The Great Depression Began Today
While the financial fiasco of 2008, the effects of which still plague us, proved a traumatic event, the Great Depression overshadows it like a mountain does a hill (though a mighty big one). While the Great Depression had its seeds in the years of wild speculation that preceded it, October 24, 1929, Black Thursday, was the day the trapdoor to ruin dropped open, with the stock market plunging 11 percent. Leading up to the twenty-fourth, the market bounced up and down, displaying a volatility quite familiar to today’s investors. By the twenty-fourth, there was no direction but down.
Unlike today’s world of instant communication, information couldn’t keep up with events. People had no way of knowing exactly what was happening, only that it was something bad. Over the weekend, newspapers, the main information sources of the times, reported on the situation. While the market bucked up a bit on Friday and Saturday, when Monday dawned, margined investors decided to bale. Black Monday saw the market plunge nearly 13 percent and almost 12 percent on Black Tuesday, October 29, 1929. It wasn’t until November 1954 that the market reached the peak closing prices of early September 1929.
Scary stuff, no doubt, yet really nothing new in financial history, for speculative booms and cataclysmic busts riddle the financial landscape. Such events should interest you since even if you don’t realize it, you have a stake in booms and busts if you have a 401K, or just a job. The standard and probably best book on the subject is Manias, Panics and Crashes: A History of Financial Crises, Seventh Edition, by Charles Kindleberger and Robert Aliber. The folly of it all will amuse and horrify you. Really, you’ll wonder, how can we behavior so stupidly so consistently? w/c