Wednesday, 26 August 2015

Quotes of the Morning: Before & after the 1929 crash

One of Colin Seymour’s hobbies is collecting nonsense.

There are few more nonsensical prognostications than folk either side of the event that’s on everyone’s mind this week: the Great Wall St Crash that began in earnest on October 24, 1929.  Here’s what some numb-nuts had to say, with the times they said them indicated on Colin’s chart above. They offer a great example of hubris when humility would be far more appropriate.  Because these people had much to be humble about …

1. "We will not have any more crashes in our time."
    - John Maynard Keynes, leading British economist, in 1927

2. "I cannot help but raise a dissenting voice to statements that we are living in a fool's paradise, and that prosperity in this country must necessarily diminish and recede in the near future."
    - E. H. H. Simmons, President, New York Stock Exchange, January 12, 1928

  "There will be no interruption of our permanent prosperity."
    - Myron E. Forbes, President, Pierce Arrow Motor Car Co., January 12, 1928

3. "No Congress of the United States ever assembled, on surveying the state of the Union, has met with a
    more pleasing prospect than that which appears at the present time. In the domestic field there is tranquillity
    and contentment...and the highest record of years of prosperity. In the foreign field there is peace, the goodwill  
    which comes from mutual understanding."
    - US President Calvin Coolidge December 4, 1928

4, "There may be a recession in stock prices, but not anything in the nature of a crash."
    - Irving Fisher, leading U.S. economist, New York Times, Sept. 5, 1929

5. "Stock prices have reached what looks like a permanently high plateau. I do not feel there will be soon if ever a
    50 or 60 point break from present levels, such as (bears) have predicted. I expect to see the stock market a
    good deal higher within a few months."
    - Irving Fisher, Ph.D. in economics, Oct. 17, 1929

    "This crash is not going to have much effect on business."
    - Arthur Reynolds, Chairman of Continental Illinois Bank of Chicago, October 24, 1929

    "There will be no repetition of the break of yesterday... I have no fear of another comparable decline."
    - Arthur W. Loasby (President of the Equitable Trust Company), quoted in The New York Times, Friday, October 25, 1929

    "We feel that fundamentally Wall Street is sound, and that for people who can afford to pay for them outright,
    good stocks are cheap at these prices."
    - Goodbody and Company market-letter quoted in The New York Times, Friday, October 25, 1929

Those last few comments were just the day or so after the first big crash – in other words, about the same stage in the exact same stage in the cycle as we are now.

And as you’ll probably be aware, those two “leading economists” are still leading us—Keynes and his remedies being well known; Fisher’s doctrine of price stability having helped to cause both this crash and that one. (Fisher lost his shirt in that crash, but unfortunately not his reputation.)

Keynes’s “remedies that weren’t” didn’t take hold until later in the thirties. But it was Fisher who had claimed during the 20s that his “scientific” approach to so-called price stability” had established a “New era of prosperity during the 1920s.” (Ludwig Von Mises published a book in 1928 that critiqued Fisher's approach and predicted that it would lead to an economic crisis and collapse. Mises passed the "market test" while Fisher lost his personal fortune during an economic crisis that his economics help create.)

But the post-crash crystal ball gazing as the numb-nuts followed it all down was no better—some trying to convince themselves, some trying to convince themselves—starting with words that are already sounding very familiar.

6. "This is the time to buy stocks. This is the time to recall the words of the late J. P. Morgan... that any man
    who is bearish on America will go broke. Within a few days there is likely to be a bear panic rather than a
    bull panic. Many of the low prices as a result of this hysterical selling are not likely to be reached again in
    many years."
    - R. W. McNeal, market analyst, as quoted in the New York Herald Tribune, October 30, 1929

    "Buying of sound, seasoned issues now will not be regretted"
    - E. A. Pearce market letter quoted in the New York Herald Tribune, October 30, 1929

    "Some pretty intelligent people are now buying stocks... Unless we are to have a panic -- which no one
    seriously believes, stocks have hit bottom."
    - R. W. McNeal, financial analyst in October 1929

7. "The decline is in paper values, not in tangible goods and services...America is now in the eighth year of
    prosperity as commercially defined. The former great periods of prosperity in America averaged eleven years.
    On this basis we now have three more years to go before the tailspin."
   - Stuart Chase (American economist and author), NY Herald Tribune, November 1, 1929

    "Hysteria has now disappeared from Wall Street."
    - The Times of London, November 2, 1929

    "The Wall Street crash doesn't mean that there will be any general or serious business depression... For six
    years American business has been diverting a substantial part of its attention, its energies and its resources
    on the speculative game... Now that irrelevant, alien and hazardous adventure is over. Business has come
    home again, back to its job, providentially unscathed, sound in wind and limb, financially stronger than ever before."
    - Business Week, November 2, 1929

    "...despite its severity, we believe that the slump in stock prices will prove an intermediate movement and not
    the precursor of a business depression such as would entail prolonged further liquidation..."
    - Harvard Economic Society (HES), November 2, 1929

