it, for Congress had said that white money and gold were of equal value and could not believe it was not so. The paying tellers worked very slowly to gain time. . . . . the officers of the sub-Treasury had just telegraphed to Washington saying they could hold out only a few hours more. That meant the gold was nearly gone. It meant that the United States Treasury might at any moment put up its shutters . . . . Never had the line been so excited, so terribly ophidian in its aspect. Its writhings were sickening. The police handled it as the zoo keepers handle a great serpent. That is, they kept it straight. If once it should begin to coil the panic would be uncontrollable. Particles detached themselves from the tail and ran up and down the body trying to buy places nearer the head. Those nearest the head hotly disputed the right of substitution. . . . In the tense babel of voices there came sudden fissures of stillness, so that one heard one's own breathing or the far-off sounds of river traffic. At those moments what was passing before the eyes had the phantastic reality of a dream.

[pp. 127-129]

This story provides background for the main plot. It may become a reality in our own lives as the government further devalues our currency in its attempts to wish away the fundamental problems in our economy.



The Driver is not a history lesson on gold or an economics essay. For a nonfiction treatment of the government's attack on gold during the New Deal (and some history of gold in the U.S.), see Garrett's "Pieces of Money" from the Saturday Evening Post, April 20, 1935 [reprinted as Chapter 7 of Salvos Against the New Deal].
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See Part X.

The Driver - Part VIII - Insider Trading

Click here for Parts 1, 2, 3, 4, 5, 6 and 7 of my review of The Driver.

Chapter V featured another Ayn Rand relic - a character similar in some ways (although not in name) to one of the main characters from one of Rand's big novels. Once again I will not say too much for fear of giving away the plot. And once again Rand's character enjoyed fundamental improvements in complexity and depth. Rand's character was more thoroughly integrated into the plot than Garrett's character.

In Chapter VI, the reader is treated to the drama from inside the corporate board room, as the reality of the Panic (of 1893) becomes undeniable. In the midst of the action, as the corporate directors meet to decide the fate of the railroad, Garrett includes a passage that would be almost unthinkable to modern investors:

There is no law forbidding a director to part with his shares when the omens foretell disaster. It is commonly done in fact in the anonymous mist of the stock market, only you never mention it. The convention is that all stockholders have equal rights of parnership. But as directors are the few who have been elected by many to act as managing partners, and since it is necessary for managing partners to have first access to all information, it follows from the nature of circumstances that they are inside stockholders and that the others are outside stockholders; and it follows no less from the nature of mankind that the outsiders invariably suspect the insiders of selling out in time to save themselves.

[p. 117]

Garrett could not know that he was describing something - "insider trading" - that would later become the scapegoat used by every political analyst as the New Deal and its stepchildren programs would careen from one economic disaster to another throughout the 20th century (and into the 21st). While Garrett discussed insider trading as an element of the Panic, he recognized that such trading was a result - not a cause - of the general chaos.
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Part IX - a run on the U.S. Treasury.

The Driver - Part VII - Panic of 1893

Click here for Parts 1, 2, 3, 4, 5 and part 6 of my review of The Driver.

Garrett's focus on the Panic of 1893 can be better understood in light of a brief explanation of that crisis. A main factor in precipitating that crisis was the federal government's decree that Gold and Silver trade at parity with each other. The two metals were treated by Congress as equal in value, the laws of economics notwithstanding. "Naive trust in the power of words to command reality is found in all mass delusions." [p. 89].

The forced parity between the metals caused a run on gold, leading to a general credit collapse. The story is more complicated, but the government's populist attack against gold (and previously against silver in 1873) was the root cause of the panic. The situation was not rectified until the government returned to the gold standard after the election of 1896.

Much of this information does not appear in The Driver except by passing reference.

There were other similarities with today's bubble. Just as today's elected officials have received favorable treatment from mortgage companies at the heart of the financial meltdown, "United States Senators were discovered speculating in the stock of corporations that were interested in tariff legislation, particularly the Sugar Trust." [p. 93]

Another similarity relates to Wall Street:

The name of Wall Street became accursed, not that morality was lower in Wall Street than anywere else, but because the consequences of its sins were conspicuous.

[p. 93]

It is always easy to blame "Wall Street" for the consequences of the government's currency devaluation.

A principle difference between the two crises can be seen in the solutions. While President McKinley returned the country to sound money, our government seems determined to devalue our currency to the point where U.S. Treasury bonds will be unmarketable. (This devaluation is in addition to increased political controls that will further cripple the economy, censor political opponents and ensure one party rule.) A century of currency devaluation has enshrined the power of mass delusion.

A by-product of the Panic of 1893 has been the lasting effect on American culture. The Driver's plot was based on the Panic. The Driver was one of many influences on the writings of Ayn Rand - writings that remain powerful and influential to this day.

Others have speculated about the influence of the Panic and the gold-silver controversy on the original book version of the Wizard of Oz in 1900. I have also read that the Panic, due to the rapid abandonment of newly built homes by suddenly insolvent individuals, created the legend of the abandoned, victorian haunted house that appears in so many movies, television programs and amusement parks. I will leave that speculation for others.

