1929

All my grandparents lived through the Depression.  Both my parents were brought up during the Depression.  Most of the time they put it behind them, but I and my siblings were once in awhile told things were much different in the not too distant past.

1929 was a pivotal year with the big stock market crash.  Although it was very significant and tied to the general economy there were other factors in the Depression.

Banks were necessary to finance farming, manufacturing, business in general and for consuming big items like houses and cars.  Some banks got involved with stock market investing.  At the same time it was easier to invest in stocks as buying on margin became easier.  That meant one could buy stocks with a downpayment and a loan.  This freedom meant more people could invest, pushing up prices with the hope of becoming rich.  Stocks have never been without downturns.  So when a downturn does happen the investor will find their stock is worth often less than what they still owed.

Communication was greatly improved after Marconi invented the radio that by 1921 there were 544 American radio stations.   Millions of citizens had access to the movements of the stock market.  

The wealthy (some of whom became wealthy with luck, or skill investing) were able to increase the fervor of increasing prices, while other wealthy people could also make profit when the prices went  down through a process called shorting.  Sorkin gives details of the manipulators, their life style and their eventual downfall.

Winston Churchill lived the high life, mostly in debt.  Gave speeches and wrote books to survive.   He liked to visit the States and had powerful friends with plenty of advice.  He also lost in the stock market.

A tariff bill, Smoot Hawley passed in 1930 helped reduce the price of grain and also cut trade by 60% within a year.  This deepened the Depression.

President Herbert Hoover is closely associated with the crisis, however that may be a bit unfair.  He had been a very successful businessman and after World I he was in charge of a humanitarian project to feed millions of Europeans.  His advice during the panic of 1921 proved to be good.  

Another consequence of the stock market crash was the Glass-Steagle bill that separated commercial banks from investment banks.  The Federal Deposit Insurance Corporation was also established under the Roosevelt administration. in 1933.

One of today's society characteristics is acceptance of debt.  The governments of most nations pay ever mounting interest.  There is always pressure to reduce taxes (especially of the wealthy), but also to increase spending.  Inequality also seems to be increasing. 

The concluding paragraph "...we need to remember how easily we forget.  The antidote to irrational exuberance is not regulation by itself, nor skepticism, but humility--the humility to know that no system is foolproof, no market fully rational, and no generation exempt.  The greater the heights of our certainty, the longer and harder we fall."

The value of reading this book is to help us remember.  There were a few powerful men who didn't always play by the rules.  Borrowing money to support a false belief of pending riches still exists.  The government enabled many to borrow to enrich the nation.  Manipulating the market is perhaps more sophisticated.