OCTOBER 2019

OCTOBER   2019
THE NEVER ENDING PUPPET SHOW

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Saturday, January 20, 2018

GEORGIA PEACHES Chapter Three

I think it is unfair to judge Patrick Henry by 21st century standards. He was an 18th century man. He was a slave owner, who measured his wealth largely by how many other human beings he owned. But  the hypocrisy of speaking for freedom while holding humans in bondage, was not completely lost on him. But it was lost on the pugnacious and ambitious and very un-humble Senator James Gunn. Which may be why American history books rarely mention him.
Born in Virginia, the “arrogant (and) ambitious” Gunn had risen to the rank of Captain during the revolution, but his career had faltered after he stole a horse from a South Carolina widow, and used it to “fix” a race.  After the end of the war Captain Gunn moved to Savannah, Georgia, where people didn't know him so well. He became a lawyer.  In the spring of 1786 Captain Gunn lead a handful of local militia in putting down a slave “revolt”.  In fact they had just run away, and were hiding in the Black Creek Swamp.  Gunn's brave militia proceeded to butcher most of them. And from that day forward, Gunn was known derisively as “General Gunn”.
The next year James Gunn was appointed to the Constitutional Convention in Philadelphia. However he could not be bothered to actually show up.  And after being appointed a United States Senator in 1789, the now 36 year old bully's only legislative achievement was to be the first Senator to block a presidential appointment. It seems a certain naval officer, Bennamin Fishbourn, had refused to kick back Charleston tariff duties to Gunn.  That may have been the political highlight for the rapacious and arrogant James Gunn, had not the French revolution expanded his horizons.
When the mob stormed the Bastille in July of 1789, it set set off a seemingly endless series of wars, as the royal houses of Europe sought to suppress the revolutionaries, and failed. This chaos inspired all the spare cash in Europe to start looking for safer pockets. Senator Gunn figured American land speculation, like that old forgotten Yazoo swamp-land scheme, would look safe by comparison.
Remember the Bank of North America, the financial institution which had saved the revolution? It had been the invention of Robert Morris, the “Mozart of American finance”, a Philadelphia land and stock speculator, and a friend of Senator James Gunn.  Another like minded friend and business partner was the trusted Comptroller for the state of Pennsylvania, John Nicholson. He was responsible for collecting that state's taxes, and liquidating the estates of absentee loyalists. He and Morris quietly got rich doing that, and they shared many of these opportunities with Senator Gunn. These three vultures now combined to resurrect the Yazoo land fraud. Their first hire was the young James Greenleaf, the U.S. Counsel to the Netherlands, who boasted he could snap his fingers and produce a million dollars of gold and silver from his dutch banker friends.
To discourage any legal challenges Gunn hired James Wilson, a Supreme Court Justice who oversaw the Federal courts in Georgia. And as a silent partner they chose Nathaniel Pendleton,  another Federal judge.  Now all Senator Gunn needed was to get his hands on the old Virginia Yazoo company.
Remember Patrick Henry's partner, David Ross? Back in 1787, Ross had been one of the wealthiest men in Virginia. But when Georgia rejected his payment on the Virginia Yazoo lands, his empire fell apart like a row of dominoes. Creditors were now nipping at his heels. In 1791, Ross sold most of his shares in the Virginia Company to the rapacious Senator from Georgia, James Gunn.
Now, remember, the Federal Government had been trying to take the Yazoo lands off Georgia's hands for a decade and more. But the Peach State's politicians had refused every offer. They were convinced there was money in 'them-there' swamps – somehow. The problem was, if they were going to find a profit in the place, they were going to have to defend it.  In 1793 the arrogant red faced fire-plug, Governor George Mathews had been elected to his second non-consecutive term, partly on a platform of defending Georgia's western border against all challengers.  But Georgia didn't have the money for soldiers or forts. The only choice was for the legislature to resurrect the Yazoo land deal. Suddenly everything was coming together rather nicely. 
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Friday, January 19, 2018

GEORGIA PEACHES Chapter Two

I don't think we should judge Patrick Henry too harshly. Shortly after the birth of her sixth child Patrick's  beloved Sarah went mad and in 1771 the doctors diagnosed her as being possessed by demons. Two centuries later it seems likely she suffered from post patrum psychosis. Over the next 4 years Sarah was kept locked in a cellar “apartment” beneath her own home and cared for by her eldest daughter Martha, and her slaves. The standard treatment – exorcisms, restraints, regular enemas and laxatives, bleedings and beatings – all probably hastened her death in 1775. 
