Friday, February 13, 2009

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].
See Part X.

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