Wednesday, October 15, 2008

Brother Can you Spare a Dime?

All of this turmoil and volatility in the stock market combined with a conversation today with a man who was a teen during the depression has inspired me to relearn some of my United States History and pen this post. Specifically, I took a quick look at the Great Depression and the Stock Market Crash of 1929.

October 29, 1929 known as "Black Tuesday" is the day that the stock market officially crashed. History books also describe "Black Thursday" and "Black Monday" leading up to "Black Tuesday." In the dark days leading up to Black Tuesday, the market was severely unstable. Periods of selling and high volumes of trading were interspersed with brief periods of rising prices and recovery. Any of this sound familiar? And interestingly, the Dow Jones Industrial Average (DJIA) which crashed in 1929 actually recovered in 1930 only to reverse and reach it's lowest point on July 8, 1932. It had not been that low since the 1800's. (So you think we've been on a roller coaster ride huh?) I wonder how the investors felt back then. Well, most of you know the rest of the story.... This crash in the market in 1929 officially set off the Great Depression. Unemployment skyrocketed--a quarter of the workforce was without jobs by 1933 and many people became homeless. Many people, fearing that the banks would run out of money and they would lose their savings rushed the banks to withdraw their money. (See this NPR story about the sale of home safes climbing) Check writing ground to a halt and most transactions were made in cash.

10 year Chart of the DJIA from AOL

(Today the Dow closed at 8577.91 down about 39% from 2007)

President Herbert Hoover was unable to improve the situation so in 1932, Franklin Delano Roosevelt was elected president and he promised a "New Deal" for the American people. The end to the Great Depression came about in 1941 with America's entry into World War II but the Dow did not return to pre-1929 levels until late 1954.

So fascinated with that refresher of U.S. history, I was motivated to search for more current news on this topic. I was delighted to run across an article in the Wall Street Journal titled: What History Tells Us About the Market.

Here's a clip from the story with a link to the full article:

July 9, 1932 was a day Wall Street would never wish to relive. The Dow Jones Industrial Average closed at 41.63, down 91% from its level exactly three years earlier. Total trading volume that day was a meager 235,000 shares. "Brother, Can You Spare a Dime," was one of the top songs of the year. Investors everywhere winced with the pain of recognition at the patter of comedian Eddie Cantor, who sneered that his broker had told him "to buy this stock for my old age. It worked wonderfully. Within a week I was an old man!"

If you have the time and are even remotely interested in the U.S. economy and stock market, it's worth a look.

To add a bit of atmosphere, I'm spinning two versions of the song - "Brother Can You Spare a Dime." The first is by the legendary Bing Crosby and the second is an emotional rendition by George Michael.

I know that was a brief re-cap of many years of history. I personally don't think we're headed for a depression but who knows? The Wall Street Journal article mentions "the psychology of fear" and talks about the lack of liquidity in the banks during the Great Depression. These are phrases we've all become familiar with in the past few months. I'm conducting a poll to see how visitors feel about the likelihood of our economy entering a depression. The poll is at the top right of the page. Feel free to vote if you're inclined.

Thanks for reading.


BellyDance Girl said...

I believe we are already in the 21st century's depression. When this was all happening in '29, 30, 31, There wasn't much talk of "We're in the Depression Right Now." from my understanding (hardly a gage to measure economic history). That's when Hollywood started to step in (after the censorship laws) and started to produce lavish show numbers to show that all was still glittery, you just had to work just a little harder, meet a producer or musician, fall in shallow love in 60 minutes, put on a show and end it with a nice song, dance, and a smiley wink. Ok, so what's different now ....???? Yes, of course, there are some differences; but, anyone who is saying with any certainty what economic category we are in today is selling us a used car. This is historical, and we have no way of knowing how to 'define' this situation until we start evolving from it.

I recently watched by the reccommendation of my building manager via her son in the Air Force. The film covers 3 different areas - religon, 911, and the Federal Reserve. Have you seen this film? I'd be REALLY interested in your take on the film.

In specific regards to your post about our current economoc situation, I am reminded of the 3rd part of the film.

the Third part of the film gives a history of the banking system and the US Federal Reserve. I remember (but not specifically) them pointing out a pre-depression dip in the stocks before Black Tuesday. Because money was losing its value, US citizens were summoned to 'help' by turning in their gold possessions. Many did, and the Depression still plowed in, only now it plowed in over many who just gave over their only 'solid' investments in precious metal.

I'm just wondering if the 'bailout' was this century's way of the Fed and the World Bank to 'get our gold,' stocks will still tanks, all of us 'little people will be in more dire economic straits, and the banks will only consolidate more into an Orwellian prediction.

I may be a bit paranoid but look at it this way - I'm only paranoid if I'm wrong.

Will someone please geve me proof that I'm wrong? I'm serious! I majored/minored in English/history - only took econ 101 and 102 and can't do simple math without a calculator.

Jane Turley said...

Mr you really not think the USA is headed for depression?? Is the USA/ global economy not already in it?? I'm confused now... markets/finance etc not being my strongest area of interest. I already know friends made redundant here in the UK and more that will get the chop before christmas...and nationalizing our banks when we have spent the last few decades privatising???

Free Music said...

well i hope this doesnt turn out to be a collapse

Blackhawk Gear said...

well there were depression but i dont think this is going to be as big as it was 1929