Geoffrey Wansell: So what can we learn from the Crash of 1929 to avoid a 21st Century Great Depression?





[Geoffrey Wansell is an author and journalist.]

By the end of September 1929, the American stock market on New York’s Wall Street was riding the wave of a decade of intoxicating growth.

The Roaring Twenties — that era of the Jazz Age, bootleggers and gangsters like Al Capone — had seen millions of ordinary Americans caught up in the excitement of owning shares, and making money.

The Dow Jones Industrial Average of leading shares had grown five-fold in the previous five years.

As the social historian Cecil Roberts was to put it later: ‘Everyone was playing the market. Stocks soared dizzily.

'I found it hard not to be engulfed. I had invested my American earnings in good stocks.

'Should I sell for a profit? Everyone said, “Hang on — it’s a rising market.”’

On the last day of a visit to New York that September, Roberts went to have his hair cut.

As the barber swept the clean white sheet from his shoulders and bent to brush his collar, he said softly: ‘Buy Standard Gas. I’ve doubled. It’s good for another double.’

Stunned, Roberts walked upstairs and said to himself: ‘If the hysteria has reached the barber-level, something must soon happen.’ It did.

On October 3, the day after Britain’s widely respected Chancellor of the Exchequer, Philip Snowden, had warned that the Americans had got themselves into a ‘speculative orgy’ on Wall Street, the New York stock market started to fall.

Today, almost 80 years later, history seems to be on the verge of repeating itself — with the Dow Jones index of leading shares on Wall Street falling, followed by major stock markets around the world.

Back in 1929, as October continued, so the fall in the value of stocks and shares steepened.

On Monday, October 21, six million shares swapped hands, the largest number in the history of the exchange.

But then, on the morning of Thursday, October 24, 1929, it went into freefall. When the New York Stock Exchange opened there were no buyers, only sellers.

The Great Crash had begun. On the floor of the Exchange, there was pandemonium.

Watched by none other than Winston Churchill, who was in the United States on a speaking tour and had come to see how his American investments were faring, there was ‘bedlam’ with ‘the jobbers (trying to buy or sell stocks and shares) caught in the middle’.

As Selwyn Parker, author of a new book on the Crash puts it: ‘In vain attempts to be heard above the din, they were screaming orders to sell; when that did not work, they hurled their chits at the chalk girls.

'Others, transfixed by the plummeting share prices, simply stood where they were in an almost catatonic state.

‘What Churchill was watching,’ Parker goes on to say ‘was the collapse of the collective nerve of American shareholders.’

On the street, the crowds of onlookers grew ever bigger as rumours of the falls swept New York — with thousands upon thousands of ordinary Americans fearful that they were about to lose everything.

By midday police riot squads had to be called to disperse what The New York Times itself called ‘the hysterical crowds’, but they had little or no effect. Rumours spread everywhere — one was that 11 speculators had killed themselves that very morning, though it was not true.

One poor workman on the roof of an office building nearby found himself watched by the crowds below — all convinced that he was about to throw himself to the street below.

He didn’t, but the legend that one banker did throw himself to his death was to become one of the abiding myths of what became known as ‘Black Thursday’.

Almost 13 million shares changed hands on the NYSE that day, the most that had ever done so, and yet the worst of the falls in value were recouped that same afternoon — in the wake of a rescue attempt by leading bankers who had held an emergency meeting at the offices of JP Morgan.

Yet the rally didn’t last. By Monday, October 28, the sellers were back, and on Tuesday October 29, the Great Crash finally came to a dreadful conclusion in what The New York Times described as ‘the most disastrous day’ in the American stock market’s history.

On that day — ‘Black Tuesday’ — losses approached £4.5 billion ( equivalent to £800 billion today), and more than 16.4million shares changed hands.

No matter what the bankers, or wealthy investors like John D. Rockefeller, tried to do to stem the tide of sellers, their efforts were pointless. They were swept aside, as huge blocks of shares were sold, and confidence drained out of the market.

Groups of men — ‘with here and there a woman’ in the words of one observer — stood beside the new ‘ticker-tape’ machines, which monitored the price of stocks and shares, watching as their fortunes vanished in front of their eyes.

One reporter noted: ‘The crowds about the ticker-tape, like friends around the bedside of a stricken friend, reflected in their faces the story the tape was telling.

There were no smiles. There were no tears either. Just the cameraderie of fellow sufferers.’ The comedian Eddie Cantor lost everything, but kept his sense of humour.

‘Well, folks,’ he told his radio audience that evening, ‘they got me in the market, just like they got everybody else.

'In fact, they’re not calling it the stock market any longer. They’re calling it the stuck market.

'Everyone’s stuck. Well, except my uncle. He got a good break. He died in September.’

Groucho Marx, star of Duck Soup and Animal Crackers, lost £400,000, while heavyweight boxer Jack Dempsey, one of the first multi-millionaire sportsmen, lost £1.5million.

Even the man who was later accused of triggering the stock market boom, economist Professor Irving Fisher, lost everything.

Just four months earlier, Fisher had told the readers of an article entitled Everybody Ought To Be Rich: ‘If a man saves £7.50 a week, and invests in good common stocks, and allows the dividends and rights to accumulate, at the end of 20 years he will have at least £40,000 and an income from investments of around £200 a month. He will be rich.

‘And because income can do that, I am firm in my belief that anyone not only can be rich, but ought to be rich.’

Small wonder that the most popular song of 1929 was Irving Berlin’s Blue Skies — with its unforgettable lines: ‘Blue skies smiling at me/Nothing but blue skies, do I see.’..



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