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Comment: The Panic of 1907

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The Panic of 1907

The Panic of 1907 was a run on the American banking system as a result of a public announcement by J.P. Morgan that a prominent bank in New York was insolvent. The results were wide-spread mass withdrawals on the entire banking system. This forced the banks to call in their loans. Bankruptcies, repossessions and financial turmoil emerged.

The public was told that the creation of the Federal Reserve would stabilize the economy. From 1914-1919 the money supply nearly doubled. This resulted in extensive loans to small businesses and the public. A calling in of the loans in 1920 resulted wide-spread bankruptcies and bank-runs marking the steep 1920-1 recession. Over 5400 independent and competitive private banks outside of the Federal Reserve System collapsed thus consolidating the power of the central banks

"Its easier to fool people than to convince them that they have been fooled."
Mark Twain