As I’ve noted here earlier, the blog newsfrom1930 performs a very valuable ”reality check” for today by each day publishing a summary of the Wall Street Journal from the same day in 1930. The overwhelming flavour of reports from that time is that the Depression was over and recovery was imminent. Plus la change…
This week it’s offering another service–publishing summaries of news reports from one year earlier: 1929. The reason, of course, is that we are approaching the 80th anniversary of “Black Tuesday“: the day in 1929 when the Dow Jones fell for more than 10 percent for a second day in a row, bringing to an emphatic end the bull market of 1929 and ushering in the Great Depression.
Newsfrom1930′s coverage began on October 24th, since the market’s serious fall really began the day before with a 6.3% drop (which was duly reported in the next day’s Wall Street Journal).
The entire blog post on October 24th 1929 is reproduced below, but I do recommend reading it in the original as well:
Thursday, October 24, 1929: Dow 305.85 -20.66 (6.3%)
[Note: Your regularly scheduled 1930 news will be along later in the day, but first a commemorative special. This day in 1929 was roughly the start of what's known as the Great Crash, which lasted about a week. I'm going to give a quick summary for each day, to give an idea of how it played out. As with the 1930 news, the summary is from the WSJ on each day in 1929, so it describes the action from the previous day. So the following describes Wednesday, Oct. 23 - note this is not one of the legendary “Black” days yet.]
Market wrap: Bears resumed aggressive operations, “combed the list during the morning for issues in a weakened state,” attacking Bethlehem Steel, Hahn Dept. Stores, Hayes Body, and others. Selling spread to the main trading stocks in the noon hour, picking up momentum on increasing volume as the afternoon progressed; many stop-loss orders hit; leaders including Radio, US Steel, GE, and Westinghouse broke sharply. “Selling took on a panicky character” in the final hour; “pandemonium reigned around the posts at which active stocks were traded”; 2.6M shares were traded in the final 50 minutes, or about 40% of the total day’s volume of 6.4M; the tape ran almost 2 hours behind and price breaks were exceptionally wide.
Prof. I. Fisher of Yale Univ. defends stock market rise of 100% since 1923, says based on increasing prosperity due to many factors, including more stable money, new scientific management, new inventions, Prohibition [Note: huh???]; believes public speculative mania is least important factor in the rise. Concludes by criticizing capital gains tax.
Bond market has been rallying as stocks decline recently.
Some commodity prices: Wheat over $1.25, corn over $0.90, cotton 19 cents, copper 18 cents.
Rail freight loadings for the week ended Oct. 12 were down 11,121, or about 1%, from 1928, vs. 7,985 decline prev. week.
Steel trade reviews report decline in production appears to have hit bottom, with all departments except automotive active.
Senate refuses to classify avocado as pear for tariff purposes.
Somewhat later in history, another important event occurred–the election of Franklin D Roosevelt as US President, and the beginning of the New Deal policies in 1933. I was reminded of this by a quote on program outline for the Green New Deal conference that I attended yesterday. Normally we only see the “the only thing we have to fear is fear itself” quote, but that program excerpted a rather more relevant observation of Roosevelt’s on what had caused the Great Depression:
Yet our distress comes from no failure of substance. We are stricken by no plague of locusts. Compared with the perils which our forefathers conquered because they believed and were not afraid, we have still much to be thankful for. Nature still offers her bounty and human efforts have multiplied it. Plenty is at our doorstep, but a generous use of it languishes in the very sight of the supply. Primarily this is because the rulers of the exchange of mankind’s goods have failed, through their own stubbornness and their own incompetence, have admitted their failure, and abdicated. Practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected by the hearts and minds of men.
True they have tried, but their efforts have been cast in the pattern of an outworn tradition. Faced by failure of credit they have proposed only the lending of more money. Stripped of the lure of profit by which to induce our people to follow their false leadership, they have resorted to exhortations, pleading tearfully for restored confidence. They know only the rules of a generation of self-seekers. They have no vision, and when there is no vision the people perish.
The money changers have fled from their high seats in the temple of our civilization. We may now restore that temple to the ancient truths. The measure of the restoration lies in the extent to which we apply social values more noble than mere monetary profit.
It’s a great speech, and I recommend reading it in its entirety. We’re also very fortunate to have ready access these days to original documents like this via the Internet.
