Villified Corporate Bosses Sometimes Are Great Americans February 25, 2010

Union Pacific Stock Certificate Artwork Symbolized Innovation and Progress of E.H. Harriman

"Think you used enough dynamite there, Butch?"

On This Date in History:  Do you remember the movie, Butch Cassidy and the Sundance Kid?   It starred Robert Redford as Sundance and Paul Newman as Butch.  It had some amusing scenes and some were actually based on some true events, though maybe not events associated with Butch Cassidy.  For instance, there was the great scene in which the Hole in the Wall Gang try to rob a train.  Woodcock was the man inside the car and he had been held up by Butch and Sundance before.   So, the second time, he refuses to open the door of the car and Butch uses dynamite to blow the door only to blow up the entire car.  Sundance asks, “think you used enough dynamite there, Butch?”  Well, I suspect that this type of event really happened only it was an event in the life of whom I called the worst outlaw in the old west, Al Jennings.  Now, part of the comedic aspects of these train robberies was Woodcock’s outspoken loyalty to Mr. E. H. Harriman.  As it turns out, E. H. Harriman was indeed a real person and a very powerful and influencial man.

Union Pacific Fell Hard and Fast After Triumph At Promontory, Utah in 1869

Episcopal minister Orlando Harriman and his wife, Cornelia Neilson, brought Edward H. Harriman into the world in Hempstead, New York on this date in 1848.  Young Edward hated school, dropped out at age 14 and became a broker’s boy.  He amazed the stock brokers at his ability to pick stocks.  By the time he was 21, he had his own seat on the stock exchange.   He got interested in railroads when he tried to revive some distressed rail lines owned by his wife’s relatives.  He apparently was the type of man who dove into his projects because he became very astute when it came to managing rail flow as well as the technological aspects of steam locomotion.  He also seemed to enjoy the challenge of rehabilitating depressed railroads.   So, he moved on to a more ambitious project: saving the Union Pacific Railroad.

Harriman Rebulding the Union Pacific in 1899

The Union Pacific had been one of the railroads that completed the transcontinental railroad.  But, by 1897, it was but a shadow of its former self as its equipment fell into disrepair, the business had become extremely inefficient and in general was behind the times.  In about a decade, E. H. Harriman had turned the Union Pacific into one of best run railroads and companies in the nation.  As part of his revival of the Union Pacific, he gobbled up weaker railroads in the West and Southwest in order to maximize profits and efficiency.  His business created a concentration of power in the transportation business that was vital to the American economy.  That got the attention of the great “trust buster” President Theodore Roosevelt.  He sued Harriman and the Union Pacific for violation of anti-trust laws and the US Supreme Court ordered that Harriman divest in 1904. 

Railroad Was A Wreck Until Harriman

Because Harriman adamently refused to explain his rationale, he is viewed in history as a robber baron who only wanted to make more money for himself at the expense of others.  But, like John D. Rockefeller, Harriman went about his business in an effort to maximize efficiency and a more efficient transportation system was a benefit to the economy and the nation as a whole. He didn’t buy railroads for a quick profit but instead believed that a more efficient operation and improvement to the railroad property would maximize profitability.  It can be argued that monopolies are the most efficient way to bring a product or service to the public but, that is dependent on having an honorable person at the helm.  However, pragmatically, the temptation to take advantage of the opportunities presented by a monopoly is extreme and the risk involved is just  too great to allow that to happen as a matter of  normal business.    Rockefeller defended his position and left a large portion of his enormous fortune to build the University of Chicago and the Rockefeller Institute and also greatly improve education of minorities in the South. 