On 15 July, 1788, Federal Secretary of the Treasury Alexander Hamilton suggested that Georgia cede her “vacant territories” west of the Apalachicola River to the Federal government.  In exchange the Federal government would assume Georgia's entire war debt. But Georgia politicians said “no thanks”. Instead, on 21 December, 1789, Georgia governor Edward Telfair, signed grants of five million acres between the Apalachicola River and the Mississippi River, to the Virginia, Tennessee and Carolina Yazoo companies.  In exchange, within two years, the Yazoo companies were to pay Georgia $207,000 – or about 24 cents per acre. The first payment was to be made in six months. A disinterested observer might ask, when land claims in the region were certain to be disputed by local Indians and the Spanish,   and since undisputed claims elsewhere were selling for two pennies an acre, how could the investors in the Yazoo swamp – er, Yazoo lands – hope to make a profit?  Well, there was the golden rule of business - Caveat Emptor
The concept has officially been a part of English law since 1603, when a goldsmith named Lopus sold what turned out not to have been the magical gallstone of a wild goat to a Mr Chandler, for 100 pounds. When Chandler realized he had bought a useless rock, he sued, and a court ordered Lopus to give Chandler his money back. But on appeal the case was thrown out, because the higher court said it didn't matter what the seller's sales pitch had been - “for everyone in selling his wares will affirm that his wares are good...(yet) the warranty ought to be made at the same time of the sale.” In other words, without a written guaranty, there was no legal promise. That was quite a barrier to justice when the vast majority of the population could neither read or write. And in Georgia in 1790, buyer beware was the business model for all three of the Yazoo companies, never mind that the buyers were Georgia taxpayers.
But again, how do you make a profit buying swamp land for 24 cents an acre, when adjacent dry land was selling for 2 cents an acre? The answer is simple - you pay in play money. And in 1789 there was a lot of it around.
At America's lowest point in the revolution, a desperate Continental Congress had created the Bank of North America, and it had furnished the financial framework to support Washington's army. The BNA was the great unsung hero of the revolution. But in 1785 the new Confederation Congress withdrew the bank's charter, leaving the Federal government $11 million in debt to France and Spain, and the states about $48 million in debt to their own citizens. In exchange the moneyed class got “free market” banking.  And it was utopia. Right?
Within 2 years bonds issued by the American government were selling for ten to fifteen cents on the dollar, and most state bonds were selling for less than that. State legislatures were reduced to borrowing money just to pay the interest on earlier loans. There were more than fifty currencies in circulation, including English pounds and Spanish “pieces of eights”.  Individual cities were chartering banks, which then issued their own money. And in the woods of western Pennsylvania, where their were no banks, the standard medium of exchange was home brewed whiskey. The collapse of the American economic system was the major reason the Articles of Confederation were scrapped in 1787.
Under the new Constitution, establishing a stable economy was the job of President Washington's bright-eyed boy, Alexander Hamilton. Having been orphaned twice while growing up (even his adoptive parent had died), the new Secretary of the Treasury had an aversion to chaos. Hamilton's imposition of economic order was simple, brilliant and realistic. And he had a little help when reality kicked the Virginia money class right in their pocket books.
That summer, when agents for the Virginia Yazoo Company showed up in Georgia to make their first payment for the Yazoo land grants, they were carrying a huge pile of paper money.  Some of it was Federal bonds, and the rest was cash issued by various state banks, all bought at a discount. None of it was gold or silver and Patrick Henry and friends expected their payment to be accepted at "face value".  But the state of Georgia refused to fall for that.  They deemed the offer insufficent and canceled grants to all three Yazoo companies – No sale.
That left Patrick Henry David Ross and Thomas Jefferson, et al, holding huge piles of paper which had just been officially declared worthless. Which is when Alexander Hamilton offered to exchange their “worthless” paper “at par”, meaning at the best rate offered in the open market - for new U.S. government bonds. In other words, he was offering something of nothing. And all they had to do was convince the state of Virginia to allow the Federal government to take over their entire debt, and give up claims to any western lands.  Oh, and Hamilton also wanted to set up a new Bank of North America - this time to be called The First Bank of the United States.
