How one bank’s failure triggered the Panic of 1857

libertystreeteconomics.newyorkfed.org

28 pointsjackgavigan4 comments

As I read this it strikes me how much even the height of capitalism is a participatory, integrated, community-based culture. And how much the actions of a few can arbitrarily affect so many.

Interesting lesson for the startup scene of today, (which I am not a part of, so I don't really know) is what would happen if a large fund (Say, a18z) suddenly looked for exits for ALL of their portfolio companies. Would Silicon Valley see a similar crash to the Panic of 1857?

A VC firm typically has many "funds" that are locked up for particular lengths of time. Since that money is locked up & they are taking a percentage off the top, as well as a portion of any profits on exit, there is very little incentive for them to liquidate & take a loss early, unless the invested-in company is close to going bankrupt anyway.

You might enjoy Karl Polanyi's The Great Transformation if you haven't read it.

https://en.wikipedia.org/wiki/The_Great_Transformation_(book...

Tangentially, you can read about the bank crisis that spawned the worlds first central bank.

https://en.wikipedia.org/wiki/Stockholms_Banco

Reply on news.ycombinator.com