Bust Times, The 1930's

In early and mid 1929 the stock market soared from high to high. Herbert Hoover, the 31st president of the USA, entered the White House in March of 1929 and he foresaw the final triumph over poverty in the states. But the winds of downturn were gathering. Auto sales were down and also housing starts plus manufacturing output was falling.

***

“Dave, why did the 1929 stock market crash happen?” said Tom, soberly.

“Well, millions of Americans were in debt, buying on installment plans and “Buying on Margin” in speculative purchasing of stocks. The economy wasn’t on a sound footing.”

“What’s “buying on margin”?”

“I remember my Dad explaining it to me this way: A speculator would put down 10% of the stock price in cash and borrow the rest. They would pay back the borrowed money with the profits when the paper was sold. This concept worked as long as the stock prices kept growing. This became so popular that 90% of the stock was being bought with borrowed money!”

“But Dave, not everyone played the stock market,” said Tom, quizzically.

“That’s right Tom, my Dad never owned stock. In fact, less than 20% of Americans invested in the stock market leading up to the crash.

But it was the psychological effects that pushed the downward economic slide. Business couldn’t get capital for new projects and expansions. The consumer stopped buying. Companies got rid of workers so consequently it led to mass unemployment. And then, the banks failed!”

***

“So Dave, the booming, roaring twenties was a time of wealth and excess that led to the crash and depression.”

“That’s right Tom, nothing was the same again after the Crash, billions of dollars of wealth were wiped out in one day and that depressed consumer buying.”

“The depression was like the apocalypse of the economy.”

“Right Tom, in fact you could liken the times to the biblical four horsemen of the Apocalypse.

The first horseman was the dodgy distribution of income. The farmers never had prosperity in the 20’s. The urban masses faired better, but the rich got the gravy, dividends, interest and profits. Industrial profits rose 40% and corporate profits rose 80%! But wages rose only 8%. When the rich started to slow their investments, consumer spending could NOT plug the gap.

The second horseman was the bank failures, the banks had no deposit insurance so there was a run of people trying to withdraw their money. The banking system collapsed.

The third horseman was that America had become a creditor nation.

The fourth horseman was poor economic intelligence. The thinking was that there was an automatic functioning of the markets, that left alone the markets would restore normal business.

And the fifth horseman, one more added, was the Crash itself.”

***

“Lots of people were on the breadline, going to the soup kitchens, because they couldn’t find a job.”

“That’s right Tom, my Dad told me he jumped on a boxcar on a long freight train going from Chicago to New York, to find a job. He got a part time job in N.Y. and he existed on sinkers(stale doughnuts) and coffee. But eventually he came back to Chicago because the job situation was no better in New York.”

“What else happened in the 30’s?”

“Well, Franklin Delano Roosevelt was elected president in 1933. Also, Prohibition was repealed on Dec. 5th, 1933. This noble experiment spawned modern organized crime. Now, bootlegging was over but the criminals had grown rich and bold. Everyone could drink freely again so they could enjoy their pickled relatives!”

“Didn’t Roosevelt state in his inaugural address: “The only thing we have to fear, is fear itself” and everyone sang, “Happy Days Are Here Again.”

“Right you are, Tom. Roosevelt got to work on his “New Deal” program. He started deposit insurance in the banks, regulated the stock exchanges and got people back to work on infrastructure projects.”

“Boy, he was busy!”

“I almost forgot, Al Capone went to Alcatraz prison for tax evasion in 1931, he was released in 1939 with a brain disease brought on by syphilis. He died in 1947 at the age of 48.”

***

“You and I, Tom, were Depression Babies”, but by 1938 the USA was climbing out of the Depression.”

Happy Days Are Here Again

The Skies Above Are Clear Again

So Let’s Sing A Song Of Cheer Again

Happy Days Are Here Again!

Originally published at Writer Dave.

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I was born and bred in Chicago, Illinois, USA. I left the US when I was 47 years old to live permanently in England, where I now write full time.

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Writer Dave

I was born and bred in Chicago, Illinois, USA. I left the US when I was 47 years old to live permanently in England, where I now write full time.