It was the deal which saved the Virginia speculators' collective behinds, but it was a bitter pill for the aristocracy to swallow. Thomas Jefferson, a life long land speculator, would later say bitterly that Hamilton had fooled him. But he still cashed the check.
So the Yazoo swamp land deals were dead and buried. Except they weren't. Like movie zombies the land speculators would rise again. It is the nature of capitalism that its keeps ripping open its scars.. Have I mentioned that greed makes you stupid?
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Thursday, January 18, 2018

GEORGIA PEACHES Chapter One

I have always been confused by Patrick Henry. He is famous for saying, “Give me liberty or give me death”, a bold statement that should have gotten a lot of press. Yet nobody at the time recorded him saying it.  He also supposedly said “If this be treason, let us make the most of it”, another bold statement which, again, nobody wrote down at the time. What is fact is that he was always suspicious of the power of government. We largely have him to thank for the Bill of Rights, today a beacon of freedom for billions of people world wide. But he was also the CEO of the Virginia Yazoo Company, when he sold  swamp land to war veterans and unsuspecting tax payers.
My guess is the Yazoo Indians were only joking with French explorer Robert de La Salle.   In 1682, la Salle asked about the water at the edge of their town and the Yazoos told him it was a river....a 180 mile long by 100 mile wide “river” which did not so much as flow into the Mississippi River, as seep. It was a swamp.  But the last laugh was on the Yazoo Indians because La Salle named the “river” after them.
And since even in 1789 nobody was interested in buying a swamp, American crooks decided to call it the Yazoo Lands, instead.  Besides patriot and ex-governor Patrick Henry's Virginia Yazoo Company, there was the Tennessee Yazoo Company and the Carolina Yazoo Company. And together they formed the first American lobby firm, what they called "The Combined Society".  It's stated purpose was  “By means of certain influences...to obtain from the State (of Georgia) large grants of land...for the end of making a large sum of money...” They were certain they could obtain a deed from Georgia, because Georgia was flat broke.
Georgia had paid for its war of revolution by claiming lands westward to the Mississippi and beyond, and using them as collateral to borrow gold and silver. The problem was that land, including that swamp,  was occupied by native American tribes and claimed by the King of France.
The solution was first suggested by an ex-militia Colonel named Thomas Marston Green.  He'd been farming out in the Pine forests when a bunch of Spanish soldiers and surveyors showed up looking to inventory the lands they had just bought from the French. Colonel Green realized that after the inventory would come the taxes. And he hated paying taxes.  Luckily Green had no objection to collecting taxes. In the fall of 1784 Green showed up in the state capital of Louisville, Georgia, suggesting the state take over his plantation as "Bourbon County".  It would be the largest county in the United States, and Marston Green would, of course, run it, selling the land he did not want and splitting the take with the state. And on 7 February, 1785, the rich white men running Georgia passed the Bourbon County Act, and waited for the money to roll in. 
Unfortunately, Green went home and told the Spanish to get out because Georgia was now running things. They threw him in jail. And as long as Georgia was taking that attitude, the Spanish decided Americans could no longer use the port of New Orleans to ship their produce to market. That made the settlers in western Georgia, very unhappy.  In 1788 the state of Georgia backed down and repealed the Bourbon County Act.  But that still left Georgia flat broke.
The next answer they tried in the fall of 1788 was the infamous Pine Barren Land Speculation, in which a dozen rich white men surveyed (badly) about thirty million acres of Georgia and sold it off (quickly), mostly to smaller speculators, Everybody thought they were going to get rich. The problem this time was that Georgia contained only about nine million acres. There were a lot of duplicate titles, and five or six owners for every section of land. Over night land prices went from sky high to bargain basement,  inspiring a fake advertisement, offering, “ Ten millions of acres of valuable pine barren land in the province of Utopia, on which there are several very sumptuous air castles, ready furnished”.
This business model would later be called a Ponzi scheme, and the only people who got rich were the ones at the top, and none of that money trickled down to the state of Georgia. So in 1789, this time under the Governorship of an arrogant fire plug named George Mathews, they tried it again, only bigger. And this was where Patrick Henry got into the game.