I will comment only that for the present crisis to have a lasting effect on our culture such that writers, readers and viewers in 100 years will see elements in fiction that grew out of this crisis, policies will have to change. We cannot bankrupt the United States and expect literature and culture to thrive in the future. Vibrant culture grows out of vibrant civilizations, not decaying, balkanized people mired in chaos over a destroyed currency. If the U.S. is reduced to a third world country, no one will remember the allegedly "historical" political events that have been celebrated in recent months, and no mythology equivalent to the Wizard of Oz/haunted house legends will emerge to commemorate our economic woes.
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Click here for Part VIII.

The Driver - Part VI - Economic nightmares and mass delusion.

Click here for Parts 1, 2, 3, 4 and 5 of my review of The Driver.

Chapter IV is entitled "An Economic Nightmare" and opens as follows:

You may define a mass delusion; you cannot explain it really. It is a malady of the imagination, incurable by reason, that apparently must run its course.

p. 86

Garrett was referring to the causes of the Panic, not some policy designed to "stimulate" the economy following the Panic. [Garrett writes often of 1894 even though the Panic is known as the Panic of 1893. Many of the consequences continued to be felt in 1894.]

Continuing on his theme of "mass delusion," Garrett writes of how people throughout history "have been mad together about a number of things, -- God, tulips, witches, definitions, alchemy and vanities of precept." [p. 87].

Leaving aside the issues related to the conflict between proponents of gold and silver, Garrett's words apply today as well as to panics of the past:

Either side was willing to see the government's credit ruined, as it very nearly was, for the vindication of a fetich. They did not know it. They had not the remotest notion why or how they were mad because they were unable to realize that they were mad at all. . . . . . Intelligence was in suspense. The faculty of judgment slept as in a dream; the imagination ran loose, inventing fears and phantasies. That the government stood on the verge of bankruptcy or that the United States Treasury was about to shut up under a run of panic-stricken gold hoarders was regarded not as a national emergency in which all were concerned alike, but as proof that one theory was right and another wrong, so that one side viewed the imminent danger gloatingly and was disappointed at its temporary postponement, while the other resorted to sophistries and denied self-evident things.

[pp. 87-88]

The discussion of gold and silver is instructive today for a people that have grown accustomed to paper dollars and the unspoken assumption that government paper has always been the only medium of exchange. But the discussion of mass delusion is even more instructive for those of us that wonder how the recent bubbles could have wrought so much havoc:

Delusions are states of refuge. The mind, unable to comprehend realities or to deal with them, finds its ease in superstitions, beliefs and modes of irrational procedure. It is easier to believe than to think.

[pp. 90-91]

Recent superstitions include the belief in 200 to 1 p/e ratios for stocks [1990's] and the notion that real estate prices would always rise [2000's]. Superstitions of 2008 and 2009 include the belief in "hope," "change" and "stimulus."

For five or six years preceeding there had been an ecstasy of great profits. The prodigious manner in which wealth multiplied had swindled men's dreams. No one lay down at night but he was richer than when he got up, nor without the certainty of being richer still on the morrow. The golden age had come to pass. Wishing was having. The government had become so rich from duties collected on imported luxuries that the Treasury surplus became a national problem. It could not be properly spent; therefore it was wasted. And still it grew. This time for sure the tree of Mammon would touch the Heavens and human happiness must endure forever.
Then suddenly it had fallen. . . . . The trunk was hollow. Everything turned hollow. People were astonished, horrified and wild with dismay. They would not blame themselves.

p. 91

If we are to survive our current crisis, we must remember how we survived past crises.
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Click here for Part VII - brief background on the Panic of 1893, its impact and how it was resolved.

The Driver - Part V - Ayn Rand relics and stock prices.

Click here for Part IV of my review of The Driver.

Chapter III of The Driver is heavily influenced by Ayn Rand relics. I will not identify them for fear of spoiling the fun of seeing them for yourself. The items that appear in Driver that foreshadow the Rand novels do not reflect poorly on Rand. Rand's plots were all her own, with only an element or two from prior novelists. Rand's novels were unique. She built on elements from prior authors, but she created something new and distinct. Ayn Rand's basic plot originated in Red Pawn during the 1920's, was repeated closely in Anthem and appeared in much more complex form (with many new elements and alterations) in The Fountainhead and Atlas Shrugged. Rand's basic plot does not mirror the plot of The Driver (although the main character's battle in Driver featured some elements that would later appear in Fountainhead).

Much of The Driver involves the familiar drama resulting from the rise and fall of stock prices. At one point in Chapter III, a minor character remains notable for her silence until she asks a question that our own veterans of the 1990's stock market bubble (and its aftermath) will find very familiar - "What is the price of Great Midwestern today?" [p. 73]. This was no piece of casual dialogue. The near obsession of the characters with fluctuations in a stock price, especially in the aftermath of a general crash, has implications for our own times.

Other people have lived through stock market crashes in the past. They have sometimes found solutions instead of messiahs. Those solutions have become the subject of fiction and literature. While there is no magic solution in Driver, there is perspective.