GSM
I saw Alan Ramsey interview; puts into perspective the type of fools we have running the joint. Rudd, Howard almost all of them are from the same mould – slimy show ponies
Aac,
Yes it was an enlightening interview.Ramsey seemed so relieved that he could now finally speak his mind without the dreaded axe hanging over his head of being denied the precious “access”, that is used to control all media.
It was a good interview to put Chartalist’s theories where they belong – in fantasyland. It showed that Govt is anything but benign and benevolent.
ak,
Brazil’s tax on capital inflow is simply to devalue their currency, nothing specific to the carry trade. It’s just another method of propping up the $US, and not letting the markets work.
Several other countries are trying to prop up the $US by various methods, eg. like the Asian central banks did earlier this month. The US needs a weak dollar to help it restart exports.
Ernie,
Why do you think that “letting the markets work” would help Brazil?
The Brazilians don’t care about the US. I don’t care about the US either – I have never lived there and have no family.
To me “letting the markets work” is just blind faith in discredited economic theories.
Brazil interest rate stands at 8.75%
http://www.tradingeconomics.com/Economics/Interest-Rate.aspx?symbol=BRL
I think that you are wrong regarding the carry trade potential. It has not been realised only because of the Brazilian government policy.
http://www.investorsinsight.com/blogs/dailypfennig/archive/2009/09/28/a-new-carry-trade-currency.aspx
“But, let’s talk about that for a minute… If the dollar begins to become the new funding currency of the Carry Trade, that means that people will be selling the dollar short, and using the proceeds to buy a higher yielding asset… Well, in today’s markets, there aren’t what we would traditionally consider to be “high yielding assets”… For the Carry Trade is quite risky, therefore you need to have some cushion from the “buy side” asset… The only “real interest differential” in the world resides with Brazil… But the real is traded on a non-deliverable forward, which means it’s just as liquid as say Aussie or kiwi, which were the main beneficiaries when the yen was the funding currency.
So… This new Carry Trade, might have to wait a bit before getting into 4th gear. When the Reserve Bank of Australia (RBA) begins their rate hike cycle, probably by year-end, then it might begin to make sense… Which is just another thing in the gauntlet the dollar has to run through every day! “
ak,
I agree with you that the carry trade happens, but I would imagine Brazil would be more concerned about it’s export trade denominated in $US. If the $US is weak, then Brazilian exports will seem expensive in many countries who have chosen to devalue their currencies inline with the $US, the real issue is the use of $US for foreign trade. If you look at a chart of the $AUD vs the Brazilian Real eg: http://au.finance.yahoo.com/currency/convert?amt=1&from=AUD&to=BRL&submit=Convert then it’s been pretty flat compared to us for the last 6mths. All that time, the $US has been going down.
I thought they were on the right track doing a currency swap with China earlier on this year, to bypass the $US.
Now Brazil have chosen to introduce a 2% distortion. Does the world really need little Smoot–Hawley’s popping up everywhere?
Philip,
Most scholars do not consider Ralph Nader to be an authority on capitalism, much less economics. As someone with some experience teaching comparative economic systems to undergrads, I can assure you that your calling capitalism “one enormous system of state intervention” is rather novel. But I do believe we find much with which to agree in what caused the current economic crisis. It is something that developed, over a long period of time, as powerful corporate interests used the state to promote its interests. Wall Street created the Fed, and today it controls it and the Treasury, while military contractors exert just as much influence over the DoD and firms like ADM dictate the ag policies coming out of the USDA. What frustrates is that the state shields these entities from market correction–surely we’d be in a better place today if Citibank, Goldman, et al. were forced to internalize their losses, just as the economy would have been worse off if Enron was successful in getting the protection it sought back in 2001.
I assume we agree on this line of reasoning, but not on whether these activities are correctly called capitalism. They should be categorized as mercantilism (like you said), or corporatism, or state capitalism, or socialism. To repeat, terms matter, and to blame capitalism is to let the interventionists off the hook. And if that happens, well, they will be more likely to continue to do damage in the future.
“If the $US is weak, then Brazilian exports will seem expensive in many countries who have chosen to devalue their currencies inline with the $US, the real issue is the use of $US for foreign trade.”
So you are saying that BRL/USD * USD/AUD is not equal to BRL/AUD ?
“Now Brazil have chosen to introduce a 2% distortion.”
A distortion to what? Being a sink to US dollars printed to plug the hole?