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Tonite on PBS, an hour long documentary on the Crash of 1929, from 9:00 to 10:00pm EST:

In 1929, while the stock market was rising, seemingly without limits, there were few critics. Based on eight years of continued prosperity, presidents and economists alike confidently predicted that America would soon enter a time when there would be no more poverty, no more depressions — a “New Era” when everyone could be rich.

The Crash of 1929 captures the unbounded optimism of the age and the shocking consequences when reality finally hit, exploring a fateful year through the words and experiences of the descendants of several titans of finance.

Full program transcript here

1929 Newspaper Headlines

For a perspective with the current economic crisis, view the “World History Timeline” for October 24, 1929 called “Black Thursday” which was the start of stock market crash of 1929 and the Dow Jones was down 12.8% in one day. Then, another big drop of 13% on October 28, 1929 on “Black Monday”. Finally, the last big decrease on stock prices happened on “Black Tuesday”.


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See also:
Wall Street Crash and the Depression
BBC

http://www.bbc.co.uk/schools/gcsebitesize/history/mwh/usa/walldepressionrev1.shtml

Category: Markets

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

19 Responses to “The Crash of 1929”

  1. jmborchers says:

    Buckle up.

  2. Mike in Nola says:

    The theory is that failure to expand the money supply caused it. However, as we are seeing now, expanding the money supply by amounts unimagined six months ago is not stopping the deflation, as Japan saw in the 1990′s. There are some forces too big to stop and this may be one.

  3. Pat G. says:

    I love reading analysts’ comparisons on how the Great Depression “is different” from our current economic problems. Really? There are striking similarities as Wikipedia notes:

    “The Great Depression was not a sudden total collapse. The stock market turned upward in early 1930 returning to early 1929 levels by April, though still almost 30 percent below the peak in September 1929. Together government and business actually spent more in the first half of 1930 than in the corresponding period of the previous year. But consumers, many of whom had suffered severe losses in the stock market the prior year, cut back their expenditures by ten percent. In the spring of 1930, credit was ample and available at low rates, but people were reluctant to add new debt by borrowing. By May 1930, auto sales had declined to below the levels of 1928. Prices in general began to decline, but wages held steady in 1930, then began to drop in 1931. The decline in the American economy was the motor that pulled down most other countries at first, then internal weaknesses or strengths in each country made conditions worse or better. By late in 1930, a steady decline set in which reached bottom by March 1933. Currently theories which caused the Great Depression can be broadly classified into three main points of view.

    First, effects of the money supply and the supply of gold which backed many currencies before the Great Depression which was delinked in 1933.

    Second, there are structural theories, most importantly Keynesian but also including those of institutional economics, that point to underconsumption and over investment economic bubble, malfeasance by bankers and industrialists or incompetence by government officials.

    Third, another theory revolves around the surplus of products and the fact that many Americans were not purchasing but saving. The only consensus viewpoint is that there was a large scale lack of confidence.

    Unfortunately, once panic and deflation set in, many people believed they could make more money by keeping clear of the markets as prices got lower and lower and a given amount of money bought ever more goods.. In the 1920s, in the U.S. the widespread use of purchases of businesses and factories on credit and the use of home mortgages and credit purchases of automobiles, furniture and even some stocks boosted spending but created consumer and commercial debt. People and businesses who were deeply in debt when a price deflation occurred or demand for their product decreased were often in serious trouble. Many drastically cut current spending to keep up time payments, thus lowering demand for new products. Businesses began to fail as construction work and factory orders plunged. Massive layoffs occurred, resulting in unemployment rates of over 25%. Banks which had financed a lot of this debt began to fail as debtors defaulted on debt and bank depositors became worried about their deposits and began massive withdrawals. Government guarantees and Federal Reserve banking regulations to prevent these types of panics were ineffective or not used. Bank failures led to the evaporation of billions of dollars in assets. Bank failures snowballed as desperate bankers tried calling in loans which the borrowers did not have time or money to repay. With future profits looking poor, capital investment and construction slowed or completely ceased. In the face of bad loans and worsening future prospects, the surviving banks became even more conservative in their lending. Banks built up their capital reserves, which intensified deflationary pressures. The vicious cycle developed and the downward spiral accelerated. Many economists have argued that the sharp decline in international trade after 1930 helped to worsen the depression, especially for countries significantly dependent on foreign trade.

