In July of 1914, the world entered into
unprecedented territory as war began to break out on a global scale. The
cruelty and brutality of this catastrophic event would cause many to lose hope
in the elusive dream of peace and prosperity. Approximately five years later,
the Treaty of Versailles was signed, and the United States of America and its
allies had proved victorious. The so-called War
to end all Wars had finally come to an end. The Roaring 20’s was soon to
follow, and citizens of the US were full of hope that all citizens had the
potential of realizing the American Dream.
As victors of the global conflict, a new-found prosperity began to be realized.
However, some ten years following the end of World War I, everything would
begin to come to a horrifying and screeching halt. Turmoil would be felt again
on a global scale. The Stock Market
Crash of 1929 would occur, bringing hardship and despair to this nation,
and causing world economies to tremble. This school assignment is compiled with
the aspiration of presenting first-hand commentary and pictorials that describe
this event and the panic, despair, and hardship which it wreaked upon the
masses.
In the period of the mid- to late 1920's,
Americans truly felt that a flourishing and robust “time of plenty” had arrived,
and was there to stay. There was peace, rapid growth, and a sense that all
dreams could be attained-- that absolutely anything was possible. The stock
market in the United States had begun to rise, lifted off, and never looked
back. A new president, Herbert Hoover, was elected, and the rapid expansion of
the stock market continued for the first six months of his presidency. The
prices of stocks marched onward and soared to extraordinary, almost
unbelievable, heights. Persons who had invested in Liberty Bonds to support the
war effort now sold these and poured the cash into the stock market.
Individuals irrationally mortgaged their homes and poured that money into the
raging bull market. This untold
speculation continued, and it seemed as though all of the public, from banking
and industrial magnates, to chauffeurs, to cooks, to maids, scrambled hurriedly
to brokers in order to invest any money that they had into the market. Billions
of dollars were drawn from banks and bet on the market, many stocks being
purchased by means of loans, called margins.
No one felt that they could lose. The stock market appeared to be a sure thing, and it took on a life of its
own.
In September 1929, the Dow Jones
Industrial Average had reached the lofty peak of 381 points. Legend has it that
the rich and powerful Sen. Joseph P. Kennedy, Sr., the father of the future
president John F. Kennedy, was having his shoes shined one day, and the
shoeshine person began to give stock market “tips”. Alarmed, it is said that
Sen. Kennedy immediately called his broker, instructing him to sell and
liquidate all his positions in the stock market, wisely securing his financial
empire. He reasoned that valuations were unsustainable and had become extremely
speculative since virtually everyone
was talking about the market, even the most common of individuals who possessed
no financial training. Soon after, in September and early October, ominous signs
of gathering storm clouds blew forth. The speculation reached a fever pitch, as
untold number of persons borrowed money in order to purchase stocks. Then the
fateful day of October 18 arrived, and the market went into freefall, and the
wild and frenzy rush to buy stocks gave way to an equally wild stampede to
sell. Prices plummeted. On October 24, 1929, real panic set in, and the bottom
fell out. This apocalyptic day would become known as Black Thursday. The market stabilized slightly, but then a few
days later, on Monday the 28th and Tuesday the 29th, the
nervous anxiety would give way to wholesale, gut-wrenching, full-blown panic.
President Hoover, along with the Federal Reserve, would prove to make critical
and fatal misjudgments. Instead of loosening monetary policy and allowing money
to flow freely, thereby cushioning the financial shock, they instead ended up
choking off the remaining financial lifeline by raising interest rates due to
the miscalculation that it was important at that time to balance the federal
budget. The rest is history.
Found below is a timeline with historical
headlines (with quotations) from articles, along with pictorial cartoons, that
depict the horror that would next unfold and shake the financial system to its
very core. The fine compilations of these events are made possible by the America
in Class organization.