It was enough to make you wonder why the American people continue to have such childlike faith in capitalism, considering how often they keep getting screwed by it. It's a morality play, of sorts, if the moral is "There's a sucker born every minute".
Patrick Henry had never been much of a business man. When he was 18, the “indolent, dreamy (and) procrastinating...ill-dressed young man” impulsively married the equally impulsive, plump and buxom Sarah "Sallie" Shelton. He went to work for Sarah's father in his Hanover Tavern, but after a few months as a barkeep, Patrick decided on a career which would not require so much physical labor. With only six weeks of study he passed the Virginia bar. The parents of the bride were so thrilled, they set the fecund couple up with some land and slaves – an instant entrance into Virginia's upper class. It was the perfect foundation for a politician. But, alas, Patrick would be short of money his whole life. Which is why he formed the Virginia Yazoo company.
The 53 year old Patrick Henry assembled a slightly odd group of investors. At 53, droll and humorless, Paul Carrington was a long time member of the Virginia House of Burgesses, and a judge of the Court of Appeals. At barely 30 years old, Abraham Venerable was an up-and-comer in Virginia society, while 50 year old Francis Watkins was the clerk for the local courts.
But the key investor, the actual brains behind the original Virginia Yazoo Company was David Ross, who had already assembled 100,000 acres in Virginia, buying up plantations and farms abandoned by loyalists during and after the revolution.  Ross also owned 200,000 acres of Kentucky, and several thousand more in what would become Tennessee (claimed by North Carolina). He was a very land rich young man. And, oddly, he was Scottish
See, after the 1746 battle of Culloden, Scotland was under the royal lash, and David Ross stood to inherit nothing from his father's now looted Scottish estates. So in the middle of the 1750's he joined the horde of Scots emigrating to the American colonies. But where most Scotsmen chose the less settled Carolinas, and arrived with little but the clothes on their back, David Ross chose Virginia and arrived with contacts in the colonial government, and with cash,  Almost immediately he invested in the Oxford Iron Works along the Potomac River and the Antietam Iron Works in Maryland. He then began buying land and planting tobacco. It is hard to escape the suspicion that David Ross's family had sold out their fellow Stuart supporters, perhaps his own cousins. It is what the losing side of a rebellion often has to do to save the family fortunes.
Most years the iron works struggled to get by, and the tobacco barely covered operating expenses.  To really build a fortune, Colonial Virginia planters - such as the gout ridden George Mason - used their large plantations as collateral to buy Indian land north of the Ohio River, cheap. The new owners then surveyed it quickly, subdivided it in haste and sold it off in 100 to 600 acre sections to land hungry farmers at inflated prices.  To quote from Wood Holton's 1994 paper in 'The Journal of Southern History:  “Land speculation was a principal source of income for the Virginia gentry, the 2-to-5 % of families who stood atop the colony's pyramid of wealth and power...During the frontier years, absentee landholders owned three-quarters of the region's total acreage...little acreage was left for residents. ”
The only draw back was that the invasion of English farmers set off the French and Indian War, which brought the sale of western lands to a halt for nine long years.  Then  in 1763, after the peace was signed, King George III issued a Royal Proclamation that henceforth no colony could lay claim to any land west of the crest of the Appalachian Mountains. Individual farmers were still free to negotiate with tribes for acreage on Indian lands, but their property rights would not be recognized by the English crown, meaning the land could not be resold, ending speculating in Indian lands.  Wood Holton argues it was this loss of income which spurred Virginians, like the “great land-monger” George Washington, and speculators Thomas Jefferson, George Mason and Patrick Henry, to support the American Revolution
Even before the American victory at Yorktown, in June of 1779, Virginia and her governor Patrick Henry, joined the other southern colonies in reviving virtually all of the land claims rejected by George III's government. George Mason rehired his old employee Daniel Boone to began “exploring” new lands to the west of Boonesborough, paying him in land -  from which Boone earned $20,000, a hefty fortune during the revolution. And on 20 November, 1789, the Virginia Yazoo Company, headed by Patrick Henry and David Ross,  along with the Tennessee Company and the Carolina Company, formally applied for land grants along the Yazoo River from the State of Georgia.  
