Although everyone is looking forward to getting their free money Prime Minister Aso’s 2-trillion-yen cash handout program remains unpopular. As we get closer to payday things look like they will be getting even worse as Aso has left the responsibility for distributing the handouts to resource-strapped municipal governments.

I spoke with a Nagoya city worker last week about the program. Japan’s third-largest city seems to be having problems organizing the cash handouts. With only 5 city workers assigned to organizing the approximately 2,236,000 kickbacks, payday isn’t apparently coming until June. The clamouring masses aren’t happy and the office responsible for payments apparently receives nearly two thousand telephone complaints a week, further tying up the staff. Yes, this is third-hand information. But simple rumour of such incompetence isn’t doing wonders for the administration’s already dismal reputation.

Unlikely. It’s an obscure, rapid breakdown of the world economy barely remembers today, but it’s lessons may be a far better frame of reference for understanding the current crisis than the Great Depression.

It basically goes like this. In the 1860s, the center of the financial world was in the heart of Europe. And the banks of continental Europe started to understand the glories of mortgage-backed lending. This leads to property booms in the cities of Vienna, Berlin, and Paris, where stunning new buildings were built in the mid-19th century. In 1873, defaults on properties started to constrict lending and hit the system hard. This is followed by the Austrian stock market crash, which shocks the sytem, and the continental European banks start to call for repayment of loans from British Banks. These banks in turn begin calling loans from the entrepreneaurs of America.

The biggest clients in the US were the American railroad companies, which at this time were aggressively competing with each other. But they were in a major dilemma—the railroads had built far too much track, and financed it all with debt (both foreign and domestic). As the banks demanded payments and the railroads were unable to pay, they started to run into default. Jay Cooke & Company, a Philidelphia-based institution that was a major backer of railroads, found itself unable to market several million dollars in Northern Pacific Railway bonds, and it went into default. This Lehman (or GE?) style collapse in-turn shocked the US stock markets, which were dominated by railroads. These crash too, and American banks started to fail. In an age before deposit insurance, individuals lost their deposits, businesses lost liquidity, unemployment set in, and before you know it, there was rioting in American cities.

You can read more of the details here. To follow the aftermath, the recession lasted 4 years, but the US recovered its way out of the crisis, and towards being a major superpower, by exporting its way out of the problem with the latest consumer invention: canned food. Canned food, backed by careful branding and keen advertisements, takes the world by storm. And its popularity drives the demand for steel and agriculture. From here, the recession slowly lifted.

Two big differences between then and now: There were no national banks that played a role in stabilizing the system with flows of cash or loans to banks, and the tendency by President Grant was to restrict the money supply, not expand it.