The Stock Market Crash of October 29, 1929
In the final years of the “roaring twenties,” as many
starstruck first-time investors fueled the unparalleled growth of the stock
market, how did financial leaders view the health of an economy so dependent on
dreams and credit? Had the frenzied investment fad grown into a “mob movement”
courting disaster? Were the “small speculators” who risked their savings for
quick profits no better than weekend gamblers? Nonsense, said the Wall Street
Journal and others. Such fear-mongering is “sour grapes,” they insisted,
spurred by “propagandists of gloom and economic terror.” Prices would continue
to rise; the market would continue to deliver profits for middle class
investors. The onslaught of prediction and punditry continued for months
before—and after—the calamitous day soon immortalized as “the crash.” Presented
here is a sampling of the commentary before and after “Black Tuesday,”
illustrating that “the crash,” while a shock, was no surprise.
17 MONTHS BEFORE THE
CRASH
“Gambling and
Speculation”
The Wall Street Journal, May 15, 1928
It is to be feared that the agitation [criticism] against speculation
in Wall Street is very largely a case of sour grapes. It is felt that some
people are making money with apparent ease and it is known that they are making
it in Wall Street, which is always an object of distrust to the demagogue. The
radical politician feels that he must show injury to others somehow. Without
the slightest knowledge of the stock market and its almost automatic
safeguards, he says that the speculation is a danger to the country.
15 MONTHS BEFORE THE
CRASH
Alan H. Temple
(economist), “Impending Suicide”
The North American Review, July 1928
The machinery through which the excited speculation in
stocks is operating has commenced to creak and groan as strains are put upon it
which it was never designed to meet. . . The fuel of desire to make money by
selling something at a higher price than was paid for it is still being poured
into the market, and this desire, as Colonel Ayres of Cleveland says, cannot be
killed; it must commit suicide. Therefore the observer of things financial, as
May [1928] draws to a close, must share some of the feelings of a watcher at
the bedside. He is overlooking a mob movement leading toward a stock market
break, the effects of which only the most acrobatic, the most favored, and
those who have participated least in proportion to their resources, can expect
to escape.
10 MONTHS BEFORE THE
CRASH
H. W. Moorhouse
(economist)
“What’s Happening in
Wall Street?”
The North American Review, December 1928
Millionaires have been made many times over with the
unprecedented rise of certain individual stocks. Of a list of twenty well-known
stocks which have increased from 600 to 6,000 percent during the last ten
years, twelve famous names appear above the 1,000 percent mark, with one
outstanding motor stock heading the list with a 6,493 percent increase. No
wonder our nation has gone stock market mad.
2 MONTHS BEFORE THE
CRASH
Samuel Crowther, “Everybody
Ought to Be Rich: An Interview
with John J. Raskob,”
Ladies’ Home Journal, August 1929
The common stocks of this country have in the past ten years
increased enormously in value because the business of the country has
increased. Ten thousand dollars invested ten years ago in the common stock of
General Motors would now be worth more than a million and a half dollars. And
General Motors is only one of many first-class industrial corporations.
It may be said that this is a phenomenal increase and that
conditions are going to be different in the next ten tears. That prophecy may
be true, but it is not founded on experience. In my opinion the wealth of the
country is bound to increase at a very rapid rate.
·
The
different between a hitchhiker and an amateur stock market player is that the
latter will always find it easier to be “taken for a ride.”
·
An
outsider trying to beat the market is like a meatball trying to live in
companionate marriage with a shark.
·
The only
tips that are dependable are found on asparagus.
“The Wall Street
Lamb,” American Magazine, reprinted in the Milwaukee
Journal, March 12, 1929
55 DAYS BEFORE THE
CRASH
Roger Babson (businessman
and investment analyst)
Address to the Natl.
Business Conference, Sept. 5, 1929
(excerpts as reported
in The New York Times, Sept. 6, 1929)
I repeat what I said at this time last year and the year
before, that sooner or later a crash is coming which will take in the leading
stocks and cause a decline of from 60 to 80 points in the Dow-Jones Barometer.
