Read eBook on the web, iPad, iPhone and Android. Millions of satisfied customers and climbing. Thriftbooks is the name you can trust, guaranteed. Spend Less. Read More. The book offers a vibrant picture of a world full of plungers, powerful bankers, corporate titans, millionaire brokers, and buoyantly optimistic stock market bulls.
As Klein follows the careers of these men, he shows us how the financial house of cards gradually grew taller, as the irrational exuberance of an earlier age gripped America and convinced us that the market would continue to rise forever. Then, in October , came a "perfect storm"-like convergence of factors that shook Wall Street to its foundations. We relive Black Thursday, when police lined Wall Street, brokers grew hysterical, customers "bellowed like lunatics," and the ticker tape fell hours behind.
This compelling history of the Crash--the first to follow the market closely for the two years leading up to the disaster--illuminates a major turning point in our history.
The Great Crash of profoundly disrupted the United States' confident march toward becoming the world's superpower. The breakneck growth of s America--with its boom in automobiles, electricity, credit lines, radio, and movies--certainly presaged a serious recession by the decade's end, but not a depression.
The totality of the collapse shocked the nation, and its duration scarred generations to come. In this lucid and fast-paced account of the cataclysm, award-winning writer Charles R. Morris pulls together the intricate threads of policy, ideology, international hatreds, and sheer individual cantankerousness that finally pushed the world economy over the brink and into a depression.
While Morris anchors his narrative in the United States, he also fully investigates the poisonous political atmosphere of postwar Europe to reveal how treacherous the environment of the global economy was.
It took heroic financial mismanagement, a glut-induced global collapse in agricultural prices, and a self-inflicted crash in world trade to cause the Great Depression. Deeply researched and vividly told, A Rabble of Dead Money anatomizes history's greatest economic catastrophe--while noting the uncanny echoes for the present.
Over 1. Ordinary citizens were rioting in the streets, but their demonstrations met with indifference, and dissidents were jailed. Canada emerged from the Great Depression a different nation. The most searing decade in Canada's history began with the stock market crash of and ended with the Second World War. With formidable story-telling powers, Berton reconstructs its engrossing events vividly: the Regina Riot, the Great Birth Control Trial, the black blizzards of the dust bowl and the rise of Social Credit.
The extraordinary cast of characters includes Prime Minister Mackenzie King, who praised Hitler and Mussolini but thought Winston Churchill "one of the most dangerous men I have ever known"; Maurice Duplessis, who padlocked the homes of private citizens for their political opinions; and Tim Buck, the Communist leader who narrowly escaped murder in Kingston Penitentiary.
In this 1 best-selling book, Berton proves that Canada's political leaders failed to take the bold steps necessary to deal with the mass unemployment, drought and despair. A child of the era, he writes passionately of people starving in the midst of plenty. Spellbinding, insightful and, perhaps most important, timely. In fact, as Liaquat Ahamed reveals, it was the decisions made by a small number of central bankers that were the primary cause of that economic meltdown, the effects of which set the stage for World War II and reverberated for decades.
As we continue to grapple with economic turmoil, Lords of Finance is a potent reminder of the enormous impact that the decisions of central bankers can have, their fallibility, and the terrible human consequences that can result when they are wrong. Refutes the myth that the stock market was overpriced in and offers an explanation for the crash with implications for the current era of unparalleled stock market gains.
Understanding the American stock market boom and bust of the s is vital for formulating policies to combat the potentially deleterious effects of busts on the economy.
Using new data, Kabiri explains what led to the s stock market boom and crash and looks at whether was a bubble or not and whether it could have been anticipated. This compact, eloquent book offers a blueprint for a workable national agenda that allows for human weakness without compromising a humane culture. Arguing that it is in the best interest of the United States to avoid excessive wealth and income inequality, and to safeguard the well-being of its citizens, he explores how the goal of a good society can be achieved in an economically feasible way.
