A Nation of Deadbeats: An Uncommon History of America's Financial Disasters

by Scott Reynolds Nelson

The story of America is a story of dreamers and defaulters.  It is also a story of dramatic financial panics that defined the nation, created its political parties, and forced tens of thousands to escape their creditors to new towns in Texas, Florida, and California.  As far back as 1792, these panics boiled down to one simple Would Americans pay their debts—or were we just a nation of deadbeats?

From the merchant William Duer’s attempts to speculate on post–Revolutionary War debt, to an ill-conceived 1815 plan to sell English coats to Americans on credit, to the debt-fueled railroad expansion that precipitated the Panic of 1857, Scott Reynolds Nelson offers a crash course in America’s worst financial disasters — and a concise explanation of the first principles that caused them all. Nelson shows how consumer debt, both at the highest levels of finance and in the everyday lives of citizens, has time and again left us unable to make good. The problem always starts with the chain of banks, brokers, moneylenders, and insurance companies that separate borrowers and lenders.  At a certain point lenders cannot tell good loans from bad—and when chits are called in, lenders frantically try to unload the debts, hide from their own creditors, go into bankruptcy, and lobby state and federal institutions for relief.

With a historian’s keen observations and a storyteller’s nose for character and incident, Nelson captures the entire sweep of America’s financial history in all its utter national banks funded by smugglers; fistfights in Congress over the gold standard; and presidential campaigns forged in stinging controversies on the subject of private debt. A Nation of Deadbeats is a fresh, irreverent look at Americans’ addiction to debt and how it has made us what we are today. 

Genres: History, Economics, Nonfiction, Politics, American History, American, Business

352 pages, Hardcover

First published January 1, 2012

About the author

SCOTT REYNOLDS NELSON is the author of Steel Drivin' Man, which won the National Award for Arts Writing, the Anisfield-Wolf Literary Prize, the Merle Curti Prize for best book in U.S. history, and the Virginia Literary Award for Nonfiction. His young adult book, Ain't Nothing But a Man (written with Marc Aronson) won seven national awards, including the Jane Addams Prize for best book on social justice.

Reviews

[Al · Rating 4 out of 5]

I am not an economist, or a scholar. Additionally, I have not taken the time to research the source material for this book. However, I have experienced our economic system for over half a century on many different levels. I have been a consumer, a wage earner, a small business owner, an investor, and a landlord. All of my experience, and everything that I think I know, seems to support the idea that this book is based on rock solid concepts. His approach moves along in just the same way that events occurred, which is to say, chronologically. This approach ties the story together in just the right way to connect the dots. I truly feel like I have a much better understanding of the economic history of America. I am also a little unnerved by the reoccurring patterns. Isn't it one of the definitions of insanity to keep doing the same thing over and over, while expecting a different result? Of course, those running the game are usually crazy like a fox.

I am happy to give five stars to this book. And to think, I found this book on the New Book Shelf at the library. What a great find!

[Frank Stein · Rating 5 out of 5]

A fantastic look at over 130 years of financial panics in the United States, from the 1792 panic sparked by William Duer's attempt to corner the federal debt market, to, of course, the 1929 Wall Street crash.

Nelson mentions in the acknowledgements that the book began after he had written a prescient article, published in Chronicle of Higher Education in October 2008, comparing the current crash to the 1873 panic. When some bankers contacted him about where they could find out about earlier panics, he had to admit there was not much out there. That's been my experience as well. Shockingly little has been written about the panics of 1792, 1819, 1837, 1857, 1873, 1893, and 1907, let alone anything comparing them all, despite the fact that these panics fundamentally reshaped the American economy and landscape. Nelson makes a strong case that they were even fulcrum of sorts around which all of early American history turned. For instance, the 1792 panic led to the rise of the competing Democratic and Federalist party system, while the 1837 panic gave a fillip to the nascent Whig party and allowed them to take the Presidency in 1840. In some ways the 1857 panic did the same for the Republican Party and thus engendered the Civil War itself.

He also brings out some little known instigators of these panics. The 1819 one did partially arise out of the attempts of the Second Bank of the US to pull back on lending, as has often been stated, but a brewing trade war between England and the U.S., which soon ended the lucrative trade with the West Indies, caused wheat prices to plummet and the "bills of exchange" that the wheat collateralized to do so as well, thus crippling the small "caterpillar banks" along Western rivers. A similar obscure change in policy, the Swamp Acts of 1850 and 1857, raised doubt about the nature of railroad bonds collateralized by gifts of government lands, since under those acts states could appropriate any lands they felt were swamp, thus throwing into question the whole railroad enterprises. The panic of 1857 was the result.

So this is a dense and rewarding history of the panics that shaped America. Even more so, it is a great general history of America itself, one that puts it all in a new, and very illuminating, light.

[John Stein · Rating 5 out of 5]

Admittedly I am a bank history geek, but this book is really a must read for anyone who is tired of hearing about how "this cycle is unprecedented". In an easy to read style, Mr Nelson explains the economic, political, social, and psychological history of our country's many great financial collapses. He also rightly points out that 2007-10 was actually pretty mild when compared to 1819, or 1857, and that the political fallout was tame . I highly recommend this book

[Kate Sherrod · Rating 3 out of 5]

This was ultimately still a little opaque for me, but gave me lots to think about.