Fair weather cannot always continue. The economic cycle is
in progress today as it was in the past. The Federal Reserve System has put the
banks in a strong position, but it has not changed human nature. More people
are borrowing and speculating today than ever in our history. Sooner or later a
crash is coming and it may be terrific. Wise are those investors who now get
out of debt and reef their sails. This does not mean selling all you have, but
it does mean paying up your loans and avoiding margin speculation. . . .
Sooner or later the stock market boom will collapse like the
Florida boom. Someday the time is coming when the market will begin to slide
off, sellers will exceed buyers, and paper profits will being to disappear.
Then there will immediately be a stampede to save what paper profits then
exist.
53 DAYS BEFORE THE
CRASH
“Babson’s Stock Crash
Prophecy Draws Fire from
Other Experts,” Chicago Tribune, Sept. 7, 1929
Roger Babson’s dire predictions of an “inevitable crash” in
the stock market, which would some time break the averages 60 to 80 points,
evoked retorts today from economists, stock exchange houses, and others, most
of whom took an opposite view or advised clients and the public not to be
stampeded by Mr. Babson’s forecast of a collapse that would rival that of the
Florida land boom.
Mr. Babson’s view was directly controverted by Prof. Irving
Fisher of Yale University, an economist of highest standing. Prof. Fisher
flatly asserted that “stock prices are not high and Wall Street will not
experience anything in the nature of a crash.”
16 DAYS BEFORE THE
CRASH
“Stock Prices Will
Stay at High Level for Years to Come,
Says Ohio Economist,”
The New York Times, Oct. 13, 1929
The stock market will see bigger gains in the immediate
future than at any other period of its history, and except for minor
fluctuations the present high level of prices will be constant for years to
come, according to a statement by Dr. Charles Amos Dice, professor of business
organization at Ohio State University . . .
“Among the yardsticks for predicting the behavior of stocks
which have been rendered obsolete,” Dr. Dice went on, “are the truism that what
goes up must come down . . . that stock prices cannot safely exceed ten times
the net earnings available for dividends on the common stock per share.”
“The day of the small investor is here. Once despised and
turned away, he is now sought day and night. The appeals come from the best
banking houses as well as from the fly-by-night operator. The wage earner is
made aware of how easy it is to build up an estate by small installment
payments.
7 DAYS BEFORE THE
CRASH
“Stocks Slump Again,
but Rally at Close on Strong
Support,” The New York Times, Oct. 22, 1929
Amid scenes of wild confusion and drastically lower prices,
the stock market continued yesterday to pay the piper for its long dance of
advancing and inflated prices. . . . Trading was so confused, the market was so
big and broad, and the [ticker] tape so late, that most traders in stocks had
no idea where they stood at any particular time. At any rate, in those stocks
which reflected vulnerability, the losses of open market value ran into the
hundreds of millions of dollars.
Five major factors are considered mainly responsible for the
market’s wide break, which now has lasted through three days of trade and has
cut billions off open market values. These are:
·
The readjustment of prices to a lower level more
commensurate with earnings and immediate prospects.
·
Unanswered margin calls by thousands of small
traders whose stocks were sold at the market. The catching of a multitude of
stop-loss orders also added to the confusion.
·
Foreign liquidation [selling] on a large scale,
especially in the railroad stocks, as foreigners had to protect their interests
at home.
·
Impressive hammering at the market by bearish
traders [investors taking advantage of the falling “bear” market], with especially
skillful short selling by many wealthy individuals.
·
The development of a wave of apprehension among
stockholders, many of whom still had profits.
5 DAYS BEFORE THE
CRASH
“Prices of Stocks
Drop in Heavy Liquidation; Total
Drop of Billions,” The New York Times, Oct. 24, 1929
Frightened by the decline in stock prices during the last
month and a half, thousands of stockholders dumped their shares on the market
yesterday afternoon in such an avalanche of selling as to bring about one of
the widest declines in history. Even the best of seasoned, dividend paying
shares were sold regardless of the prices they would bring, and the result was
a tremendous smash in which stocks lost from a few points to as much as
ninety-six.