Touching on topics from regulation, inflation, and deficits to education, the environment, bureaucracy, and the military, Galbraith avoids purely partisan or rigid ideological politics—instead addressing practical problems with logic and well-thought-out principles. An edition of The great crash, This edition was published in by Houghton Mifflin Co. Written in English — pages. The great crash, , Houghton Mifflin Co.
Libraries near you: WorldCat. The Great Crash, , Easton Press. Not in Library. The Great crash, , Houghton Mifflin. The great crash, , Deutsch. The great crash, , Houghton Mifflin. The great crash, , Avon. The great crash, For a century after the collapse of the South Sea Bubble, Englishmen regarded the most reputable joint stock companies with some suspicion.
Even as the Florida boom collapsed, the faith of Americans in quick, effortless enrichment in the stock market was becoming every day more evident. III It is hard to say when the stock market boom of the nineteen-twenties began. There were sound reasons why, during these years, the prices of common stocks should rise.
Corporate earnings were good and growing. The prospect seemed benign. In the early twenties stock prices were low and yields favorable. In the last six months of , the prices of securities began to rise, and the increase was continued and extended through Thus at the end of May , the New York Times average of the prices of twenty-five industrial stocks was ; by the end of the year it was The advance through was remarkably steady; there were only a couple of months when values did not show a net gain.
During there was something of a setback. Business was off a little in the early part of that year; it was thought by many that values the year before had risen unreasonably. February brought a sharp fall in the market, and March a rather abrupt collapse. The Times industrials went down from at the beginning of the year to at the end of February, and then dropped by nearly 30 points to at the end of March. However, in April the market steadied and renewed its advance.
Another mild setback occurred in October, just after the hurricane blew away the vestiges of the Florida boom, but again recovery was prompt. At the end of the year values were about where they had been at the beginning. In the increase began in earnest. Day after day and month after month the price of stocks went up.
The gains by later standards were not large, but they had an aspect of great reliability. Again in only two months in did the averages fail to show an increase. On May 20, when Lindbergh took off from Roosevelt Field and headed for Paris, a fair number of citizens were unaware of the event. The market, which that day was registering another of its small but solid gains, had by then acquired a faithful band of devotees who spared no attention for more celestial matters.
In the summer of Henry Ford rang down the curtain on the immortal Model T and closed his plant to prepare for Model A. The effect on the market was imperceptible. At the end of the year, by which time production had also turned up again, the Times industrials had reached , a net gain of 69 points for the year.
The year is historic from another point of view in the lore of the stock market. According to a long accepted doctrine, it was in this year that the seeds of the eventual disaster were sown. The responsibility rests with an act of generous but ill-advised internationalism.
Some—including Mr. Hoover—have thought it almost disloyal, although in those days accusations of treason were still made with some caution. In , under the aegis of the then Chancellor of the Exchequer, Mr. Winston Churchill, Britain returned to the gold standard at the old or pre- World War I relationship between gold, dollars, and the pound.
The consequences, nonetheless, were real and severe. Customers of Britain had now to use these costly pounds to buy goods at prices that still reflected wartime inflation.
Britain was, accordingly, an unattractive place for foreigners to buy. For the same reason it was an easy place in which to sell. In began the long series of exchange crises which, like the lions in Trafalgar Square and the street walkers in Piccadilly, are now an established part of the British scene.
There were also unpleasant domestic consequences; the bad market for coal and the effort to reduce costs and prices to meet world competition led to the general strike in Then, as since, gold when it escaped from Britain or Europe came to the United States. This might be discouraged if prices of goods were high and interest rates were low in this country.
The United States would be a poor place in which to buy and invest. They had previously pled with success for a roughly similar policy in The Federal Reserve obliged. Government securities were purchased in considerable volume with the mathematical consequence of leaving the banks and individuals who had sold them with money to spare.
