Logo Homeschool World ® Official Web Site of Practical Homeschooling Magazine Practical Homeschooling Magazine
Practical Homeschooling® :

Banking on Panic

By Sam Blumenfeld
Printed in Practical Homeschooling #89, 2009.

A history of financial crises in America and how we survived.

   Pin It

Sam Blumenfeld


In May of this year I reached my 83rd birthday. I have spent the last thirty years promoting educational freedom and, in particular, home schooling. It is my strong belief that you cannot have a free society without educational freedom. A government education system simply creates the means for the government to indoctrinate the nation’s children in whatever philosophy the government wants. We have seen this scenario in operation wherever governments have wanted to impose totalitarian power over their citizens.

So far, in the United States, no political group has succeeded in imposing a totalitarian form of government over our people. Our separation of powers has made it difficult for any political group to achieve total power. Our Constitution guarantees our citizens freedom of speech, freedom of religion, and freedom to own firearms. In the area of education, Americans have the right to create private schools and to educate their children at home. As long as these freedoms are maintained by a vigilant citizenry, we shall not have a totalitarian system of government.

But recently we find government’s heavy hand intruding itself in areas where economic freedom is being hotly contested, particularly in the area of banking.

The function of banks in a free society is crucial to that society’s economic well-being. In the early days, before regulation, the banks stored savings in terms of gold and issued loans in their own banknotes. Credit is the essential fuel of economic progress. And so we must have it. But as in every human endeavor, banks and their depositors are also susceptible to error and fraud.

For example, our earliest banking panic, in 1810, was brought on by over-generous lending policies. Does that sound familiar? The Panic of 1837 resulted, with specie payments being suspended, causing many bank failures and a depression that lasted until 1844. In 1856, the Farmer’s Almanac published an extensive list of “Worthless and Uncurrent Bank Notes in New England.” Twelve banks in Boston alone were listed. Forty-one banks in Maine were listed as having worthless bank notes. Yet, the country survived.

There were bank panics in 1873, 1884, 1893, and 1907. During all these, the country survived without government intervention. But with the growth of a huge industrial economy, the large investment bankers in New York decided that what the United States needed was a European-style central bank. They held a secret meeting at Jekyll Island, GA, and mapped out a plan for getting Congress to create the Federal Reserve System. It would be sold to the American people as a means of preventing further financial panics. The law creating the Federal Reserve was passed in December 1913. In reality, the new central bank was nothing more than a cartel of the big national banks to control the financial system of the United States.

Thus we continued to have financial panics. There were 825 bank failures between 1914 and 1929 and 1,947 failures by the end of 1933. So, from 1913 to 1933, there were 12,714 state bank failures. By 1933 there were 14,771 banks in the United States, half as many as in 1920. The banking holocaust of the early 1930s—9,106 bank failures, 1,917 of them national banks, in four years—culminated in a nationwide bank moratorium in March of 1933, and the enactment of more government regulation.

And yet, our capitalist system survived. During the Depression many auto companies went out of business. But those that survived—like General Motors, Chrysler, and Ford—managed to produce cars the public wanted, at very moderate prices. The Depression had also created deflation, a lowering of prices on everything, since money was hard to get. The Empire State Building, the Chrysler Building, and Rockefeller Center were built during the Depression. Great bridges and highways were also built. And Hollywood did a booming business.

World War II got us out of the Depression and led the U.S. into its great post-war prosperity. Since then we’ve seen the growth of a huge consumer economy, spurred on by easy money provided by credit cards. And when money is easy to get, the greedy get greedier. The technological revolution created thousands of new millionaires. Ordinary Americans by the millions were investing in the stock market, in mutual funds, in retirement accounts. And to spread the American dream, Congress passed laws requiring banks to finance the mortgages of risky borrowers.

The result? A great financial blow-up, not seen since the Depression. But instead of letting the market sort things out, our leaders in the White House and Congress have decided to use this crisis as a pretext for destroying our capitalist system and imposing more socialist-style government control over our lives.

The nation has survived as a free society through all of the financial crises of the past. And it will survive this one, if it is allowed to follow its natural course. That is the lesson that history teaches us.

Education expert Sam Blumenfeld’s Alpha-Phonics reading program is available on www.samblumenfeld.net. His latest book, The Marlowe-Shakespeare Connection, is about the Shakespeare authorship mystery.


