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Despite the dangers of speculation, many believed that the stock market would continue to rise indefinitely. On March 25, 1929, after the Federal Reserve warned of excessive speculation, a mini crash occurred as investors started to sell stocks at a rapid pace, exposing the market's shaky foundation.[7] Two days later, banker Charles E. Mitchell announced his company the National City Bank would provide $25 million in credit to stop the market's slide.[7] Mitchell's move brought a temporary halt to the financial crisis and call money declined from 20 to eight percent.[7] However, the American economy showed ominous signs of trouble:[7] steel production declined,[quantify] construction was sluggish,[quantify] automobile sales went down,[quantify] and consumers were building up high debts[quantify] because of easy credit.[7] Despite all these economic trouble signs and the market breaks of March and May 1929, stocks resumed their advance in June and the gains continued almost unabated until early September 1929 (the Dow Jones average gained more than 20% between June and September). The market had been on a nine-year run that saw the Dow Jones Industrial Average increase in value tenfold, peaking at 381.17 on September 3, 1929.[7] Shortly before the crash, economist Irving Fisher famously proclaimed, "Stock prices have reached what looks like a permanently high plateau."[8]
"Cheers broke out when word came that a consortium of bankers had agreed to pump hundreds of millions of dollars into the stock exchange to shore up the faltering market. Word spread once again that the day had been saved by the house of mortem. But the day had not been saved. On Friday, with the market apparently stabilized, the banks withdrew their funds. The following Tuesday, October 29th, 1929 known forever after as black Tuesday, another title wave of selling hit the exchange, and this time, no one came to the rescue."
Change a few dates from this paragraph and it could be ominous warning what may yet come
So, the Stock Market crashes, big deal.
It's a non-event.
Quote:
Despite all these economic trouble signs and the market breaks of March and May 1929, stocks resumed their advance in June and the gains continued almost unabated until early September 1929 (the Dow Jones average gained more than 20% between June and September).
And in June 1929, the 1928 Recession ended. That's good news economically.
Quote:
The market had been on a nine-year run that saw the Dow Jones Industrial Average increase in value tenfold, peaking at 381.17 on September 3, 1929.[7]
Well, you did have Monetary Inflation running at 15%-25% during the Post-WW I Era.
Also, Pukipedia is wrong as usual.
There was no 9-year run.
From about January 1920 to September 1921, stocks fell from 119.62 to 63.90....almost 50%.
It took the Market until 1925 to recover, during which time it had two significant drops in 1923 and again in 1924.
The Stock Market took another 20 point dive in 1926 as the US came out of the 1925 Recession and housing bubble.
So in reality, it was more like a 5 1/2 year run.
Quote:
Originally Posted by Thatsright19
The following Tuesday, October 29th, 1929 known forever after as black Tuesday, another title wave of selling hit the exchange, and this time, no one came to the rescue."
Good, I'm glad.
All you protectionists want is for tax-payers to pick up the tab.
in dollar terms the markets actually recorded from the great depression in 5 years . not only does the indexes not include dividemds which we running double digits stocks since fell so much but the cpi fell 18% .
you had the exact same purchasing power with 1&% less money .
there were other reasons too such as many popular stocks that were doing well were not in the index's yet like ibm.
However, the American economy showed ominous signs of trouble:[7] steel production declined,[quantify] construction was sluggish,[quantify] automobile sales went down,[quantify] and consumers were building up high debts[quantify] because of easy credit.
Production isn't declining
I'm also pretty sure consumer debt has been relatively steady. Not sure on automobiles.
Back in the 1920s and 30s how many people really depended on the stock market?
How many companies did it even list, and how much market share in their respective target markets did they even have?
The direct linkage of the Crash of 1929 to the Great Depression of the Thirties is a myth; magnified and hyped by the media ever since the politicians started looking for a scapegoat.
Economic progress during the Twenties was not a continuous expansion from the point at which the economy stabilized on a peacetime footing in 1922-23. There were several "slowdowns", notably in 1925 and 1927, during which growth faltered, and overextended enterprises were wiped out; this is a normal function of an economy free from government interference, intervention and mismanagement.