8. "... a serious depression seems improbable; [we expect] recovery of business next spring, with further
    improvement in the fall."
   - Harvard Economic Society, November 10, 1929

    "The end of the decline of the Stock Market will probably not be long, only a few more days at most."
    - Irving Fisher, Professor of Economics at Yale University, November 14, 1929

    "In most of the cities and towns of this country, this Wall Street panic will have no effect."
    - Paul Block (President of the Block newspaper chain), editorial, November 15, 1929

    "Financial storm definitely passed."
    - Bernard Baruch, cablegram to British Chancellor Winston Churchill, November 15, 1929

9. "I see nothing in the present situation that is either menacing or warrants pessimism... I have every confidence
    that there will be a revival of activity in the spring, and that during this coming year the country will make
    steady progress."
    - Andrew W. Mellon, U.S. Secretary of the Treasury December 31, 1929

    "I am convinced that through these measures [public spending, minimum-wage laws] we have
    re-established confidence."
   - U.S. President Herbert Hoover, December 1929

    "[1930 will be] a splendid employment year."
   - U.S. Dept. of Labor, New Year's Forecast, December 1929

10. "For the immediate future, at least, the outlook (stocks) is bright."
    - Irving Fisher, leading economist, in early 1930

11. "...there are indications that the severest phase of the recession is over..."
    - Harvard Economic Society (HES) Jan 18, 1930

12. "There is nothing in the situation to be disturbed about."
    - Secretary of the Treasury Andrew Mellon, Feb 1930

13. "The spring of 1930 marks the end of a period of grave concern...American business is steadily coming back
    to a normal level of prosperity."
    - Julius Barnes, head of Hoover's National Business Survey Conference, Mar 16, 1930

14. "... the outlook continues favourable..."
    - Harvard Economic Society, Mar 29, 1930

    "... the outlook is favourable..."
    - Harvard Economic Society, Apr 19, 1930

15. "While the crash only took place six months ago, I am convinced we have now passed through the worst --
    and with continued unity of effort we shall rapidly recover. There has been no significant bank or industrial failure. 
    That danger, too, is safely behind us."
    - Herbert Hoover, President of the United States, May 1, 1930

    " May or June the spring recovery forecast in our letters of last December and November should clearly
    be apparent..."
    - Harvard Economic Society, May 17, 1930

    "Gentleman, you have come sixty days too late. The depression is over."
    - Herbert Hoover, responding to a delegation requesting a public works program to help speed the recovery,
      June 1930

16. "... irregular and conflicting movements of business should soon give way to a sustained recovery..."
     - Harvard Economic Society, June 28, 1930

17. "... the present depression has about spent its force..."
   - Harvard Economic Society, Aug 30, 1930

18. "We are now near the end of the declining phase of the depression."
    - Harvard Economic Society, Nov 15, 1930

19. "Stabilization at [present] levels is clearly possible."
    - Harvard Economic Society, Oct 31, 1931

20. "All safe deposit boxes in banks or financial institutions have been sealed... and may only be opened in
    the presence of an agent of the I.R.S."
    - President F.D. Roosevelt, confiscating gold in 1933

A version of this post appeared at the Gold-Eagle.


  1. You saved the most chilling, number 20, for last.


  2. The fun will really start in NZ when people walk away from Auckland property.

    Those two tards Key & English are already talking about lowering interest rates and increased government spending. Anything to keep the size and influence of the state intact.

    One of the big four banks during GFC1 was quietly bailed out by the RBNZ. Doubt if this time around the RBNZ will have the means too.

    If you havent been buying US $ now would be the time to start. Not too late in this case.

    1. Another bankrupt currency in debt? USD? Lololol

  3. Keep in mind back then was bricks and morter now it is only numbers

  4. Many of these quotes only appear as hubris if you reject Friedman's analysis that a depression was not necessary, but caused by government intervention. Coolidge for example could not have known that Hoover would act as he did.

    1. To be perfectly fair, Friedman's analysis is only related to the actions of the central bank, and only to its actions after the crash on not re-inflating fast enough.
      By contrast Mises, in response to Friedman's analysis, suggests expecting expecting success by re-inflating to fix an sudden deflation is like reversing over a man in your car in the hope that might fix him from you having knocked him down. Mises, incidentally, was one of those who saw the crash coming, made inevitable by the central banks's earlier inflations. (Read about in either Murray Rothbard's "America's Great Depression" or Lionel Robbins's "The Great Depression.")
      But you're right with your final comment, Hoover's actions turned the crash into a depression, and Roosevelt's actions turned a depression into The Great Depression--and Coolidge wouldn't have expected either.

  5. Yeah, those d@mned greedy, remind me what party FDR belonged to? Confiscating personal property.

  6. You can lay every stitch of the blame for the Great Depression on J. M. Keynes, though plenty of others mishandled the mess he made:

  7. Even though the most famous crash took place on October 24, 1929, "THE REAL FUN" (sarcasm) really started from item no. 17 in this list i.e. August 1930. Quite instructive indeed.


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