    Monetarists, including Milton Friedman and Ben Bernanke, argue that the Great Depression was caused by monetary contraction, which was the consequence of poor policy making by the FED and continuous crisis in the banking system. By not acting, the FED allowed the money supply to shrink by one-third from 1930 to 1931. Friedman argued the downward turn in the economy starting with the stock market crash would have been just another recession. The problem was that some large, public bank failures, particularly the Huntly NY Bank, produced panic and widespread runs on local banks, and that the FED sat idly by while banks failed. He claimed if the Fed had provided emergency lending to these key banks, or simply bought government bonds on the open market to provide liquidity and increase the quantity of money after the key banks fell, all the rest of the banks would not have fallen after the large ones did and the money supply would not have fallen to the extent and at the speed that it did. With significantly less money to go around, businessmen could not get new loans and could not even get their old loans renewed, forcing many to stop investing. This interpretation blames the Federal Reserve for inaction, especially the New York branch, which was owned and controlled by Wall Street bankers.”

    I like the last paragraph best because it sums up Bernanke’s and our government’s intentions on how they plan on addressing our current issues. Will it work? I don’t think so. Two reasons: the banks are still building their capital reserves and the consumer is either reluctant or incapable of adding new debt. On the other side we’ll have too many dollars chasing too few good and services which equals inflation and that’s where by bet is placed.

  4. jmborchers says:

    When the market can crash without interference is when we will start to get recovery. Giving people false hopes just delays the problem that much longer.

    Things are actually better than most people think. However bankrupt companies or companies not making money should not be trading at ridiculous values on the stock exchange. The same goes for companies like AAPL that benefitted for many years with high priced devices.

    When AIG, GM, F is trading near $1 and AAPL and GOOG aren’t trading at 2012 pricing then we have reached reality and it’s time to buy.

  5. KJ Foehr says:

    My favorite retort to the possibility of another depression now: “It won’t happen again; we learned a lot from the GD, and we are taking actions more quickly than they did in the 1930s to prevent it”.

    So relax; no worries: we have learned how to turn paper into gold and are dispensing it via helicopter.

  6. to Mike’s point: and nobody wanted to hear what Lammert was going on about..nobody cares to understand what the ‘Economic Fractalists’ are driving at..

    LSS: asymptotes are a B*tch, you’ll break before they even begin to think about it..

    what’s worse, as Steve Barry has been, repeatedly, pointing out, these, current, levels of imbalances make those of c.’29 look modest..our Hubris…

  7. CNBC Sucks says:

    Hey Bar, I’m back. As a registered Republican (that again? what the hell?), I am going to ignore your topic as moderator and talk directly to the American people. Let me, as those Obama type of people like to say, “break it down”:

    1. Crash, smrash: This crash sucks. GM is bleeding money hand over fist, but the Dow was still up. Let’s see…Wal-Mart and McDonalds should go up as Americans cannot afford anything else but crappy clothes and fast food. Yay! How did that song go? HAPPY DAYS ARE HERE AGAIN!

    2. Genius Joe Kernen was already looking forward to the 2010 mid-term elections this morning. We are not a week past the 2008 elections, and Genius Joe is talking 2010. Joe’s brilliant, always forward looking. Cuz you know, we have to give Big Corporations every structural advantage possible – even by turning the dollar into toilet paper – so that the stock market remains inflated and Dennis Kneale can feel good about his 401(k).

