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Fall back (to bartering)

What did the financial crises of 1873, 1907, 1929, 1987, and 2008 all have in common?

As Catherine Rampell notes, they all happened in the fall. The explanation of yore held that the fall coincided with an inauspicious period in the crop cycle. Rampell wonders whether "the approaching Christmas-bonus season gets businesses and people looking more closely at their balance sheets?" Or maybe it's just random. It is, after all, only five data points.

Any other ideas?

By Ezra Klein  |  October 30, 2009; 9:00 AM ET
 
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Comments


fiscal years ending either july 1 or oct 1? though not sure how long they've been around. probably 'history of the fiscal year' is one of the more boring googles one could do...

Posted by: ThomasEN | October 30, 2009 9:25 AM | Report abuse

Here in the real world there won't be any christmas bonuses, just like there was no raises this year.

Posted by: obrier2 | October 30, 2009 9:35 AM | Report abuse

I think it is just a case of limited data points.

According to my google search, the panic of 1837 was caused by a bubble which burst in May of that year when banks ceased specie payments.

I can't find when the panic of 1819 occured, but it appears it was caused by a tight monetary policy orchestrated by the central bank. If it happened to occur during the fall then the timing was probably purely coincidental.

The panic of 1893 is believed to have begun with the failure of the Philadelphia and Reading Railroad in February of that year.

Posted by: justin84 | October 30, 2009 10:00 AM | Report abuse

Can't have a financial crisis while people are on vacation in the Hamptons. Think how disruptive it would be. That would be like rolling out a new war in late summer...

Posted by: paul314 | October 30, 2009 10:08 AM | Report abuse

Hah. No clue about crop cycles. Or crop circles for that matter.

When I first read your headline I thought you were going to "fall back on bartending." Serving alcohol is pretty recession-proof. Look into it.

Posted by: mikenmidland | October 30, 2009 10:10 AM | Report abuse

Initially I thought the title read: "Fall back (to bartending)"

Sorry, need another drink.

Posted by: leoklein | October 30, 2009 10:11 AM | Report abuse

Maybe we should call the season "static asset prices." Otherwise, in fall, things are going to fall.

Posted by: Lindemann777 | October 30, 2009 11:57 AM | Report abuse

Panics only happen when people are possessed with a sense that doom is right around the corner -- that Things are Getting Worse. Since the stock exchanges are centered in areas with strong seasonal changes, it's not at all surprising that panics correspond with the time of year right before the gloomiest.

A nice check would be to see if panics in less seasonal areas are more randomly distributed, and to see if panics in the colder parts of the southern hemisphere tend to occur around April.

Posted by: davestickler | October 30, 2009 12:20 PM | Report abuse

"bartering"

:-)

Ezra's humor is more realistic than he would guess, in my estimation.

I believe that a significant share of disposable income is now being diverted into debt-paydown and savings, aided by barter-like activities. Money is used, but only as a transition to further transactions. It's close to "barter." If I sell a used bike for $50, and buy used toys for $40, etc., it is close to barter. It does not involve the manufacture of new goods.

That's a shift that's invisible in places like the beltway, where the population lives by different rules and conditions from most of America.

And I this trend will not reverse anytime soon.

Posted by: HalHorvath | October 30, 2009 2:02 PM | Report abuse

First off - isn't it possible that there were banking failures/etc. that didn't lead to fullscale "Panics"? In other words, we're really only considering the worst of the worst here and it's possible that the reason why these particular ones were the worst was because they occurred in the fall (consider the Depression of 1921 - now largely forgotten - but it began in January of that year)

This past winter I read Bruner and Carr's THE PANIC OF 1907 - and they discussed the seasonality issue. Money flowed from the money centers in New York to the rest of the country. In the fall, there was great demand for money (specie), especially in the mid-West, to pay for the farmers' harvests (don't forget, farmers get paid after they produce - so they must borrow each spring to lay in the crops, and then repay after they get paid for them in the fall). So if there was a banking crisis in the fall (as happened in 1907) where banks in New York were unable or unwilling to send money to the banks in the rest of the country, the farmers had nothing to get paid with, and then they ended up defaulting on the loans they had taken out in the spring, which then lead to pressure and failure of the local banks who were depending on the farmers repaying their loans.
I don't know how this squares with more modern stock crashes such as 1987 and 2008 (and the initial 1929 crash wasn't started by a banking panic, after all), but it is certainly conceivable that, in the 19th century when the country was more agricultural and economics was on a smaller and more local scale, that a bank panic in NY in the fall could subsequently have devastating effects on the rest of the country.

Posted by: hohandy1 | October 30, 2009 2:30 PM | Report abuse

1/4*1/4*1/4*1/4*1/4=1/1024~.00098. Hypothesis that it is random rejected.

Posted by: CraigMcGillivary1 | November 1, 2009 8:48 AM | Report abuse

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