How Bad Was the '29 Crash; How Bad Will the Next One Be? Part Igreenspun.com : LUSENET : TB2K spinoff uncensored : One Thread
There have been a lot of questions over the last two years on TB2000 about how bad the '29 crash was. As I have posted before, my Dad's family went from upper class to upper poor. However,that isn't the thrust of this post....Incidently, I see the market is down again today.
I happen to be re-reading "Flight From the City" by Ralph Borsodi. The book was published in 1933. It contains some interesting statistics from "The Business Week" (mag?) for November, 1932.
Unemployment: 31.2%; 15,252,000 people
Unemployment by Occupation:
manufacturing -- 46% Mining -- 45% Foresstry/fishing -- 40% Transportation -- 38% Services -- 35% Skilled trades -- 21% Agriculture -- 17% Professionsl -- 10% Publich service -- 10%
Using round numbers, it is easy to foresee at least 40,000,000 unemployed were a depression to occur today, involving a total of 60,000,000 people were dependents included.
None of the New Deal programs mas a real dent in the Depression even with a far smaller population, essential self-sufficiency, no environmental regulations, isolationism, etc.
I belive the Feds do anticipate anothe depression, potential populous revolt and have been taking steps for some time to prepare for it is a number of noxious ways.
I'll go into this in Part II in a few days.
-- Todd Detzel (email@example.com), April 13, 2000
Even though I was born in '32, I can tell you from experience the depression did not end until the advent of WWII. Prior to the war, it was slim pickings for everyone. Once the war started, money began to "fall from the skys".
I do remember very clearly, that around the age of two or three, I thought popcorn really was an evening meal. Cigarettes were a penny a piece. Hamburger was ten cents a pound.
-- Richard (Astral-Acres@webtv.net), April 13, 2000.
I agree and Part II will go into a lot more and what I see as the future with the coming crash (bad news based on lots of stuff). I'll check the thread out tomorrow.
-- Todd Detzel (firstname.lastname@example.org), April 13, 2000.
I've been concerned over the "irrational exuberance" of the markets for quite a while now. Investors in general seem to have completely forgotten about basic concepts such as profits, P/E ratios, intrinsic value, stuff like that.
Ten years ago, P/E ratios of 12:1 were seen as being about as out-there as any reasonable person should risk. 20:1 was seen as pretty near reckless.
Now, 20:1 is nothing. 140:1, 250:1 is commonplace. A lot of dot.com's don't even have earnings yet, after several years of doing business; how do you measure? Sooner or later, some of the dancers have to pay the piper.
It wouldn't bother me to see a Great Correction. The market doesn't belong in the stratosphere, after all -- thin air makes for silly thinking.
I've been talking with a lot of businessmen, doctors, etc. around here lately who seem to share these types of sentiments. Something's a-brewing.
HOWEVER -- none of them are thinking of booby-trapping their yards, or installing gun turrets in their attics, so they can shoot their desperate starving neighbors when "The Big One" hits.
(as in, http://pub5.ezboard.com/fyourdontimebomb2000.show Message?topicID=2488.topic&index=1 and other beneath-the-cesspool sentiments expressed on that thread.....which despicable sentiments Ed Yourdon says NOTHING against.....AGAIN)
-- Chicken Little (email@example.com), April 13, 2000.
Mr. Richard, I have been curious about that point in our history. From the bowels of a depression, how did a war create a a sudden bounty? How did we (U.S.) go from having no money to feed our own, to a war driven country which out of no where, seemed to suddenly have enough money to fire up and fund every industry? I was looking at some family WWII rationing coupons a couple of days ago.
-- Name (firstname.lastname@example.org), April 13, 2000.
A lot of the new money that has gone into the market has been in 401K plans. Most of those invested in these plans are in for the long run. I wonder how the money actually breaks down-How much is in mutual funds via individuals, via institutional investors, and via 401k plans. Likewise, it would be interesting to find out how the money is divided in individual stocks, commodities, annuities, etc.