Was this article helpful to you?
Subscribe to Practical Homeschooling today, and you'll get this quality of information and encouragement five times per year, delivered to your door. To start, click on the link below that describes you:

USA Individual
USA Librarian (purchasing for a library)
Outside USA Individual
Outside USA Library

Time4Learning
University of Nebraska High School
Free Email Newsletter!
Sign up to receive our free email newsletter, and up to three special offers from homeschool providers every week.

Articles by Sam Blumenfeld

The Whole-Language Boondoggle

High School for Freedom!

Dyslexia: The Man-Made Disease

Teach Reading to the “Learning Disabled”

Uncle Sam Wants Your Child on his National Database

Why the Internet will Never Replace Books

Teach Reading to the "Learning Disabled"

Homeschooling and Charter Schools

Homeschoolers and Vouchers

The History of Public Education

College At Home

Learning from The "Old Dead Guys"

The Meaning of Educational Freedom

The Importance of Rote Learning

The Exodus Continues

A World Without Public School

The Benefits of Teaching History at Home

How to Tell Real from Phony Phonics?

Getting Started in Arithmetic

Teaching Arithmetic

Teaching the Alphabet

Teaching the Alphabet Sounds

Teaching Blends

Teaching Long Vowels

The History of Geometry Education

Never Bored Again

Learning Greek

How and Why to Teach Shakespeare

How to Get the Most Out of Homeschool Conventions

Forgotten American History: The Barbary Wars

Forgotten American History: God's Providence in the American Revolution

Forgotten American History: The Spanish-American War

Forgotten American History: The Great Awakening

Forgotten American History: Puritan Education

Colonial Education: The Free Market in Action

America Started with Educational Freedom

How Harvard Became Liberal

The Glory of the Alphabet

19th Century Communists & the Origin of American Public Education

The Benefits of Cursive Writing

It Pays to Know Your Legislator

Intelligent by Design

Teaching Kids to Enjoy Classical Music

Before Compulsory Education: The Private Academies

What Schools Teach: Then and Now

The Real Meaning of Easter

The Truth About Independence Day

The Benefits of Reading Biographies

Why We Celebrate Veterans Day

The Purposes of Education

Why Homeschoolers Should be Book Collectors

How History Was Taught Back Then

The American Almanac: A Great Learning Tool

The Fun of Going to an Antiques Auction

Politics and Homeschoolers: A Primer

A Novel Suggestion

Who Wrote Shakespeare?

Why Homeschoolers Should Learn Public Speaking

The Presidency

Party Politics in the United States

The Road to an American Independent Nation

George Washington: Our First President's First Term

George Washington: Our First President's Second Term

Celebrating Flag Day

Going to School Back in the Great Depression

Middle School During the Great Depression

High School During the Depression

Inventions and Progress

On Falling in Love

A Taste of the Old Days

The True Root of American Freedom

Classical Gems on YouTube

Curing Dyslexia

Popular Articles

The Charlotte Mason Method

Saxon Math: Facts vs. Rumors

How to Win the Geography Bee

Columbus and the Flat Earth...

AP Courses At Home

Who Needs the Prom?

Myth of the Teenager

Getting Started in Homeschooling: The First Ten Steps

Start a Nature Notebook

Laptop Homeschool

Can Homeschoolers Participate In Public School Programs?

Shakespeare Camp

The Equal Sign - Symbol, Name, Meaning

What We Can Learn from the Homeschooled 2002 National Geography Bee Winners

Top Tips for Teaching Toddlers

Phonics the Montessori Way

Getting Organized Part 3

Bears in the House

Advanced Math: Trig, PreCalc, and more!

How to "Bee" a Spelling Success

Montessori Language Arts at Home, Part 1

The Benefits of Debate

Don't Give Up on Your Late Bloomers

Why the Internet will Never Replace Books

Whole-Language Boondoggle

Combining Work and Homeschool

The Gift of a Mentor

I Was an Accelerated Child

Getting Organized Part 1 - Tips & Tricks

Critical Thinking and Logic

Give Yourself a "CLEP Scholarship"

A Homeschooler Wins the Heisman

Top Jobs for the College Graduate

Teach Your Children to Work

Joyce Swann's Homeschool Tips

What Does My Preschooler Need to Know?

Classical Education

University Model Schools

Teaching Blends

Discover Your Child's Learning Style

Narration Beats Tests

Character Matters for Kids

The History of Public Education

Patriarchy, Meet Matriarchy

Montessori Math

Interview with John Taylor Gatto

Art Appreciation the Charlotte Mason Way

The Benefits of Cursive Writing

A Reason for Reading

The Charlotte Mason Approach to Poetry