facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast phone blog external search brokercheck brokercheck Play Pause
VIDEO: What the FED and the Railroad Robbers Have in Common Thumbnail

VIDEO: What the FED and the Railroad Robbers Have in Common

Video Investing


Learn the similarities of what the Fed actions were in April and May and to what the robber barons were doing in the late 1800s.

Welcome everyone to the Highball Advisors Railroad Retirement whiteboard. My name's John McNamara, Highball Advisors. And I thought I'd have a little fun with this video. Want to talk about the Federal Reserve and what they're doing in the marketplace now, and just kind of compare it against some of the historical references to the railroad robber barons. Kind of is a bit of a stretch but I thought it was kind of fun. So, may you get something out of it education-wise.

So the Federal Reserve, when they were chartered in the early 1900s, they had some responsibilities of why they came into being. You want to maximize employment, stabilize prices, right? You don't want that runaway inflation and keep a control on the long-term interest rates. Noble causes, each one of these, for sure. And they did that by controlling the monetary supply.

At the end of the day, the printing press, how much money goes into the system. That was what the Federal Reserve did because we had a lot of panics in the 1800s. And it'd be a big boom-bust cycle. So they're trying to smooth out the boom-bust cycles. And that was the purpose of the Federal Reserve. However, what they did in this last time is they really cranked up the printing press. And as the markets were collapsing in March and April, the Federal Reserve stepped up and just kept lowering the interest rates and they were just buying everything. They had the printing press going at full speed. So that kind of got my thinking about when was a similar time of that printing press where they just were the ... They were supporting everything and it reminds me of the Erie Railroad War of the late 1860s. Very interesting story.

So you had three railroad robber barons at the time, and actually, they were all railroad robber barons, but one team was Daniel Drew, Jay Gould, and Jim Fisk. All speculators down at Wall Street, they made big money, but they controlled the Erie Railroad at the time. And at the other time was Cornelius Vanderbilt. Very famous name, Cornelius Vanderbilt. He controlled the New York Central and he also wanted to control the Erie Railroad. So what he started to do was to start buying stock of the Erie Railroad. I'll just keep buying stock of the Erie Railroad and I'll eventually own the Erie Railroad.

Well, once again, just like the Federal Reserve, these three fellows, they controlled the board. They controlled the printing press. Meaning, every time that Cornelius Vanderbilt went to buy the stock, they just printed more stock diluting the value, diluting the value. He buys more, they keep printing more, more and more and more. And this went on for years. And at the end of the day, he was never able to control the Erie Railroad. So the point of this is don't ever, when you're investing, don't fight the printing press. The printing press is valuable. If it's the Federal Reserve or thankfully, the shady people like this aren't around anymore with the SEC, that's not a factor, but the point is don't fight the printing press when you're looking to make investments.

So I hope you found this anecdote kind of interesting. Give you a little food for thought when you think about some of your investments, long-term investments, and fighting the central bank printing press. Please reach out to me if you need any help with a railroad retirement assessment. I'm always here to help you with that. Give me a thumbs up on this video or put in any comments and I'll write back on that and subscribe to my channel as always. In the meantime, everyone, please stay safe, stay on track and take care. So long, everybody. Bye.


Get Free Railroad Retirement Assessment

Disclaimer: This article is provided for general information and illustration purposes only. Nothing contained in the material constitutes tax advice, a recommendation for purchase or sale of any security, or investment advisory services. Highball Advisors encourages you to consult a financial planner, accountant, and/or legal counsel for advice specific to your situation. Reproduction of this material is prohibited without written permission from Highball Advisors, and all rights are reserved.from Highball Advisors, and all rights are reserved.