[Sandy Peterson · Rating 5 out of 5]

The author did a great job of explaining how recurring financial crises in the US were caused by the evolving nature of money and banking, international trade, and politics. According to Nelson while every financial meltdown is unique in its specific cause, there are repeating patterns involving an asset bubble, over leveraging and government intervention. I don’t know how well his theories fit in with the consensus of other economic historians. It is possible that his stories sound plausible but are too good to be true. Regardless, there was a lot of interesting information in the book that I never learned in history class

[ava · Rating 4 out of 5]

Super fire book and like now i maybe understand the economy or something

[Jeffrey Blake · Rating 3 out of 5]

a rare look at the often overlooked financial side of American History.. The book is not particularly as well sourced as one might expect, and I found myself bogged down in much of the older financial instruments that he attempts to explain, but a fascinating read all the same.

[Noah · Rating 1 out of 5]

Potentially interesting economic history of the U.S., but got the feeling that the author doesn't know a lot about the issues he discusses. It seems like he did of good job of digging into primary and secondary sources, but can only repeat what those sources say, without adding context or insight or a good understanding of the issues.

[Will · Rating 4 out of 5]

Epic. Funny, informative, the right amount of pages. I've read a lot of narrative economic histories that seemed like they were 400 pages too long. You could bang this one out in a evening if you wanted to.

[Mel · Rating 4 out of 5]

If you think this financial crisis is new and different, you really should read this book.

[Paul Statt · Rating 5 out of 5]

Unfortunately titled, a serious work of history. But also great fun.

[Bryce Galloway · Rating 3 out of 5]

Pgs 40-47 Tells the tale of the original Bank of America, its British stakeholders using their fiscal power to exert political power. Congress dissolved the bank allowing dozens of smaller banks to crop up in place of its monopoly. Britain and the US go to war in 1812.
The ‘caterpillar’ banks across the US each print their own currency – p59, ‘…to address the risks of [highway robbers on] the Natchez Trace, the inland caterpillar banks provided “river money” to farmers. Like all printed money, it was local. It traded along the river and decreased in value the farther it was from the bank.’
Like a cold-blooded economist, Nelson focuses on battles of currency in the colonial US. Nelson is a historian, not an economist, but with the Peterloo Massacre, black slavery and Andrew Jackson’s ‘removal’ of Indians mentioned solely in terms of their economic implications to settler US, one could be forgiven for wondering if Nelson’s has had his heart served to the Bank of America.
The pace of the book speeds up after US Civil War, sprinting from boom to crash to boom again, through the prosperity of cotton then wheat, liquor then sugar. The dollar moves away from the gold standard and then regroups (hilariously, with more real gold in the coinage than printed on the currency at one stage, leading locals and overseas investors to buy US coin and melt it down). Sometimes the book moves too fast to be of interest to a novice of economics history like myself. I selfishly want Nelson to dispense with some details and dig into specific human narratives. He tries to do this at times, but not emphatically enough for my liking.
Hints at the long-shadow repercussions of global trade with American exports undercutting the export market of the Austro-Hungarian empire, discrediting their royal family and making Archduke Franz Ferdinand the target for the assassination that would ignite WWI. Ironically, the US would quadruple its federal reserves during WWI, and with British banks having temporarily frozen their funds for the duration of the war, by war’s end the US dollar was the new global currency standard. And again, in the late 1920s, Germany’s National Socialists take the temperature as US loans to Germany dry up.
Stops its detailed analysis somewhere between WWI and WWII and then skips to the Conclusion, folding in the deregulated markets of the 2008 global financial crisis. Nelson champions the Occupy Movement, still active in 2012 when this book came out.
Admittedly, a lot of what I read went over my head, and I was not in the habit of close-reading/rereading paragraphs to glean a better understanding. I just let it wash over me like I was reading some magic realist fantasy. I guess economics is some magic realist fantasy, though unfortunately, real bodies pile up in mounds. This is the first book on economics that I’ve ever read.

[M Thomas · Rating 3 out of 5]

The title is somewhat misleading. As the author explicitly states he does not believe that America is a nation of people that make little attempt to pay off their debts. Rather, it is the story of how the allocation of global capital (i.e., Capitalism) relentlessly rolls over those who incur debt at the wrong time and the resulting social chaos drives lasting political change.