John Muir Painted A Different Picture of E. H. Harriman

Harriman did not defend himself and, regardless of what he did, is largely remembered as an evil Robber Baron.  Nevertheless, had someone like Harriman not come along and improved the transportation system, the American marketplace and economy may not have evolved as quickly and with such gusto as it did from the late 19th century into the 20th century.  Harriman established standards for locomotives, cars, bridges, structures, signals, and even such items as paint and stationery.  And, he spearheaded an expedition to Alaska in 1899 that brought valuable knowledge to the science community.   He probably should be praised, not buried.  Naturalist John Muir, who founded the Sierra Club, wrote this about Harriman:

“Comparatively few have gained anything like adequate knowledge of the extent and warmth of his sympathies, but none who came nigh him could fail to feel his kindness, especially in his home, radiating a delightful, peaceful atmosphere, the finest domestic weather imaginable. His warm heart it was that endeared him to his friends, but in almost every way he was a man to admire—in apparent repose brooding his work plans, or in grand, overcoming, enthusiastic action shoving them forward, rejoicing and influencing all the country like climate; when silent in company, or at long intervals giving out something striking, saying the commonest things in unforgettable ways and making them seem uncommon in the new light flashed upon them; when severe and rigid as fate; or merry in friendly conversation, eye striking eye, thought clashing against thought making wit sparkles fly.” 

Does that sound like the Robber Baron presented to us in history?  Often, labels given by historians or popular culture do not fit the man.

Early Afternoon Saturday NAM Shows Low to Mid 30's....Dont Look For a Warm Up

NAM Nudges Us Over 32 by early Afternoon Despite less than 5400 thickness

Weather Bottom Line:  Now, yesterday, I told you that I am a bit handicapped by not having access to a Skew-T/Log P diagram, though I may have said Log P/Skew T.  This would be helpful as general rules of thumb come into conflict with reality when we have a change of seasons.  It’s good to be able to analyze what is happening.  So, I often have to rely on experience.  For instance, I saw forecasts for Wednesday that called for highs of 36, 37 or 38 degrees.  Now, a rule of thumb is that freezing conditions can generally be found when there is a 1000mb – 5oomb thickness of 5400 meters or less.  Different times of year and other variables mess that up but, in this case, we are still in winter, the forecast was for cloudy skies and with light snow or flurries all day which would tend to drag cold air down.  The thickness forecast for the models had it going from 5230 mb to 5130 mb.  I could not figure out how in the world we would get above freezing if all of those factors came to pass.  For all practical purposes, we did not.  The high at the almost always warmer than everyone else airport was 33 and that was at 12:39 AM.  The low was 27 at 1:25 pm and we stayed in the upper 20′s for most of the day.  So, its stuff like this that often causes my puzzlement.

Our Adopted "Paintbrush" Fits the Bill

Anyway, I had surmised that we we’d have light snow all day but because it fell over a long period, accumulations would not be an issue and that was correct, though I think most people got more than the trace of snow reported at the airport.  Now, by Wednesday evening, we had some decent light snow bands coming through and the ground became covered in snow and the roads slick in spots.  It was enough for Snow White to go out and cover up our adopted outdoor kitty cat, Paintbrush, though she refrained from using the expensive robe I gave her and instead used fleece blankets.  That has got to be the most pampered stray cat of all time.  He gets all the food he wants, has time to chase birds or the ladies at his leisure and can return to a pampered bed.

Early Sun AM, GFS has freezing line well south and wrap around moisture from Low in New England over Ohio Valley. Doesn't look like the 40's to me.

The outlook continues to be cold.  That little warm up we had last weekend was simply an fluke and the pattern shows no signs of changing.  Over the next couple of days, the thicknesses do increase a bit and we get sunshine.   So, even though after lingering snow flurries or light snow early Thursday the thickness only rises to about 5300 meters, we get some sunshine so that should get us to 34 or 35, if the sun does show up.  So, that call has some merit.   After that though, through the weekend, its hard to draw a conclusion to support temperatures much beyond 40.  I mean….maybe some of the forecasts that I see of 43 or 44 come about, but I don’t get it.  In fact, there is a big fat snow snowstorm that you will hear about because it bombs out going up the east coast, stops off of New York Harbor and then backtracks into New England where it stays put.  Parts of the Northeast should get buried in a couple of feet of snow and David Letterman will probably be talking about weekend snow on Monday night.  I suspect that storm will help drag down cold air for the weekend, perhaps some clouds and maybe even some flurries or weak light snow bands.  So…I don’t get how we get to 40.  After that, there had been indications of a potential event around here…first it was snow then it looked like maybe a severe outbreak in the southern plains, but now some indications are that the big trof in the east persists and we get nothing like that.  I’m guessing that the longer range models are having a conflict between reality and the climate parameters built into the programming.  For that reason, long range modeling will probably be in flux and the data largely unreliable.  Eric…that is your answer.