5 HOURS AFTER THE
CRASH: OCT. 29, 1929, 9:20pm
Lawrence Richey,
secretary to Pres. Herbert Hoover
Memo to the
President, sent as White House telegram
Mr. President: –
Mr. Rand, of Remington-Rand Company13 New York has just telephoned stating that
he thinks you should issue statement to the press tonight for publication
tomorrow morning, such as this:-“I am of
the opinion that speculators excessive have been thoroughly liquidated [sold]
and sound investment securities [stocks and bonds] have been reduced to a safe
and attractive [price] level. Now is the time for Bankers, Brokers, and
Investors to exercise the utmost of patience and cool judgment in all dealings
with one another.”
Mr. Rand states that conditions are very serious and if
exist for day or two longer as they have for past few days, will result in
ruining millions of business people. States reaction not alone in New York, but
all over the Country, as he has been in touch with different sections of the
country over long-distance phone, and states business people of the Country are
looking to you for some such statement to save the situation.
1 DAY AFTER THE CRASH
“The Stock Market”
New York Evening Post, October 30, 1929
It is clear that the Street is going through the greatest
disaster in its history. No fair words can gloss over that fact. Because there
is no tightness of money we are without the most familiar feature of a bad
[economic] time. Furthermore, the stock market has been operating so
independently of business that we have not yet realized the larger results of
its break. Nevertheless, good must come even from this stern and cruel
housecleaning. The country will go back to work. . . .
That means here, as it meant in postwar Germany, a revival
of values. How can any cool head fail to agree with Professor Irving Fisher’s
declaration that standard American stocks have gone so much too low as to be
crying to be bought?
Such stocks are the bone and sinew of the country. Not to
believe in them is not to believe in America. The world has so many things that
must be done, and no one can do them better than our own people. Our business
strength has pulled us out of difficulties in days gone by. With faith it will
do it again.
7 DAYS AFTER THE
CRASH
President Herbert
Hoover
Press conference,
November 5, 1929
We have had a period of over speculation that has been
extremely widespread, one of those waves of speculation that are more or less
uncontrollable, as evidenced by the efforts of the Federal Reserve Board, and
that ultimately results in a crash due to its own weight. . . .
The ultimate result of it is a complete isolation of the
stock market phenomenon from the general business phenomenon. In other words,
the financial world is functioning entirely normal and rather more easily today
than it was two weeks ago, because interest rates are less and there is more
capital available.
The effect on production is purely psychological. So far
there might be said to be from such a shock some tendency on the part of people
through alarm to decrease their activities, but there has been no cancellation
of any orders whatsoever. There has been some lessening of buying in some of
the luxury contracts, but that is not a phenomenon itself. . . .
The sum of it is, therefore, that we have gone through a
crisis in the stock market, but for the first time in history the crisis has
been isolated to the stock market itself. It has not extended into either the
production activities of the country or the financial fabric of the country,
and for that I think we may give the major credit to the constitution of the
Federal Reserve System.
As B. C. Forbes
recently said, about the best thing that could happen to the Stock Market now
would be to get itself off the front page of the general newspapers. The Wall Street Journal Nov. 5, 1929
11 DAYS AFTER THE
CRASH
“Wall Street’s
‘Prosperity Panic’”
The Literary Digest, November 9, 1929
The worst panic in Wall Street’s history at least in peace
times record-breaking in magnitude and in widespread losses, was nevertheless
an entirely new kind of panic. Future historians, it is freely predicted, will
speak of it as “the prosperity panic of 1929.” “The panics of the past were
brought about by something fundamentally wrong with finance or business, crop
failures, earthquakes, strained international relations, prohibitive rates for
money, inflated inventories, and the like,” remarks the Wall Street Journal.
But this October catastrophe on Wall Street was purely a speculative stock
market panic, all authorities agree. The downward moves in other markets were
repercussions of the crash in stock values in New York. One writer frankly
terms it “a gamblers’ and not an investors’ panic.”
