Last night I watched a documentary on The Great Depression.
It was pretty interesting - some tidbits here:
It was pretty interesting - some tidbits here:
1) The Roaring 20s sounded pretty special. Economic prosperity in the US. Women even went to college and had their own money and a fair bit of independence.
The government war bonds got ppl thinking about investing in a way most ppl hadn't before.
The government war bonds got ppl thinking about investing in a way most ppl hadn't before.
2) Prior to those gov bonds, most Americans were not investing. Banks incl Chase started getting into offering and marketing stocks of companies after seeing investment behavior change.
3) The economy boomed! So everyone wanted to invest in the NYSE. Most Americans didn't have a lot of cash so ppl started investing on the margin - borrowing money to invest.
4) Economists predict that up to 90% of money invested in the stock market in the 20s was borrowed money!
What could possibly go wrong?
What could possibly go wrong?
5) What most consumers didn't realize is there were a lot of private pump and dump groups who drum up a frenzy around a stock and then the initiators would dump after luring in speculators.
Reminds me of the crypto markets of 2017 - we tend to repeat history.
Reminds me of the crypto markets of 2017 - we tend to repeat history.
6) On Thurs Oct 24, 1929 the market crashed. It just couldn't keep going up anymore. The wealthiest investors quickly got together to invest hundreds of millions in the market after that to try to stabilize prices and demonstrate everything would be ok.
7) That sorta worked but then the lenders of the money that was poured into the market got scared they wouldn't get paid back so they started asking all their customers to pay them the following Monday or forfeit their stock. Most ppl couldnt pay.
8) So the market tanked again on that Monday and kept going down. This then led to a run on banks. Ppl needed to get their cash out because they were now worth less.
9) Except most banks were investing in the market too so they didn't have enough cash to cover everyone's requests to pull money out... The concept of FDIC insured didn't exist.
10) So even ppl who hadn't participated in the stock market were hosed too! There was just no cash.
Short term loans for even growing businesses were not available.
Short term loans for even growing businesses were not available.
11) So then a lot of companies couldn't afford to make payroll and a lot of employees were let go.
This then meant there was even less consumer spending power which hurt businesses further and kicked off a downward spiral.
This then meant there was even less consumer spending power which hurt businesses further and kicked off a downward spiral.
12) One interesting thing I forgot to mention is that stock tickers back then were pretty manual so even though you could get stock information basically anywhere, the information was often delayed. And during the tumultuous stock mkt crash, the ticker was delayed by hours.
13) This lack of tech was probably a big factor in the panic because no one knew what the real time price was which set off a frenzy of panic.
(Although arguably we have RT stock tickers today and still have panic :))
(Although arguably we have RT stock tickers today and still have panic :))
14) Lastly gov spending in the 1940s counted for about 2/3 (!) of all investment in the US which brought the economy back. (Ie the war + rebuild)
15) Here is the documentary on YouTube:
