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Acting on the belief that land prices would never fall again, Japanese banks provided loans against the collateral of land rather than cash flows. Towards the end of the 1980s, they increased lending against property, especially to smaller companies. The rising value of land became the engine for the creation of credit in the whole economy. Tochi-hon’i sei, the land standard, had arrived.

Paradoxically, the widespread acceptance of the Efficient Market Hypothesis may have served to make the markets less efficient: in the Panglossian world of efficient markets, investors were told that, theoretically, it was not possible to pay too much for financial assets. As a result, they were encouraged to bid up prices to unsustainable levels.

When governments found their formal currency arrangements disintegrating, the speculator became a convenient scapegoat for the failure of policy. Before the war, Hitler had blamed the inflation and deflation of the Weimar Republic on foreign currency speculators, while both Lenin and Stalin cursed speculators for the Soviet Union’s economic woes.

In other words, Mellon suggested that the market should be left to fall until it found its own clearing level when demand would return and the economy revive. Instead, Hoover’s policies prevented wages from falling at a time when asset and commodity prices were declining. This served to increase unemployment and reduce the returns on capital, thus preventing reinvestment. Rothbard concluded that the “guilt of the Great Depression must be lifted from the shoulders of the free economy, and placed where it properly belongs: at the doors of politicians, bureaucrats, and the mass of ‘enlightened’ economists.”

The Federal Reserve, with its ability to control interest rates and conduct “open market operations”–buying and selling government bonds in order to affect the supply of money available to banks–was hailed in the 1920s as “the remedy to the whole problem of booms, slumps, and panics.” As a result, bankers and speculators alike were lulled into a false security which led the to operate irresponsibly, exacerbating the severity of the ensuing class.

“Stock prices have reached what looks like a permanently high plateau,” declared the eminent Yale economist Irving Fisher in the autumn of 1929.

Samuel Johnson defined gambling as the redistribution of wealth without an intermediate good. The speculation of the Gilded Age conformed to Dr. Johnson’s definition: it brought more harm than good and transferred property from the hands of the many into the pockets of the few.

When a stock was effectively cornered, the operator could demand any price he wished from the short-sellers, who were legally obliged to cover their positions. As the great stock operator Daniel Drew mused:

He who sells what isn’t his’n, Must buy it back or go to pris’n.

A letter in the Times stressed the cynicism of the speculators: “There is not a single dabbler in scrip who does not steadfastly believe–first, that a crash sooner or later, is inevitable; and, secondly, that he himself will escape it. When the luck turns, and the crack play is sauve qui peut, or devil take the hindmost, no one fancies that the last mail train from Panic station will leave him behind. In this, as in other respects, ‘Men deem all men mortal but themselves.'”

In November 1840, a fatal accident on the York and North Midland line occurred after Hudson had employed an elderly train driver with defective eyesight in order to save on wages. Similar accidents became frequent on his railways and Hudson’s critics accused him of sacrificing public safety to profitability.