Santayana’s Dividend: On Investing in U.S. Financial History

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Few investments pay off as well as time spent pursuing financial history – to paraphrase George Santayana only slightly: study the past in order to prevent it from picking your pockets.

Were one transported back in time a quarter century to the height of the dot-com bubble, one could have cleaved the suckers from the survivors simply by asking them if they had read John Kenneth Galbraith’s The Great Crash 1929 or Charles Mackay’s Memoirs of Extraordinary Popular Delusions and the Madness of Crowds. ‘Twas ever thus; American financier Bernard Baruch was so grateful to Mackay’s book that he wrote the introduction to its 1931 edition.

To that canon add Mark Higgins’ Investing in U.S. Financial History, which covers the past two and a half centuries of the domestic financial markets in the best way possible: as a history of the United States told through the lens of finance. The author is not a historian or finance academic, but rather a history-buff practitioner whose outsider status enables him to make penetrating connections missed by many specialists. For example, he suggests that the 1912–1914 Pujo Committee hearings, which discredited the “money trusts” personified by J.P. Morgan, subsequently cleared the way for the less honest security promoters of the 1920s. Chief among them was National City Bank’s Charles Mitchell, who plundered not only the bank’s customers, but its employees as well.