Banks and Stocks: The Financial Industrial Complex

Abstract

Money is the lubricant of any modern economy — too little, and the economy stalls, too much, and its prices overflow. A lack of money characterized America’s first three centuries. Coin was always scarce. Tobacco leaves and wampum during the early colonial era and banknotes during the early republican era were the primary mediums of exchange. Although “greenbacks” appeared briefly during the Civil War, the United States did not even have a standard national currency until the early twentieth century. All along, neither the government nor the banks could raise enough money to feed entrepreneurial demands. Uncertainty over unregulated financial markets undoubtedly led millions of Americans to squirrel away their savings in cookie jars rather than bank vaults. The scarce supply of finance kept interest rates high and borrowers limited. Entrepreneurs who hoped to build canals, railroads, or factories had to look abroad for much of their capital. Foreign investors tended to spirit their profits overseas rather than spend or save it within the United States, leaving America all the poorer.