To the wealthy speculators who were also the founding fathers, this is what they meant by the word “freedom”. And that is the morality play we shall now follow.
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Wednesday, January 17, 2018

A THROW OF THE DICE

I know of only three ways to win at the game of Monopoly. First you buy or trade to get a monopoly of all four railroads and the three orange properties; St. James Place, Tennessee Avenue and New York Avenue. On average, players land on the oranges more often because they are just after the Jail. Then you build three houses on each, no hotels. This gives you a return on your investment about every ten times your opponents roll the die. The only way to give yourself a better chance of winning is to either become the banker and embezzle your way to victory, or get the other players to adopt a house rule that subtly favors you, and then apply it mercilessly. Real Wall Street bankers will only play this way.
Surprisingly few people notice the fundamental capitalistic lesson in Monopoly, which is that you play it with dice. Chance always determines the short term outcome of events, much the same way that derivatives always explode, because sooner or later everybody rolls snake eyes. As proof of this consider what happened to the lady who invented the game of Monopoly. Her name was Elizabeth “Lizzie” Magie, a bright, well educated and determined Illinois Quaker lady, who in her late twenties was looking for a cause. See, Quakers had a long history as abolitionists, and the abolition of slavery after the Civil War, left them with an identity crises. “Lizzie”  found her new cause in the rantings of a self taught economist with two first names.
All you need to know about Henry George is that in the 1870's he owned a newspaper in San Francisco, and in 1886 he ran for mayor of New York City, coming in second but still beating Republican Teddy Roosevelt – in short, all his life George was a square peg in search of a round hole. He did not believe in free trade, he didn't like Asians, he liked paper money but he hated taxes - income taxes, sales taxes, and capital gains taxes. He sounds very Republican, doesn't he? Well, he was a Socialist- Catholic- Trade Unionist, who thought government should be supported solely by property taxes. But if you think a government supported only by property taxes is a good idea, I suggest you talk to any school board in America.
“Lizzie” Magie was a Henry devotee, and as the 19th century drew to a close, she was living in a interracial community of Brentwood, Maryland, and looking for some way to popularize her hero's ideas. Possessing that odd combination of whimsy and discipline required to design games, Lizzie came up with a joyless plaything she called “The Landlord's Game”. “Children of nine or ten,” she assured potential customers, “can easily understand the game and they get a good deal of hearty enjoyment out of it...The little landlords take a general delight in demanding the payment of their rent.”
Lizzie's innovation was that unlike previous Victorian board games, her's had no beginning or end. It was an endless loop. The four corners of her board were labeled Absolute Necessity - Coal Tax, Public Park, Jail and a globe encircled by a banner reading “Labor Upon Mother Earth Produces Wages”. Properties along the straightaways were four railroads, a Water Franchise, four Luxury Lanes, and Easy Street, Lonely Lane, Legacy, the Poor House and Lord Blueblood's Estate (No Trespassing, go to jail), and three other Absolute Necessities – Clothing, Shelter, and Bread. Every time you passed the Labor space you got a hundred bucks, and every time somebody landed on a property it went up for auction. In 1902, “Lizzie” took her new game to America's king of games, George S. Parker
When this George was sixteen he had invented a card game called Banking. Players borrowed money from the bank and a draw from the 160 card deck determined how successful they would be. George invested $40 to print up 500 decks of Banking cards, and sold 488 of them. With that $100 in profit he built an empire, hiring his brothers and issuing similar card games called Klondike Gold Rush and War in Cuba. So,  when Lizzie approached him, George found her a kindred spirit and offered a considered critique of “Landlords”. Basically, he said it stunk. “How do you end this game?” he asked, voicing a concern millions of players would repeat over the next 100 years as 2 in the morning approached with no winner in Monopoly.  But he also urged her to get her game copyrighted, which Maggie did. She was granted U.S. Patent 748,626 on 5 January 1904.  In 1906, the brothers hit it big with George's new card game Rook. Frustrated and almost unnoticed, Lizzie packed her bags and moved to Chicago. And there she started her own game company.
