Real Estate, Religion, & Credit Unions

In the 1830's shortly after Joseph Smith founded the Church of the Latter-day Saints, he moved the young church to Kirtland, OH. Arguably the greatest undertaking of the members of the church of this time was in building the first temple of the Latter-day Saint movement.

The city of Kirtland tripled in size in just 6 years. Since I am a master economist (I took Econ 110 so, you know...) I can tell you that this probably did wonders for the price of land in Kirtland. In fact. It did. The price of land rose from approximately $7/acre in 1832 to $44/acre in 1837.

With the church in deep debt from temple building and prices too high for many of the early church members to buy land, the church found itself in a special place. So, Joseph Smith called for the creation of a financial institution similar to the structure of modern day credit unions. This all, of course, in an effort to help fix these 2 big problems.

Zoom out now to the macro-economy. Wait too far. Okay - good. Banks started issuing paper money no longer backed by bullion (precious metals). Money supply up. Demand is up. Guess what happened to the price of land. Up. Up. Up. Speculators (buy-and- flip folks) started to drive the price of land up even further creating a juicy real estate bubble. (I know what you are thinking - you are right).

POP. The Panic of 1837 results in those Kirtland land prices dropping from their $44 dollar per acre prices to $17.50. This, and other causes directly led to the failure of the Kirtland Credit Union (Kirtland Safety Society) and 343 of the nations 850 banks. Massive unemployment and a 5-year depression ensued.

Joseph Smith and other church leaders flee Kirtland as internal dissension and external persecution reach a climax. Approximately 30% of church leadership defects and the church is nearly in shambles.

My old boss back in college was not only an earnest Latter-day Saint, but he also founded his own credit union. Where he drew his inspiration, I know not. But he shared a similar fate when his credit union went under recently, in a similar fashion as those of 1837. This time the bubble was not caused so much by new non-bullion backed money, but by, of course, sub-prime lending (primarily).

Spared the "fallen prophet" title and allowed to stay in his own home, emotions were not running quite as high thanks to that ever important NCUA insurance for bankrupt credit unions. But I just wonder sometimes. During all the bedtime prayers. Did the thought just ever come to mind: "Kirtland Safety Society."

Who knows though - maybe it did. He probably just didn't have his spiritual ears on that night. Then again, neither did the rest of us of course. Well...except for Peter Schiff.

Or maybe we should just brush up on our history.