    3. What is the deal with your constant attention to legality? Constitution, schmonstitution. In the GOP, we consider such legal minutae as “guidelines”. Laws may be inconvenient, but any good Republican ought to be able to overcome them. Remember: Bailouts for the rich and powerful are good for you. Stop being such a party pooper.

    Yeah, this comment lacked my usual bite, but I guess that comes from knowing my real boys are about to whack some ass, and based on what I saw on a certain Tuesday evening, they are gonna be sticking around eight years.

  8. Myr says:

    The best way to stop a Depression from happening is to prevent the giant credit backed asset bubble from forming in the first place. Bernanke is a “student” of the Great Depression, but he never learned lesson number one.

  9. jimcos42 says:

    So, might this program be the equivalent of 1982′s “Death of Equities?”

    While I’m at it, since NBER is the popular, formal arbiter of Recessions, who is the arbiter of Depression?
    I want to know, because when it (the Depression) is declared, it’s over.

    Or am I looking for bull in all the wrong places?

  10. KJ Foehr says:

    Tony Crescenzi on Squawk Box this AM talked about the total public and private debt that is now about 3.5 times GDP, whereas it was about only 2.5 during the ‘30s. Thus serious deleveraging will be in order for a long time and suggests that we may indeed be in for some kind of depression like scenario.

    But Roubini replied that the public portion of the debt was still not problematic and that we could absorb a couple trillion more to help us through the recession without serious consequences – although China and others, who will be spending much more on their on economies, will probably demand higher interest rates to fund our treasury borrowing.

    Roubini also said the important thing now was to provide debt relief to the private sector such as face value reduction of mortgages to allow people to stay in their homes as was done in the GD via the Home Owner’s Loan Corp.
    http://en.wikipedia.org/wiki/HOLC

    What a fool I am: Why, oh why didn’t I buy that new house that I couldn’t afford when I had the chance to get it with no money down?

  11. babycondor says:

    The Fractal Depression of 2010: by the time it was declared, it was over.

  12. leftback says:

    No fractals before 4 o’clock, please, Mark.
    Some of us are not mathematically sophisticated.

    I am enjoying analyst price targets of zero.
    This from a group with zero credibility.
    Zero interest rates. Zero credit.
    The zero hour approaches…

  13. Arca says:

    hey, can someone record this today, i’m not at home when it’s on tv.
    thanks.

  14. Winston Munn says:

    “It’s not a depression – it’s an economic slowdown.” – Herbert Hoover

  15. DL says:

    From 1929-1932 the Dow fell about 90%.

    Many believe that this could not happen again. Yet it did. During the period from 1966-1982, the decline in the Dow, IN INFLATION ADJUSTED TERMS, was comparable to the decline of ’29-’32.
    Then of course you’ve got the situation in Japan.

    The point is that the stock market decline of ’29-’32 may not be quite the anomaly that many consider it to be.

  16. constantnormal says:

    I’m looking through Galbraith’s book for the chapter on “How to make money during a depression” — but I guess I must have the abridged edition, as there doesn’t seem to be one.

  17. mddwave says:

    I like the simple analogy of the bubble as being a balloon. As one blows air (money) into the balloon, the balloon inflates being constrained by the rubber balloon. Once the balloon catastrophically pops, any additional air (money) blown into the balloon will only make a funny noise. The FED is fooling themselves. Their tools (easy money) can’t fix the catastrohpic failure of the whole system.

  18. sellthekids says:

    uh, wow.

    i set TiVo to record it from work and had it waiting when i got home. just finished watching it. uh, wow. again.

    this program was created in 1990. sure looks/feels like they made it in 2007. frightening.

    so basically, as Galbraith said, we have one of these every 30 years or so. guess they come in flavors…is the one we’re experiencing now an “original” flavor or is it “new and improved”?

    thanks for the reminder, Barry. gotta love PBS!

  19. bill750 says:

    Hmmm… Our local PBS station had this on the schedule for 8pm CST, but actually ran a documentary about the Berlin Airlift. Ah well, at least the Airlift had a happy ending.