Adolph C. Miller, a dissenting member of the Federal Reserve Board, subsequently described this as "the greatest and boldest operation ever undertaken by the Federal Reserve System, and So provided with funds, people rushed into the market. Perhaps the most widely read of all the interpretations of the period, that of Professor Lionel Robbins of the London School of Economics, concludes: "From that date, according to all the evidence, the situation got completely out of control.
There are reasons why it is attractive. It is simple, and it exonerates both the American people and their economic system from any substantial blame. The danger of being guided by foreigners is well known, and Norman and Schacht had some special reputation for sinister motives. Yet the explanation obviously assumes that people will always speculate if only they can get the money to finance it.
Nothing could be farther from the case. There were times before and there have been long periods since when credit was plentiful and cheap—far cheaper than in —29—and when speculation was negligible. Nor, as we shall see later, was speculation out of control after , except that it was beyond the reach of men who did not want in the least to control it. The explanation is a tribute only to a recurrent preference, in economic matters, for formidable nonsense.
IV Until the beginning of , even a man of conservative mind could believe that the prices of common stock were catching up with the increase in corporation earnings, the prospect for further increases, the peace and tranquility of the times, and the certainty that the Administration then firmly in power in Washington would take no more than necessary of any earnings in taxes. Early in , the nature of the boom changed. The mass escape into make-believe, so much a part of the true speculative orgy, started in earnest.
It was still necessary to reassure those who required some tie, however tenuous, to reality. And, as will be seen presently, this process of reassurance—of inventing the industrial equivalents of the Florida climate—eventually achieved the status of a profession.
However, the time had come, as in all periods of speculation, when men sought not to be persuaded of the reality of things but to find excuses for escaping into the new world of fantasy. There were many indications by that this phase had come. Most obvious was the behavior of the market. While the winter months of were rather quiet, thereafter the market began to rise, not by slow, steady steps, but by great vaulting leaps.
On occasion it also came down the same way, only to recover and go higher again. In March the industrial average rose nearly 25 points. News of the boiling market was frequently on the front page.
Individual issues sometimes made gains of 10, 15, and 20 points in a single day's trading. On March 12, Radio, in many respects the speculative symbol of the time, gained 18 points. On the following day it opened 22 points above the previous close. Then it lost 20 points on the announcement that the behavior of the trading in the stock was being investigated by the Exchange, gained 15 points, and fell off 9. The March boom also celebrated, beyond anything theretofore, the operations of the big professional traders.
The lore of competitive markets pictures the stock exchange as the most impersonal of markets. No doctrine is more jealously guarded by the prophets and defenders of the Stock Exchange. Somewhere around there are big men who put stocks up and put them down.
As the boom developed, the big men became more and more omnipotent in the popular or at least in the speculative view. In March, according to this view, the big men decided to put the market up, and even some serious scholars have been inclined to think that a concerted move catalyzed this upsurge.
If so, the important figure was John J. Raskob had impressive associations. A contemporary student of the market, Professor Charles Amos Dice of the Ohio State University, thought this latter appointment a particular indication of the new prestige of Wall Street and the esteem in which it was held by the American people.
He may also have suggested —the evidence is not entirely clear—that G. This would have meant a price of as compared with a current quotation of about Such, as the Times put it, was "the magic of his name" that Mr. Raskob's "temperate bit of optimism" sent the market into a boiling fury. On March 24, a Saturday, General Motors gained nearly 5 points, and the Monday following it went to The surge in General Motors, meanwhile, set off a great burst of trading elsewhere in the list.
Among the others who were assumed to have put their strength behind the market that spring was William Crapo Durant. Durant was the organizer of General Motors, whom Raskob and the Du Ponts had thrown out of the company in After a further adventure in the auto business, he had turned to full-time speculation in the stock market.
They too were General Motors alumni and had come to Wall Street with the great fortune they had realized from the sale of the Fisher-body plants. Still another was Arthur W. Cutten, the Canadian-born grain speculator who had recently shifted his market operations to Wall Street from the Chicago Board of Trade.