. . . As Laurence Stern notes in the New York World, “in the
total decline since September 3, the shrinkage of stock values is
conservatively placed at $50,000,000,000, the most drastic securities deflation
[drop in value] in this history of the world.” The final orgy of selling was “a
financial nightmare, comparable to nothing ever before experienced in Wall
Street,” continues this writer “it rocked the financial district to its
foundations, hopelessly overwhelmed its mechanical facilities, chilled its
blood with terror.” Wall Street’s cry for money shook the city, newspapers
reporting pawnbrokers turning away hundreds eager to raise almost anything on
jewels and silver. . . . A fashionable restaurant in a newspaper advertisement
asked its guests to please not “discuss Wall Street.”
15 DAYS AFTER THE
CRASH
“Can the Market Be
Controlled?”
The New Republic, November 13, 1929
Is there anybody who would argue that the behavior of the
stock exchange during the past year has been a useful element in the nation’s
life? What good does it do for wealth even paper wealth to be won and lost so
quickly? While the market was going up, the successful bulls [proponents of
continued stock speculation] and those who profited by their overconfidence
loudly proclaimed, despite all critics, the virtues of speculation for the
rise, but many of these same forces now console the speculators for their
losses only by pointing out their folly. The question is insistent, what could
have been done to prevent its happening again? . . .
We cannot hope to suppress the human instinct to gamble, but
we may limit its capacity for harm in a realm which is so closely associated
with the life of the nation. We may do something to make the stock market serve
the purpose it is supposed to serve.
15 DAYS AFTER THE
CRASH
“The Men Who Did It”
The Nation, November 13, 1929
What bankers and brokers know very well, however, is that
the Federal Reserve is the body primarily to thank for the disaster which the
stock market has just gone through. . . .
The responsibility of the Federal Reserve, weighty as it is,
must be shared by the Coolidge and Hoover administrations. For two years and
more, while calamity was preparing, the country was again and again assured
from Washington that everything was all right industry prosperous, business
good, savings increasing, the outlook fine. No warning has come from the
Potomac to give the country pause nothing but smug official complacence in a
situation rotten to the core. One wonders, now that the mischief is done,
whether the people who have been misled will forget, or whether they will
remember.
17 DAYS AFTER THE
CRASH
President Herbert
Hoover
Press conference,
November 15, 1929
My own experience, however, has been that words are of no
very great importance in times of economic disturbance. It is action that
counts. The action of the Federal Reserve Board in establishing credit
stability, ample capital, the confidence of the administration in undertaking
tax reduction, with the cooperation of both political parties, speaks a good
deal stronger than any number of statements.
20 DAYS AFTER THE
CRASH
“Market Smash Epoch
Making”
The Wall Street Journal, Nov. 18, 1929
Veterans of the “Street” will long have cause to remember
the dark days of October and November 1929. They brought a stock market
hurricane, unparalleled in its scope and intensity, leaving a wide path of
ruin. . . .
All this was encompassed in a period of 57 trading days from
September 3, when the Dow-Jones industrial share average stood at its record
figure of 381.17. There [illegible] an almost uninterrupted drop, gaining
momentum as margins and confidence became impaired, down to an average of
230.07 on October 29, a decline of 151.10 points in 46 trading days.
Then came on October 30 the inspiring statement of John D.
Rockefeller from Pocantico Hills, the first he had made since the dark days of
[the panic of] 1907, that “my son and I have for some days been purchasing
sound common stocks,” and declaring that “there is nothing in the business situation
to warrant the destruction of values that has taken place. . . .”
A substantial rebound occurred in the market October 30 and
31, carrying the industrial average back to 273.51, up 43.44 points in two
days. On Friday and Saturday following the rebound, the New York Stock Exchange
and all the lesser stock exchanges were closed to enable clerical forces
[record-keeping staff] to make a start on untangling the snarled skein and to
“conserve manpower.”
The exchanges opened Monday, November 4 with a supposed huge
accumulation of “buy” orders widely heralded in advance by the press. But,
alas, this turned out [to] be a piece of fiction. What promised to be a further
advance was turned into a rout. . . .