US Economy Was Salvaged By One Man February 5, 2010

JP Morgan Bailed Out Uncle Sam in 1895

Gold Used To Back US Currency-Now Backing if the Full Faith and Credit of the United States

On This Date in History:  Once upon a time, most currencies were based on the gold standard.  The US operated on the gold standard until 1971 when President Nixon took the nation off the gold standard.  Since then, the US and most other nations operate under the fiat money system.  Basically, the gold standard calls for a particular currency to be backed by an equal amount of gold pegged at a standard price set by a particular government.  Under a fiat system, a currency is not really supported by any commodity at all but instead the value is established through supply and demand market forces as well as the full faith and credit of the issuing entity.   One of the problems with a fiat system is that, since it is not based on any commodity, governments can simply print money to inject into the currency supply and that can lead to inflation because it is often an aritificial increase in supply versus the market based demand.  That is a concern involved in today’s financial and ecnomic crisis around the world.

1893 Panic Led to Near Collapse of US Treasury in 1895

But, at the end of the 19th century, the US was still on the gold standard and the underlying commodity backing the US currency was the concern.  There was a severe economic depression beginning with the Panic of 1893.  The economy became stifled and large financial institutions were fearful that there would be a devaluation in paper money.  So, they began trading in their greenbacks for gold.   By January 1895, gold reserves in the United States were flowing out at a rate of $3 million a day.  That led to a fear that the public would lose confidence in the dollar and the paper money would be worthless.  So,  the solution would be to replentish the gold supply.  It wasn’t really practical for the government to quickly go to public lands and start mining for gold so they needed to find another solution.  President Grover Cleveland looked into the political crystal ball and decided it was best to push Congress to act with a bill that would authorize a sale of bonds.  In other words, the president thought that governmental borrowing was the answer.  Sound familiar?   The money borrowed would then used to buy gold.  Now, the financial expert of the day was not the President of the United States but instead was John Pierpont Morgan and he wasn’t so sure that publically announcing that the government was going to borrow money  for the purpose of replentishing the gold supply in the treasury was a great idea .  He reasoned that an announcement of such a bond sale would signal that the treasury was weak and only intensify the rush to cash in dollars for gold.  In other words, the government solution would make a bad situation worse.

Grover Cleveland's Great Idea Might Have Led to Disaster

So, J.P. Morgan decided to meet with President Cleveland to try and show him the error of his ways even though Cleveland continued to be convinced that his plan was the way to go to save the nation’s financial system.   While in that meeting, the president and Morgan learned at noon on this date in 1895 that the New York subtreasury only had $9 million of gold left and Morgan knew of at least one man who could present a draft for $10 million in gold that day that would send the system into collapse.  So, Morgan used the opportunity to present the president with a better idea.  For some reason, no one else knew of a law that was already on the books, thus making any announcement of governmental borrowing necessary.  But information is a key ingredient to success so it is not really surprising that J.P. Morgan knew of a Civil War era law that allowed the US Treasury to acquire gold coins directly through the issuance of bonds.  In essence, it was still governmental borrowing to buy bonds but the law would allow Cleveland to buy his gold the way he wanted but to do so privately and not with an act of Congress that might panic the public.   But, surely the saavy financial institutions would know what was going on and what was to keep them from going ahead and cashing in their greenbacks for the same gold that Uncle Sam would acquire.  Enter the power of persuasion of John Pierpont Morgan. 