She was supported by other Quakers and followers of Henry George, and in 1906, in Chicago, they formed the Economic Game Company, to publish and distribute the Landlord's Game, with a few modifications. She added a bank, wages, and public transportation in the center of the board. Lizzie kept in contact with the Parker Brothers, who, in 1910, published her her new card game called Mock Trial. Game design wasn't a living, but then Lizzie wasn't in it for the money. She was on a mission. Which is probably why what happened next had little to do with Lizzie.
In 1915 economists Scott Nearing was the most popular lecturer at the Wharton School of Business at Pennsylvania State University. Eventually the trustees would fire him for being a radical, but then eventually the American Communist Party would expel him the same reason. But before he was fired, Nearing introduced The Landlord's game to his students, and they set about spreading it from one fraternity brother to another. Future "new dealer" Rexfordd Guy Tugwell introduced a shortened version the game (called Monopoly Auction) to his classmates at Columbia graduate school of Economics. Another Nearing student, Daniel W. Lyman, started marketing his own shortened version of the game (called Finance) in Indianapolis, Indiana, where he labeled the rental properties with local street names and added Chance and Community Chest cards.
In 1929, school teacher Ruth Hoskins learned the game from her brother, who was friends with Daniel Lyman. Later that year she got a job teaching at the Friends (Quaker) School in Atlantic City, and she introduced the game to her students. When she drew up her version of the game board, she named the properties after streets her students lived on in Atlantic City. But unfamiliar with the area, she misspelled the name of a suburb, Marven Gardens (a combination of two town names – Margate City and Ventor City) as Marvin Gardens. And, since her Quaker students objected to auctions on religious grounds, the game was changed again, so that landing on a property gave you the sole right to buy it, for the price listed on the deed. Once again the game proved very popular.
Ruth's student who lived in Marven Gardens was Charles Todd. He had suggested naming the railroads after real lines. The game's B and O was the Baltimore and Ohio, while the Reading was the Philadelphia and Reading railroad. The Pennsylvania Railroad was for many decades the largest railroad in the world, and while The Short Line was not a specific road, it was the general title for any short commuter line. Just as the Great Depression began in earnest in 1932, Charles Todd introduced the game to two new friends who were in a very rough spot.
William Darrow had been a domestic heater salesman in Philadelphia, until the Depression wiped out his livelihood. His was now working at odd jobs, and his wife Esther was pregnant, and one look at the game Monopoly Auction, convinced William that this could be his salvation. Charles Todd would later testify that “Darrow asked me if I would write up the rules and regulations, and give them to Darrow.” Whereupon, Darrow asked for two or three copies, which Charles gave him. And with that, William Darrow was on his way to being a millionaire.
Charles drew up the game on oil cloth (copying Ruth's misspelling), his wife and son filled in the colors, and a graphic artist then added the icons of Jake the jailbird and Police Officer Edgar Mallory on the Go to Jail cards. The little rich guy with the top hat, Uncle Pennybags would come later, after Charles copyrighted the game under his own name in 1933 before selling it to Parker Brothers in 1936 as his own invention, which it was not.
The marketing department at Parker Brothers made Monopoly the most popular game in America, and made William Darrow a multimillionaire. He spent the rest of his life traveling the world in luxury. Of course, eventually the lawyers at Parker Brothers realized they had a problem with “Lizzie”. Remember her? But this also gave them power over Darrow. So, first they pressured him to give them the free and clear rights to publish the game outside of the United States,  in exchange for taking over all legal costs of defending William against copyright infringement. William Darrow caved under just a little pressure. All that remained was to get Maggie to sign over her rights to her Landlord's Game.
The new president of Parker Brothers, Robert Barton, later testified that he asked Lizzie if she would agree to some changes in her game. He testified later that her answer was “No. This is to teach the Henry George theory of single taxation, and I will not have my game changed in any way whatsoever." So being a good businessman, Barton stopped pushing, bought Lizzie's rights for a measly $500, and an agreement to publish her new version of The Landlord's Game. The third edition was shipped to stores all over the United States  in 1939, but Parker Brothers did nothing to promote it. After a few weeks all copies were called back to Parker Brothers and destroyed. By the time Lizzie realized she had been snookered, it was too late. And her game, and its twin named inspiration, were quickly forgotten.
In a way, she had just gotten a lesson in the game she had invented. And Parker Brothers had just gotten a great big Get Out of Jail Free card. And that is the real lesson in Monopoly.  In business, cheaters always prosper.
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