As a market operator, Cutten surmounted substantial personal handicaps. He was very hard of hearing, and some years later, before a congressional committee, even his own counsel conceded that his memory was very defective. Observing this group as a whole Professor Dice was especially struck by their "vision for the future and boundless hope and optimism.
June 12, a day of particularly heavy losses, was a landmark. For a year or more, men of vision had been saying that the day might come when five million shares would be traded on the New York Stock Exchange. Once this had been only a wild conversational gambit, but for some time it had shown signs of being overtaken by the reality. On March 12, the volume of trading had reached 3,, shares, an all-time high. By the end of the month such a volume had become commonplace.
On March 27, 4,, shares were traded. Then on June 12, 5,, shares changed hands. The ticker also fell nearly two hours behind the market; Radio dropped 23 points, and a New York paper began its accounts of the day's events, "Wall Street's bull market collapsed yesterday with a detonation heard round the world. In July there was a small net gain, and in August a strong upsurge. Thereafter not even the approach of the election caused serious hesitation. People remained unperturbed when, on September 17, Roger W.
Babson told an audience in Wellesley, Massachusetts, that "if Smith should be elected with a Democratic Congress we are almost certain to have a resulting business depression in In any case, during the same month reassurance came from still higher authority.
Andrew W. Mellon said, "There is no cause for worry. The high tide of prosperity will continue. Mellon did not know. Neither did any of the other public figures who then, as since, made similar statements. These are not forecasts; it is not to be supposed that the men who make them are privileged to look farther into the future than the rest. Mellon was participating in a ritual which, in our society, is thought to be of great value for influencing the course of the business cycle.
By affirming solemnly that prosperity will continue, it is believed, one can help insure that prosperity will in fact continue. Especially among businessmen the faith in the efficiency of such incantation is very great. VI Hoover was elected in a landslide. This, were the speculators privy to Mr. Hoover's mind, should have caused a heavy fall in the market. In his memoirs Mr. Hoover states that as early as he became concerned over the "growing tide of speculation.
Hoover said of speculation, "far worse than murder for which men should be reviled and punished. Hoover's attitude toward the market was, however, an exceptionally well-kept secret. People did not know of his efforts, uniformly frustrated by Coolidge and the Federal Reserve Board, to translate his thoughts into action. The news of his election, so far from causing a panic, set off the greatest increase in buying to date.
On November 7, the day after the election, there was a "victory boom," and the market leaders climbed 5 to 15 points. Volume reached 4,, shares, or only a little less than the all-time record of June 12, and this new level was reached on a rising, not a falling market. On November 16, a further wave of buying hit the market. An astonishing 6,, shares changed hands—far above the previous record. Apart from the afterglow of the election, there was nothing particular to incite this enthusiasm.
The headlines of the day told only of the sinking of the steamship Vestris and the epic achievements of the officers and crew in shouldering aside the women and children and saving their own lives. November 20 was another huge day.
Trading—6,, shares—was fractionally smaller than on the sixteenth, but by common agreement it was much more frantic. The following morning the Times observed that "for cyclonic violence yesterday's stock market has never been exceeded in the history of Wall Street.
Early in the month there was a bad break, and, on December 8, Radio fell a ghastly 72 points in one day. Over the whole year of the Times industrial average gained 86 points, or from to During the year Radio went from 85 to it had never paid a dividend ; Du Pont went from to ; Montgomery Ward from to ; Wright Aeronautic from 69 to That was the phenomenal increase in trading on margin.
VII As noted, at some point in the growth of a boom all aspects of property ownership become irrelevant except the prospect for an early rise in price. Income from the property, or enjoyment of its use, or even its long-run worth is now academic. As in the case of the more repulsive Florida lots, these usufructs may be non-existent or even negative.
What is important is that tomorrow or next week market values will rise—as they did yesterday or last week—and a profit can be realized. It follows that the only reward to ownership in which the boomtime owner has an interest is the increase in values.
