Bruce E. Baker

The Cotton Kings tells the story of how cotton was traded in the USA at the turn of the century – roughly 1895 to the First World War. Colorful characters ran amuck, making fortunes for themselves. The Bulls pushed prices artificially higher and sold off to make big money, while Bears pushed prices lower, buying cheaply at the bottom to cover themselves. Three attempts to corner the whole market, and have sellers beg to buy product at any price to fulfill their contracts, occurred in 1903 and 1904. One was completely successful. An odd condition of the time was “commercial differences”, which required the settlement of contracts at the last price, not the price at the time of contract. Farmers and spinners, who needed these markets to give some stability to their very lives, were victims on the sidelines. The trader/bankers of the era were in control. Gordon Gekko’s ancestors could teach him a thing or two.

The book is remarkably dry for all that. Congressional hearings alone usually provide wonderful color, amusing stupidity, and compromised outcomes. So too Supreme Court hearings and decisions. But precious little of that made it through the filters. This is a straightforward story of the rise and fall of the cotton exchanges in New York and New Orleans. There is a long and winding introduction and then just 130 pages of story. There is no buildup, no drama – just a recounting of the facts. The “Essay on Sources” at the end is a much better introduction than the introduction. It is terribly misplaced at the back.

There is a far greater point than the mere machinations and manipulations by the key players. The whole concept of Efficient Markets and Rational Expectations is (once again) tossed out the window, as men prove, once again, to be more devious and greedy than the markets are capable of handling. The lesson – that the fox should not be running the henhouse – is still being debated in places like Davos, despite constant revolting revelations such as the VW Diesel Scam. Markets do not and cannot regulate themselves. The Cotton Kings shows this is nothing new, and far from being the problem, government is critical to keep the playing field at least somewhat level.

David Wineberg… (altro)