JP Morgan Knew How To Take Charge...And The President Needed Him to Take Charge

It is rather amazing but in order for this scheme to work, President Cleveland needed one man, J.P. Morgan to assume control of the entire international financial community in order to maintain support of American paper currency.  Morgan had to convince large financial institutions to stop converting their currency to gold.  Perhaps no one else in American history could do what Morgan could do; Morgan promised that there would be no further drain from the financial community.  The bond gold currency exchange took place and no further drain of gold from the treasury took place due almost entirely to Morgan’s power of persuasion.  Now, at this point, it may be common to think that Morgan must have had a dog in this fight; he had to profit from this.  He did in the sense that the system that had made him wealthy and powerful was saved but as to the transaction and the effort, Morgan’s company made less than a one percent profit.   This little story tells us a few things.  One is that the US has been in severe crisis situations many times in the past.  This 2009 fiasco was not the first  time that we have been “on the brink.”  Another is that government alone is rarely the solution; it usually takes cooperation between public and private policy and action to solve a complex problem.  

University of Chicago Founded by John D. Rockefeller

Now, J.P. Morgan bailed out the US government on many occasions and he is often labled as one of the “robber barons.”  But, while these men of great wealth did have tremendous power on a large scale, they used their power for the general good of the public.  John D. Rockefeller argued that a monopoly was the most efficient way to bring products to the public at the lowest price.  You know what? He’s right and he generally did that, though he did run competitors into financial ruin to gain that monopoly.  But, the trouble is that it is impossible to expect everyone who is in charge of a monopoly, including any government, to actually deliver products to the public at the lowest rate. Rockefeller is often demonized for his fortune that pushed toward $1 billion in 1912 yet, he established education systems in the South specifically to bring education to minorities, though this researcher trys to denegrate his Calvinist intention to aid Blacks with ulterior motives.  Even if he’s right about the motives, the fact remains that Rockefeller was instrumental in helping to bring equality of education to America.   He established the Rockefeller Institute for Medical Research, the University of Chicago and provided so much philanthropic funding that when he died, his worth had dwindled to about $26 million.  He gave most it away and his son used his inhertitance to revive Colonial Williamsburg.  

Andrew Carnegie's Legacy Lives in Today's Libraries

Then there is Andrew Carnegie who has a tremendous rags to riches story and he left a legacy of the free public library system across the United States and other parts of the world when he donated over $56 million for that cause.  He believed that his gift of attaining wealth should be used for the benefit of all.  But, early 20th century labor issues were often tumultuous and Andrew Carnegie is associated by many for the brutal response to the Homestead Strike.  I suppose that the point I am trying to make is that wealthy people aren’t necessarily bad simply due to their wealth.  They do good for society, if nothing else, they provide incomes and opportunity to people. Same is true of corporations.  And historically, it is been shown repeatedly that cooperation between the public and private sector most often provides the best solutions to problems that face the nation and society as a whole…but we tend to forget that. Perhaps a few more “robber barons” today may be a better alternative to many who currently call  Wall Street home.

NAM Fri 18Z seems content with 2 inches of snow

GFS Fri 18Z Likes 3 Inches of Snow

Weather Bottom Line:  Okay, it’s here.  Rain all day then turning to snow overnight.  Daytime temps mainly in the upper 30′s will be the rule and as the upper low swings around, the air column will chill down from above and so there will be no risk of icing except on roadways and I think that is somewhat of a concern.  The wet roads will probably still be wet when we eventually get to freezing and since there was no opportunity to treat the roads, Saturday morning drive will be problematic areawide.  I’m still thinking something like 2 inches of snow with areas north of the river with higher amounts.  I still think that afternoon temperatures on Saturday will be in the upper 20s for most people. 

The next system for Tuesday still looks interesting but there are so many potential solutions that I don’t want to deal with it right now.   There are some machines claiming a fair amount of rain, others call for a huge amount of snow while others have a some of both with  a popular idea being snow, rain, snow.  I don’t like that last solution because I don’t want it.  It does appear though that it will be more of a Tuesday/Wednesday event and not Monday.  We’ll look at it closer when there is something more concrete to deal with.  I wouldn’t totally pooh pooh the risk of decent snow just yet but the trend in the models has been for a track of the storm to not support the giant event that one bucket of bolts still is looking for.