Could the right to the increased value be somehow divorced from the other and now unimportant fruits of possession and also from as many as possible of the burdens of ownership, this would be much welcomed by the speculator. Such an arrangement would enable him to concentrate on speculation which, after all, is the business of a speculator.
Such is the genius of capitalism that where a real demand exists it does not go long unfilled. In all great speculative orgies devices have appeared to enable the speculator so to concentrate on his business.
In the Florida boom the trading was in "binders. This right to buy—which was obtained by a down payment of 10 per cent of the purchase price—could be sold. It thus conferred on the speculators the full benefit of the increase in values. After the value of the lot had risen he could resell the binder for what he had paid plus the full amount of the increase in price.
The worst of the burdens of ownership, whether of land or any other asset, is the need to put up the cash represented by the purchase price. The use of the binder cut this burden by 90 per cent—or it multiplied tenfold the amount of acreage from which the speculator could harvest an increase in value.
The buyer happily gave up the other advantages of ownership. These included the current income of which, invariably, there was none and the prospect of permanent use in which he had not the slightest interest. In the stock market the buyer of securities on margin gets full title to his property in an unconditional sale.
But he rids himself of the most grievous burden of ownership—that of putting up the purchase price—by leaving his securities with his broker as collateral for the loan that paid for them.
The buyer again gets the full benefit of any increase in value—the price of the securities goes up, but the loan that bought them does not. In the stock market the speculative buyer also gets the earnings of the securities he purchased. However, in the days of this history the earnings were almost invariably less than the interest that was paid on the loan.
Often they were much less. Yields on securities regularly ranged from nothing to 1 or 2 per cent. Interest on the loans that carried them was often 8, 10, or more per cent. The speculator was willing to pay to divest himself of all of the usufructs of security ownership except the chance for a capital gain. The machinery by which Wall Street separates the opportunity to speculate from the unwanted returns and burdens of ownership is ingenious, precise, and almost beautiful.
Banks supply funds to brokers, brokers to customers, and the collateral goes back to banks in a smooth and all but automatic flow. Margins—the cash which the speculator must supply in addition to the securities to protect the loan and which he must augment if the value of the collateral securities should fall and so lower the protection they provide—are effortlessly calculated and watched.
The interest rate moves quickly and easily to keep the supply of funds adjusted to the demand. Wall Street, however, has never been able to express its pride in these arrangements. They are admirable and even wonderful only in relation to the purpose they serve. The purpose is to accommodate the speculator and facilitate speculation. But the purposes cannot be admitted. If Wall Street confessed this purpose, many thousands of moral men and women would have no choice but to condemn it for nurturing an evil thing and call for reform.
Margin trading must be defended not on the grounds that it efficiently and ingeniously assists the speculator, but that it encourages the extra trading which changes a thin and anemic market into a thick and healthy one. At best this is a dull by-product and a dubious one. Wall Street, in these matters, is like a lovely and accomplished woman who must wear black cotton stockings, heavy woolen underwear, and parade her knowledge as a cook because, unhappily, her supreme accomplishment is as a harlot.
However, even the most circumspect friend of the market would concede that the volume of brokers' loans—of loans collateraled by the securities purchased on margin—is a good index of the volume of speculation. Measured by this index, the amount of speculation was rising very fast in Early in the twenties the volume of brokers' loans—because of their liquidity they are often referred to as call loans or loans in the call market— varied from a billion to a billion and a half dollars.
By early they had increased to two and a half billions and remained at about that level for most of the year. This was an incredible sum, but it was only the beginning. In the two dull winter months of there was a small decline and then expansion began in earnest. Brokers' loans reached four billion on the first of June , five billion on the first of November, and by the end of the year they were well along to six billion.
People were swarming to buy stocks on margin—in other words, to have the increase in price without the costs of ownership. This cost was being assumed, in the first instance, by the New York banks, but they, in turn, were rapidly becoming the agents for lenders the country over and even the world around.