But creating a permanent expansion has been the dream of politicians (of all varieties, except open-market advocates) since the emergence of a manufacturing and commercial, rather than an agricultural economy. A week or two before the Crash, Herbert Hoover (who was a career bureaucrat, and not in sympathy with free markets) convened a meeting of business leaders at Henry Ford's Michigan retreat.
Their schemes were quickly proven to be powerless.
A little research involving corporate annual reports, stock factographs, or mainstream newspapers of the day will reveal that while Wall Street (to borrow from the entertainment trade paper Variety) might have "laid an egg", business conditions on Main Street in most communities held up well through 1930 and most of 1931. The exceptions to this were capital goods (most notably, machine tools and transportation equipment) and big-ticket consumer goods such as radios and, most prominently, automobiles.
The disparity was further accentuated by he practice of guaranteeing more stable employment to that part of the labor force consisting of native-born, predominately-Protestant whites who filled much of the ranks of the stronger, skill-based craft unions (carpenters, sheet-metal workers, etc). In boom times, these people actually drew paychecks which were somewhat smaller than the recent Eastern European immigrants and the first wave of African-Americans fleeing the peonage of sharecropping in the Agrarian Deep South (who also performed the dirtiest and riskiest work).
By 1930, two politicians named Smoot and Hawley thought they'd found a suitable scapegoat for the slow business conditions -- foreign competition. So a high tariff was enacted, and world trade plummeted. The Europeans began to suffer as well, so they transferred as much of the burden as possible to the hated Germans.
Throughout 1931, the cycle of collapse and retrenchment repeated itself; more businesses and banks failed, and the burden fell most heavily on those least established, By the spring of 1932, US Steel could report that no one on the payroll, from the Chairman of the Board to the lowest forge tender, was working a full week.
Hoover's background and personality left him neither disposed nor prepared to deal with conditions which no one could understand the reasons for at the time. Franklin Roosevelt's "hundred days" generated some small-scale measures and a belief that at least someone was doing something, but the facts show that the economy remained stagnant until the spring of 1935, and measures such as the National Recovery Act did little more than rigidize the process.
But eventually, the excesses of the late Twenties were finally worked off, and stable basic industries like utilities and mining began to rebound in the winter of 1934-35, and the invalidation of the NRA by the Supreme Court sent a message that supply and pent-up demand, rather than bureaucratic fiat, would drive the new recovery.
And so the American economy finally moved forward, stabilized in part by the first components of the "safety net" formulated during the New Deal, But those measures had to be funded, and unlike every President since Kennedy, the leaders of that day did not hesitate to fund them by and increase in taxes. Since anyone familiar with the process knows that the markets are driven by anticipation of future returns and burdens, it shouldn't surprise us that 1941 was almost as bad a year for Wall Street as 1932.
Last edited by 2nd trick op; 08-30-2015 at 08:50 PM..
The direct linkage of the Crash of 1929 to the Great Depression of the Thirties is a myth; magnified and hyped by the media ever since the politicians started looking for a scapegoat.
Economic progress during the Twenties was not a continuous expansion from the point at which the economy stabilized on a peacetime footing in 1922-23. There were several "slowdowns", notably in 1925 and 1927, during which growth faltered, and overextended enterprises were wiped out; this is a normal function of an economy free from government interference, intervention and mismanagement.
But creating a permanent expansion has been the dream of politicians (of all varieties, except open-market advocates) since the emergence of a manufacturing and commercial, rather than an agricultural economy. A week or two before the Crash, Herbert Hoover (who was a career bureaucrat, and not in sympathy with free markets) convened a meeting of business leaders at Henry Ford's Michigan retreat.
Their schemes were quickly proven to be powerless.
A little research involving corporate annual reports, stock factographs, or mainstream newspapers of the day will reveal that while Wall Street (to borrow from the entertainment trade paper Variety) might have "laid an egg", business conditions on Main Street in most communities held up well through 1930 and most of 1931. The exceptions to this were capital goods (most notably, machine tools and transportation equipment) and big-ticket consumer goods such as radios and, most prominently, automobiles.
