I don't want to freak anyone out, but this article surely did send some shivers down my spine when I read it earlier today. From the Washington Post, here are some excerpts from a retrospective piece about October 29, 1929. Emphasized are gloom and doom parallels to what is going on in our economy today. How accurate is it and how much attention should be paid? Is there some hidden agenda in it somewhere? I don't have a clue. If anything, it makes me more certain than ever(and I was already pretty darned certain) of who to vote for for president:
The bread lines didn't form overnight. The banks didn't buckle all at once. And no one, despite urban legend, is known to have jumped out of a window in sorrow over financial ruin.
Instead, the worst would come later, sometimes months and even years after Oct. 29, 1929, "Black Tuesday." On that date -- 79 years ago today -- few people could conceive that an economic apocalypse was gathering, even as the ominous news soaked in. But the ripples would soon begin.
In 24 hours of trading, starting Oct. 28 and continuing into the next day, some 25 percent of the value of America's biggest companies vanished on the New York Stock Exchange. Coming on the heels of big losses a few days earlier, the reversal was stunning. Just six weeks before, stocks had reached their all-time high.
Still, it was possible at first to view the Crash of '29 as an isolated event. Most people hadn't shared in the rising prosperity after World War I, so most didn't lose money in the Crash. Only about 2 percent of households owned stocks, says historian David E. Kyvig, compared with about 50 percent who have direct or indirect investments in the market today.
A consumer culture was growing -- about 80 percent of households had a radio by the late 1920s -- but the middle class was still small. Soon, they would know. Slowly, in irregular waves, people across the country began to feel that things were different.
In New York, the Crash claimed its first victims within hours. The day after, smaller brokerages in the city folded, driven under by "margin" loans to clients who were wiped out. The undertow drew in a number of smaller banks, which in turn had lent money to the brokerages and to stock market players.
The first bread line appeared in New York in February 1930, according to historian William K. Klingaman. When the images of men lining up for a handout appeared in newspapers and newsreels, they shocked the rest of the nation, which until then had largely been spared. These men -- able-bodied, well-dressed -- didn't fit the stereotype of the destitute, he says.
...By the middle of 1930, though, the malaise had spread beyond Manhattan. Nine months after the Crash, the national unemployment rate had tripled, claiming more than 10 percent of the nation's 48 million workers. By the time Franklin Roosevelt was inaugurated in March 1933, the figure had risen to more than 25 percent.
Americans of that era still remember their first encounter with the Depression: The day the family switched from electric lighting to cheaper kerosene lanterns. The day that beans were on the dinner table instead of beef. The day that extended family members moved in. The day a relative arrived home, ashamed to report that he'd lost his job.
Neil Schaffner, the proprietor of an acting troupe that barnstormed small towns in Iowa during the 1920s and '30s, told Terkel about how his business seemed to freeze up all at once in early July 1930. "We had heard talk of hard times being back East," Schaffner says. "We couldn't see it. . . . All of a sudden, the plug was pulled out of the bathtub. I have a wife, a baby and a mother-in-law. All I've got to sell is my ability as an entertainer. But it appeared nobody had any money to buy. The audience had become benumbed."
Soup kitchens popped up within months, but didn't become "ubiquitous" in many cities until 1932, says Kyvig, author of "Daily Life in the United States, 1920-1940." The demand was so overwhelming by then, he says, that church and private charities turned to increasingly strapped local governments to keep their programs going.
Kyvig, a professor at Northern Illinois University, says he stuns his students when he tells them what happened in Detroit, a particularly hard-hit city. Overwhelmed by demands from the needy, the city shut down its zoo in 1932 and slaughtered its animals to provide food.
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The parallels between October 1929 and today are striking.
Although the contemporary economy is far larger and more complex than it was eight decades ago, consumers were deeply in debt then, too. The gap between rich and poor had widened, thanks in part to tax cuts for the wealthy. Amid it all, the stock market -- lightly regulated -- grew into a speculative bubble, driven to unsupportable highs by investors who used borrowed money to purchase shares.
...It was still possible to see sunshine after Black Tuesday. The day after the Crash, the Washington Post carried a front-page story citing "98 leading businessmen" who insisted that the engine of American capitalism was still revving. "Our October sales are the largest on record," crowed R. E. Wood, president of Sears, Roebuck and Co., in the article. "While the shaking of public confidence may impair buying power somewhat in the next few months, I see no grounds for any real depression in business."
A few weeks later, the Economist magazine tut-tutted the doomsayers. "On the whole, the experts are agreed that there must be some setback, but there is not yet sufficient evidence to prove that it will be long or that it need go to the length of producing a general industrial depression," the magazine wrote. "If we are justified in assuming that the setback in American industry will only be temporary, we may look forward to steady development in 1930."
...After the Crash, the Dow Jones Industrial Average began to climb again. By mid-April of 1930, the average was within a few percentage points of the pre-Crash levels of early October. But then the index began to march downward again; by the time it bottomed out in July 1932, stocks had fallen an average of 89 percent from their peak.
It would take an entire generation, almost 25 years, for the market to recover fully.
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