There is no mystery as to why so many wished to lend so much in New York. One of the paradoxes of speculation in securities is that the loans that underwrite it are among the safest of all investments. They are protected by stocks which under all ordinary circumstances are instantly salable, and by a cash margin as well. The money, as noted, can be retrieved on demand. At the beginning of this admirably liquid and exceptionally secure outlet for non-risk capital was paying around 5 per cent.
While 5 per cent is an excellent gilt-edged return, the rate rose steadily through , and during the last week of the year it reached 12 per cent. This was still with complete safety. Everywhere men of means told themselves that 12 per cent was 12 per cent.
A great river of gold began to converge on Wall Street, all of it to help Americans hold common stock on margin. Corporations also found these rates attractive.
A few firms made this decision: instead of trying to produce goods with its manifold headaches and inconveniences, they confined themselves to financing speculation. Many more companies started lending their surplus funds on Wall Street. There were still better ways of making money.
In principle, New York banks could borrow money from the Federal Reserve Bank for 5 per cent and re-lend it in the call market for In practice they did. This was, possibly, the most profitable arbitrage operation of all time.
VIII However, there were many ways of making money in Never had there been a better time to get rich, and people knew it. It wasn't that was too good to last; it was only that it didn't last. In the January issue of World's Work, Will Payne, after reflecting on the wonders of the year just over, went on to explain the difference between a gambler and an investor. A gambler, he pointed out, wins only because someone else loses. Where it is investment all gain. Everyone makes money.
As Walter Bagehot once observed: "All people are most credulous when they are most happy. This was not because Mr. Hoover was soon to become President and had inimical intentions toward the market. Those intentions developed at least partly in retrospect.
Nor was it because men of wisdom could tell that a depression was overdue. No one, wise or unwise, knew or now knows when depressions are due or overdue. Rather, it was simply that a roaring boom was in progress in the stock market and, like all booms, it had to end. On the first of January of , as a simple matter of probability, it was most likely that the boom would end before the year was out, with a diminishing chance that it would end in any given year thereafter.
When prices stopped rising—when the supply of people who were buying for an increase was exhausted—then ownership on margin would become meaningless and everyone would want to sell. The market wouldn't level out; it would fall precipitately. All this being so, the position of the people who had at least nominal responsibility for what was going on was a complex one.
One of the oldest puzzles of politics is who is to regulate the regulators. But an equally baffling problem, which has never received the attention it deserves, is who is to make wise those who are required to have wisdom. Some of those in positions of authority wanted the boom to continue. They were making money out of it, and they may have had an intimation of the personal disaster which awaited them when the boom came to an end.
But there were also some who saw, however dimly, that a wild speculation was in progress and that something should be done. For these people, however, every proposal to act raised the same intractable problem. The consequences of successful action seemed almost as terrible as the consequences of inaction, and they could be more horrible for those who took the action. A bubble can easily be punctured. But to incise it with a needle so that it subsides gradually is a task of no small delicacy.
The real choice was between an immediate and deliberately engineered collapse and a more serious disaster later on. Someone would certainly be blamed for the ultimate collapse when it came.
There was no question whatever as to who would be blamed should the boom be deliberately deflated. For nearly a decade the Federal Reserve authorities had been denying their responsibility for the deflation of — The eventual disaster also had the inestimable advantage of allowing a few more days, weeks, or months of life. One may doubt if at any time in early the problem was ever framed in terms of quite such stark alternatives.
But however disguised or evaded, these were the choices which haunted every serious conference on what to do about the market. As the most powerful of the Federal Reserve Banks, and the one with the market at its doorstep, the New York bank both had and assumed responsibilities which were not accepted by the other eleven banks of the system. President Coolidge neither knew nor cared what was going on. A few days before leaving office in , he cheerily observed that things were "absolutely sound" and that stocks were "cheap at current prices.
However tender his scruples, President Coolidge could have acted through his Secretary of the Treasury, who served, ex-officio, as a member of the Federal Reserve Board. The Secretary also had the primary responsibility for economic and especially for financial policy.
0コメント