In post World War One. America was rebuilding and recovering. The 1920’s were truly boom years. The electrical grid was expanding, and more and more electrical appliances were being sold and installed. This was consumerism with a capital “C”, and at the same time, lots of autos were being sold. The Model T was being surpassed by GM. Ford realizing that, introduced the Model A, which quickly became popular. Electric refrigerators, mixers, ovens, vacuums, light fixtures and even elevators were selling, and consumerism was doing well indeed. Electrically powered streetcar lines and commuter railroads were being built rapidly. Everything looked rosy! Not only was consumerism booming, but one could buy stocks with 10% down, and make monthly payments. This was known as buying on “margin,” and most banks loaned for stock purchases ‘on margin.’ Economists were watching things, and were becoming more and more worried as each month passed, but the market was doing great, and no one knew how to stop or even slow it. There was heavy discussion about the national economy, and the general opinion was that the best thing to do was to use the Latin expression of ‘laissez-faire’ as a policy, which simply means ‘let things be.’ ‘Letting things be,’ proved to be deadly. If only someone could have figured a way to curb the huge margin sales of stocks without causing a panic. No one did.
In late March of 1929, just after the inauguration of Herbert Hoover, the Federal Reserve Board was meeting every day behind closed doors. Undoubtedly, they were discussing the stock market and the national economy. The first of several ‘mini-crashes’ and recoveries began on March 25th, but even though the market recovered, worries of economists and the Fed increased. The summer of 1929 seemed to be good, and the market did recover. After Labor Day however, a ‘bear market’ became foremost in minds of stock holders, bankers, and economists, but what to do about it? On March 12, 1928, 3,875,910 shares traded. A nice, typical, 1928 day on Wall Street. On October 24, 1929, 13 months later, a record number of 12,894,650 shares were traded, and panic was spreading.
There was no TV nor internet. Stock trades were reported on ‘ticker tape machines,’ and they were very clever, but even with these modern machines, stock trades were sometimes an hour to an hour and a half behind, so it was difficult to make decisions. Phones were ringing endlessly, and crowds had gathered on Wall street to try to get stock quotes. Police had to be called to restore order. Banks were at huge risk, since they had financed 90% of a huge number of stock purchases, and they were at extreme risk. On Friday, as an example, Montgomery Ward opened at 83 and quickly dropped to 50, but recovered to 74. People took a breath and hoped for the best. It was a weekend, so hope ruled everyone’s psyche. On Monday, the volume was heavy, and unlike the previous Friday, there was no recovery. Next day, Tuesday, October 29, 1929, has been known as ‘Black Tuesday,’ when 16,410,030 shares were traded. People were dumping their shares, causing the market to drop like a lead sinker. Remember, for every buyer, there has to be a seller, and the reverse. Everyone was selling, trying to get out before it crashed even lower, and there were no buyers. Guess what? Millions were lost. Stock brokers were despondent, trying to contact their customers. People were jumping out of windows, from such a bankrupt condition they suddenly found themselves. Banks went bust, and depositors lost their savings, as did my Mom and Dad. The stock market did not achieve its former level, till 1954. Twenty five years to recover, and all that time the dollar was losing value. It lost 50% during WW II alone, which means that the stock market in 1929 dollars, may not have reached parity till maybe Trump’s win, but I don’t know, nor have I been able to find out. Sorry.
I do know however, that gold remained at $20.67 per ounce during the crash. An ounce of gold has always bought a good men’s suit, and still will. – Don Stott – 1-888-786-8822