I think he is generally correct. The part on the machinations of the sugar lobby was news to me. Nonetheless, I am giving the book 3 stars because there are enough small errors and evasions to lead me to doubt everything else in the book. For your benefit, here are the ones I caught. Obviously, there are likely to be others.

p.74 - conflates "western Vermont" with "Connecticut River Valley", which is in the eastern half of the state.

p.82 - refers to British exports in the 1815-1835 period going to markets including Hong Kong, which wasn't established until 1842.

p.97 - refers to the British victims of Andrew Jackson's summary justice in 1818 as "English officers". In fact, both were civilians and one was a Scot, not English.

p.100 - refers to filibuster expeditions to Texas and California in the 1830s. I have never heard of any such move into California that early. There is no evidence footnoted.

p.110 - attributes the resignation of Jackson's cabinet to fears of the Bank of the United States' influence. Multiple Jackson biographies that I've read attribute it to the Peggy Eaton Affair. In a footnote, Norris admits this and does not say why he goes against consensus.

p.123 - puts the start of the Whig Party as 1839 but they had run presidential candidates in 1836.

p.159 and p.160- refers to the Austro-Hungarian Empire as "vast and brutal". I don't know how to say this, but the Empire was not at all brutal and might have lasted longer if it had been.

p.162 - refers to the "speculator John Law". Calling John Law a speculator is correct, but merely a one aspect of his remarkable life. One might as well refer to Ronald Reagan as a mid-century actor.

p. 166 - states that the Philadelphia Public Ledger, backed by JP Morgan and Anthony Drexel, undermined Jay Cooke's empire by publishing rumors. This is largely correct, however, Morgan had nothing to do with the newspaper. It was backed entirely by Drexel, whose involvement predated his partnership with Morgan. Indeed, Drexel backed the Ledger's publisher, George Childs, with almost exactly the same formula as he backed JP Morgan.

p.208 - refers to the links between JPMorgan and the Chase Manhattan Bank. While JPMorgan did deal with Chase as with the other large New York banks, it was much closer to Guaranty Trust and First National. Morgan did not control Chase in any way.

p.212 - refers to Prussia in World War I. Prussia had been part of the German Empire for 50+ years.

p.225 - refers to National City's acquisition of International Banking Corporation in China in 1915. IBC's largest branches were in China, but it was based on Wall Street and had branches in a half dozens countries, including Panama, Japan, Philippines, etc.

p.243 - attributes the German invasion of Poland in 1939 to a desire that its debts be repaid. That is simply preposterous.

[Mary · Rating 5 out of 5]

Easy to read with often surprising details on the repeated economic crises that have punctuated history. I was about to write "American history" but, though the focus is on the U.S., it is clear that the globalized economy was always present and only grew stronger over the entire span of the last four hundred years. A major underlying theme is "everything old is new again" as each crash presented similar features: accumulated debts with no real collateral behind it, the dependence on a single booming sector on which many others depended, the sensitivity to a political/social/political shock (often distant geographically), and the lack of reliable and transparent essential information. As the author notes today isn't at all different from the past.

[William Stone · Rating 4 out of 5]

A very interesting review of US History, as driven by financial crises. At times a bit confusing, the book generally is well written and aimed a general audience. The book essentially makes the case that all major developments in US politics and policy were driven by finance and monetary policy. That may be too big a claim, but his view of major US and European events is fascinating and well researched.

[Kate · Rating 3 out of 5]

This book is almost certainly the most entertaining economic history I have ever read. Nelson spins a coherent narrative which spans a century and a half of American history, and points to consumer debt and its international consequences as the culprit behind each major financial crisis. It is sprinkled throughout with plenty of interesting anecdotes. Nelson's strongest point is his ability to link human interest storylines to the broader historical context in which they took place. Most notable is the way he traces the life of Anton Cermak from his birth in the Austro-Hungarian Empire in the 1870s to his election as the first foreign-born mayor of Chicago, and in the process links American wheat, European financial crashes, immigration booms, American crash politics, tariff policy, and more.
Nelson's main argument is mostly sound, but often downplays the importance of regulatory policy in favor of emphasizing the role of consumer debt and expectations about American solvency. Overall though, it is well researched and written book, and breaks down complicated economic and financial terms and phenomena into more accessible explanations.

[Samuel Brase · Rating 4 out of 5]

A very fascinating account of America's major economic downturns, from the late 1700s through the Great Depression--as well as some thoughts for the most recent crisis. (I do find it odd that he basically ignores the Savings & Loan crisis from the late 80s/early 90s.)

I'd have given it five stars but frankly some of the financial talk went over my head. Occasionally he simplifies the complex systems at play--usually variations of credit and assets--but not often enough for my taste. Most crises were borne of people figuring out a way to inordinately profit within the system, which causes imbalance and eventually a crash--but understanding specifically those systems, and thus how people gamed them, remained elusive to me in a majority of cases. I got the general gist but would have preferred a comprehensive understanding. Perhaps a reread in a year or two will help.

[Robert · Rating 4 out of 5]

A well written overview of financial crises in American history. In my opinion the author overextends himself when he addresses the crises of 2008. He gives us an rough outline rather than a thorough discussion and analysis. I found the analyses of the early and mid 19th century panics illuminating and informative.

[Nathan · Rating 4 out of 5]

A good panoramic overview of past crises and their similarities to present circumstances; some deficiencies in the presentation of complex financial instruments and economic phenomena (but the author is a historian, not an economist and I give him props for trying!)

[Jim Plybon · Rating 4 out of 5]

Interesting

[Robert · Rating 2 out of 5]

Tough read for me. Mostly about early US characters and financial industry, therefore little to relate to. "Conclusions" chapter connecting early chicanery with 2008 debacle more interesting.

[Austin High]

338.5 NEL