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Footnotes since the Wilderness
On this day in 1666, on the island of Manhattan, one Frederick Phillipse, a noted merchant found a way to corner the market. Of course it was 126 years before the New York Stock Exchange would be founded, but markets are markets.
At the time many of the early Dutch settlers and the new English immigrants made a handy living trading goods. There was no foreign exchange markets at the time, so Fred, "the would be furrier", realized that there was a limited supply of wampum - the polished clam shell fragments and shiny beads that Indian traders valued. So he bought up a large supply of wampum and buried it in the backyard. The effect was instantaneous and Fred's wampum was suddenly worth a fortune.
Now, in case you fell asleep in sixth grade during Sister Anesthesia's course on "Modern Money Mechanics", let's review. By burying a lot of wampum, Phillipse had artificially and substantially decreased the money supply. (Yes, Virginia that is called deflation.) Thus, there were more goods (skins) around than money, so prices dropped. Old Fred could then sneak into the yard at night and unbury a little money buying lots of goods and slowly re-flating the economy. (Wow! No FOMC and no Congressional critics.)
Unfortunately, someone noticed that Fred had an uncanny ability to come up with fresh wampum whenever needed. Instead of applauding his good fortune his neighbors arrested him and put him in prison claiming they were saving him from the irate Native Americans.
To celebrate take Ben Bernanke out for a nip at "The Clam and Bead." Have a barrel of laughs but don't try to hide anything.
Many thanks to Mr. Cashin and UBS Financial Services who graciously allow his historical musings to be republished on this site. To enjoy more of Art's posts simply click on "Cashin's Comments" in the label section on the sidebar.
Editor's note: Posting to this site will continue to be sporadic and unpredictable while the editor deals with some personal issues. Please continue to stop by and perhaps enjoy some of the older posts while we wait for a more predictable posting interval to emerge. We appreciate your interest and hope you enjoy our efforts. Many thanks to Art Cashin for taking up the slack in the meantime.