The disparity was further accentuated by he practice of guaranteeing more stable employment to that part of the labor force consisting of native-born, predominately-Protestant whites who filled much of the ranks of the stronger, skill-based craft unions (carpenters, sheet-metal workers, etc). In boom times, these people actually drew paychecks which were somewhat smaller than the recent Eastern European immigrants and the first wave of African-Americans fleeing the peonage of sharecropping in the Agrarian Deep South (who also performed the dirtiest and riskiest work).
By 1930, two politicians named Smoot and Hawley thought they'd found a suitable scapegoat for the slow business conditions -- foreign competition. So a high tariff was enacted, and world trade plummeted. The Europeans began to suffer as well, so they transferred as much of the burden as possible to the hated Germans.
Throughout 1931, the cycle of collapse and retrenchment repeated itself; more businesses and banks failed, and the burden fell most heavily on those least established, By the spring of 1932, US Steel could report that no one on the payroll, from the Chairman of the Board to the lowest forge tender, was working a full week.
Hoover's background and personality left him neither disposed nor prepared to deal with conditions which no one could understand the reasons for at the time. Franklin Roosevelt's "hundred days" generated some small-scale measures and a belief that at least someone was doing something, but the facts show that the economy remained stagnant until the spring of 1935, and measures such as the National Recovery Act did little more than rigidize the process.
But eventually, the excesses of the late Twenties were finally worked off, and stable basic industries like utilities and mining began to rebound in the winter of 1934-35, and the invalidation of the NRA by the Supreme Court sent a message that supply and pent-up demand, rather than bureaucratic fiat, would drive the new recovery.
And so the American economy finally moved forward, stabilized in part by the first components of the "safety net" formulated during the New Deal, But those measures had to be funded, and unlike every President since Kennedy, the leaders of that day did not hesitate to fund them by and increase in taxes. Since anyone familiar with the process knows that the markets are driven by anticipation of future returns and burdens, it shouldn't surprise us that 1941 was almost as bad a year for Wall Street as 1932.
So it was the tariffs that caused the great depression?
So it was the tariffs that caused the great depression?
It was an imbalance of supply and demand, aggravated by tampering, using "monetary policy" via the Federal Reserve (to which, BTW, I am not opposed in and of itself) which culminated in the Crash of 1929.
At that point, a President holding to a free-market based strategy would have let the misguided investors and speculators simply take their lumps, and the stagnation probably would have deepened no further.
Or Hoover, who did have some experience in domestic "safety nets" via his humanitarian role during and after the First World War, could have phased in a pension system using several European nations as a model -- in effect, beating FDR to the punch and likely reducing the potential for both abuse, and unwarranted expansion via both localized oversight and greater private-sector participation.
But instead of allowing the markets to do their duty, a succession of misguided efforts prolonged, rather than relieved the Great Depression.
if anyone's interested in learning more, I'd highly recommend David Stockman's recent book The Great Deformation.
So it was the tariffs that caused the great depression?
Smoot–Hawley Tariff
Threats of retaliation began long before the bill was enacted into law in June 1930. As it passed the House of Representatives in May 1929, boycotts broke out and foreign governments moved to increase rates against American products.
The dutiable tariff level under the act was the highest in the U.S. in 100 years. The great majority of economists then and ever since view the Act, and the ensuing retaliatory tariffs by America's trading partners, as responsible for reducing American exports and imports by more than half.
Unemployment was at 8% in 1930 when the Smoot–Hawley tariff was passed, but the new law failed to lower it. The rate jumped to 16% in 1931, and 25% in 1932-33. U.S. imports decreased 66% from $4.4 billion (1929) to $1.5 billion (1933), and exports decreased 61% from $5.4 billion to $2.1 billion. Thus, net exports declined from $1 billion to $600 million
According to government statistics, U.S. imports from Europe decreased from a 1929 high of $1,334 billion to just $390 million during 1932, while U.S. exports to Europe decreased from $2,341 billion in 1929 to $784 million in 1932. Overall, world trade decreased by some 66% between 1929 and 1934
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