So great was the avalanche of selling that all previous
figures seem puny by comparison. On the biggest day, October 29, transactions
ran to 16,410,000 shares, a figure beyond the wildest imagination a few years
back.
26 DAYS AFTER THE
CRASH
Will Rogers, the
“cowboy-philosopher”
Weekly syndicated column, Nov. 24, 1929 This Stock Market
thing has kinder had the front page groggy here lately. They thought we had the
thing just about as low as they could possibly get it but here lately it’s been
getting still worse.
Course all that’s great for the rich, for they just sit
around and wait till somebody goes broke and then buy in. But the old Margin
Boy has got a mustard plaster on him all over. He can’t take any good stocks of
his to protect the weak ones, for there is no good ones, the good ones are the
ones that are going down. . . . Nothing determined the worth of the stock but
the fact that it was going up, and it hadn’t reached a thousand yet and there
was no reason why it shouldn’t keep going till it did.
Oh it was a great game while it lasted. All you had to do
was to buy and wait till the next morning and just pick up the paper and see
how much you made, in print. But all that has changed, and I think it will be
good for everything else. For after all everybody just can’t live on gambling.
Somebody has to do some work.
29 DAYS AFTER THE
CRASH
“After the Whirlwind”
The Nation, November 27, 1929
. . . The bursting of the stock market bubble, blown to the
limit by speculators and a public blind to the fact that what goes up may also
come down, has laid bare some of the major weaknesses of the economic
situation. Does it mean, however, that the United States, having overreached
itself and lost its head in the prosperity scramble, is now going to the dogs?
Is the country headed for calamity, with the stock market carrying the flag? We
think not. . . .
The great task of the next few months is the restoration of
confidence-confidence in the fundamental strength of the financial structure
notwithstanding the strain that has been put upon it, confidence in the essential
soundness of legitimate industry and trade. . . . The public that has allowed
itself to be drawn into the stock market at unprecedented cost to its pocket
must recover its good sense, and the best service that the average man can
render to that end is to keep his head and cheerfully shoulder his own share of
the blame.
3 MONTHS AFTER THE
CRASH
Virgil Jordan, “The
Era of Mad Illusions”
The North American Review, January 1930
Probably no nation in modern times has suffered so
frequently or so greatly as the United States from recurrent periods of
exaggerated optimism and unrealistic interpretation of its economic situation.
This tendency to ignore the natural law of steady growth has its deep roots in
American history and the American temperament. The country was discovered,
settled, and developed by speculators and adventurers, and not so long ago but
that the strain is still in the blood of American business and the general
public. The opening of the West under the Homestead Acts, the gold rush of
’Forty-nine, the period of western land speculation and boom railroad building
were all reflections of this quality, and they attest the role which the
willingness to take any chance has played in the country’s growth.
4 MONTHS AFTER THE
CRASH
Henry Parker Willis
First secretary of
the Federal Reserve Board, 1914-18
“Who Caused the Panic
of 1929?”
The North American Review, February 1930
This panic was not “inevitable.” It was the result of gross
carelessness or wanton recklessness. The recording of its causes in frank
language may help to prevent the recurrence of a similar situation at too early
a date. . . .
For generations past it has been expected of our bankers
that they should exert themselves to restrain hasty or flighty investors, and
that they should inculcate [encourage] the advantages of saving as against
speculation. Yet within the past two years it has been indisputably true that
this whole range of maxims [guidelines] has been abandoned by our banking
community. Through their establishment of affiliated financing companies, they
have put themselves into a position as issuers of stocks. Investment trusts,
shares in affiliates or associates, and similar securities of all kinds, have
poured forth from the banks, while many more have been issued by “groups,”
which were practically bankers and banking houses in another form. . . .
The breakdown of 1929 was as nearly the result of willful
mismanagement and violation of every principle of sound finance as such an
occurrence ever has been. It was the outcome of vulgar grasping for gain at the
cost of the community. It has been a national disgrace and a source of untold
national and individual loss. In paying the bill entailed by it, the American
people should think seriously about how they can best avoid running up another.