My point is, just what percentage of investors are hurt by short-term plunges in the market? Joe 6-pack does not really have the oppportunity to get in on the ground floor of those high-flying IPOS that are now having their bubble burst. Anyone who started investing 3 or 4 years ago, with moderate risk, is still ahead of the game at this point. So the NASDAQ fell 25%, but it was up over 80% last year.
From what I see, the bears will and should have their day, but I think the percentage of everyday man and women hurt by the recent plunge is minimal. I can have no pity for daytraders and other market timers who thought they could continue to bet on the 40-1 horses and win.
Todd-Any thoughts on this?
-- FutureShock (email@example.com), April 13, 2000.
How did World War II pull us out of The Depression? First, lots of deficit spending to finance guns and tanks and battleships and bombers. Second, large number of jobless men (and a few women) were pressed into military service. Third, the economy was, to a far larger extent than most people realize, tightly controlled by government. Rationing, wage and price controls, commodity controls. A truly HUGE amount of liquidity was injected into the economy at the same time the surplus labor was being sopped up by military service and arms industries, with enough economic limits to keep inflation in check. (A lot of that excess money went right back into War Bonds, remember.)
-- Cash (firstname.lastname@example.org), April 13, 2000.
Cash, you're right on the money (pun intended) about how the war ended the depression. What a lot of people don't seem to know is that 1938 was actually the second worst year of the depression in terms of both the stock market and unemployment.
Depressions are as much psychological as financial. As long as the average person feels like their job is reasonably secure and their savings aren't unduly threatened they can weather ups and downs in the markets. They will still continue to spend and that's what keeps the economy going. The minute this reverses, things start to change. People lose their sense of security and cut back on spending. Since much of our spending today is based on credit, this doesn't do much to increase savings but it does do a lot to slow down the economy. Businesses begin layoffs and decrease their spending. Increasing deficit spending becomes the only tool the government has to stimulate the economy but this only works if people's confidence is high enough to once again begin to spend. It didn't work in the period from 1933 to 1938 and the war was the only thing that got us out from under.
I don't think there's enough on the horizon now that we're looking at a 30's type depression coming but it's always good to remember the details.
-- Jim Cooke (JJCooke@yahoo.com), April 14, 2000.
A lot of truth to what you say, but that doesn't go far enough.
A whole population tightened their damn belts and GOT TO WORK. That Tom Hanks commercial you see on TV about "the greatest generation that has ever been produced.....they helped to save the world" is no joke. And no hyperbole. "Rosie the Riveter" -- "loose lips sink ships" --
Deficit spending, yep. But a whole nation pulled together, worked hard to the point of breaking slam apart, and sacrificed, like none of us under-70 people can imagine.
And I'm not just being a WWII rah-rah boy here either; have a late uncle who almost got killed in that mess right before the Battle of the Bulge (he scouted that little affair, caught a piece of shrapnel that almost took his leg off); college roommate of mine whose late dad had to go thru therapy after killing so many Germans (he survived)....
Wars aren't just about economics. Economic theories don't fight wars.
-- Chicken Little (email@example.com), April 14, 2000.
Chicken Little, you and Mr. Cooke are absolutely right about the psychological aspect of the war. I took Name Changer's question to be more of a financial nature. But I think WWII really saved this country in more ways than one. We went from a nation where there were active, credible plots by powerful men to overthrow the government and install a quasi-fascist dictatorship to one that elected the same Democrat four times. The coup plots were real; one group that reportedly included Henry Ford tried to recruit a heroic WWI Marine Corps general, who promptly reported them to the feds. Congress held hearings. The testimony was sealed until recently, and even when it was released all the names were removed. And then you had genuine rumblings for a Soviet-style revolution among the farmers and the proles at the other end ofthe economic spectrum. Father Coughlin, the Silver Shirts, Woody Guthrie, and FDR in the same decade! God knows what would happen today, in a society far less cohesive and stable than the one of the 1930s.
-- Cash (firstname.lastname@example.org), April 14, 2000.
Governments way is war, to get out of a depression. IT is better for people to say, hell know we won't go. It is better to find our on way out of trouble. The time will be shorter!
-- ET (email@example.com), April 14, 2000.