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Prince Hans-Adam II

The other day I read an overview of the annoyingly smug Prince Hans-Adam II von und zu Liechtenstein and I realized that the prosperous inhabitants of that tiny mountain nation have a problem. The Prince of Liechtenstein has the power to “irreversibly veto any law, dissolve the legislature, and appoint judges in his principality.”  He is an old school absolutist with complete power over his subjects (although he doesn’t particularly exercise his authority over the rich burghers and money launderers who live there).  The Prince has a problem as well though—he is missing his fancy hat.  It is ironic that the one European sovereign who maintains true political authority is the one without a crown.

Franz Joseph I, Prince of Liechtenstein (painting by Alexander Roslin)

The ducal hat of Liechtenstein was discovered to be missing in 1781 following the death of Prince Franz Joseph I. Commissioned in 1623 by Karl von Liechtenstein the hat was modeled on the Imperial Crown of Austria and featured eight jeweled acanthus leaves surrounding a red velvet cap with a big shiny button on top.  The white diamonds and red rubies/spinels of the crown were alleged to have magical properties for protecting the Duke (although they don’t seem to have staved off death for Franz Joseph I, nor did they protect the hat itself from whoever walked off with it).  A single gouache painting kept in the Liechtenstein Museum portrays the original crown which has vanished completely from history—well, actually I found an online account of how Bulgarian spider worshippers smuggled it into the United States to sell to Druids (but I thought that there were some issues of historical accuracy with that website).

Gouache from 1756 (Liechtenstein Museum)

The citizenry of Liechtenstein chipped in together and bought a replacement hat for their anachronistically powerful liege in 1976, but undoubtedly he can sense that it is not the real thing. Fortunately the lack of his actual crown has not prevented him from writing a new book The State in the Third Millennium which summarizes his philosophy about governance.  The Prince apparently dreams of “the creation of numerous small principalities throughout the world, where people can live in happiness and freedom…” Each of these microstates would be controlled by a despotic Prince with absolute power. Thanks Prince Hans-Adam, I’m sure the world would work much better if everything broke apart into feuding city-states run by evil autocrats. 

Close observation of this image will make you feel better about our current financial situation and about the moral progress of our nation.

The Panic of 1837 was one of the worst financial crises to ever hit the United States of America (at the time it was the worst).  It brought a five year recession in its wake.  Gloom mongers (and even hard-headed realists) believed that the nation would never recover its prosperity.

During the 1830s there was an immense boom of real estate speculation focused on public lands which were being sold off to buyers with political connections.  Huge fortunes could be made by reselling this land to railroad companies and canal builders who were rushing forward with competing projects.  The individual states were complicit with this mania, sinking vast amounts of public money into a diverse array of infrastructure projects both good and bad.

A "wildcat" three dollar banknote issued by a Michigan Bank for some sort of "Safety Fund" in 1837

Through various vetoes and political maneuvers President Andrew Jackson had successfully engineered the demise of the Second Bank of the United States (which was unable to renew its charter in 1832).  A great rash of new banks and investment companies sprang up throughout the 1830’s to supplant the bank.  Rather than paying off their debts and refinancing new projects, these financial houses anticipated greater profits from investing borrowed capital in the booming land speculations.  Because of this apparent national prosperity, the balance of trade shifted.  America, previously an exporter, was suddenly importing more goods than it was selling.  In anticipation of the huge profits, American states and corporations (and wealthy individuals) were borrowing money from European banks.  Additionally,  the world’s climate was changing in the 1830s.  An unusually cold era marked by intense volcanic activity and by an anomalous paucity of sunspots (the Dalton minimum) was coming to an end.  As environmental conditions changed, crops failed in 1835 and in 1837.

All of these factors were topped off by disastrous executive meddling.  The Specie Circular Act was an executive order issued summarily by Andrew Jackson in 1836 (during his last year in office) and carried out by his unfortunate successor. It required payment for all government land to be in gold or silver.  Jackson anticipated that the nation’s coffers would fill up with precious metals (he apparently did not trust paper money).  But people did not and could not pay.  The bubble burst.  Over 600 banks failed and the cotton market completely collapsed.  Eight states partially or wholly failed and even the Federal government was unable to discharge its debts.  Trade stood still as business confidence evaporated entirely.  Food riots shook the country.  Unemployment and hardship were the watchwords of the time.  The whole sad affair was exacerbated by economic calamity overseas: European bankers, suffering from their own setbacks, curtailed lending.  It was not until 1842 that the economy began to recover.

"I have no money and cannot get any work."

Strangely enough, the grim era between 1837 and 1842 witnessed tremendous technical innovations which would reshape the nation and the world.  In 1837 Samuel Morse invented the electric telegraph, which he successfully tested on January 6th 1838 at the Speedwell near Morristown, New Jersey–thus inventing the telecommunications industry.  Crawford Williamson Long used ether for the first time on March 30, 1842 to remove a tumor from the neck of a patient and usher in a new era of surgery.  In Europe a German chemist invented artificial fertilizer while James Nasmyth perfected the steam hammer (which made it much easier to build large machines).  Morse’s accomplishments and those of his fellow inventors are remembered.  The failures of the rapacious bankers, greedy speculators, and incompetent politicians have been forgotten by everyone except for historians.

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