Europe began a fragile economic recovery in 1924. In the United States, ever-rising corporate profits fueled an ever-rising stock market, until Wall Street began drawing away needed investment capital from Europe, and beyond.
In the US, the Federal Reserve was divided between those who wanted to raise interest rates to dampen the stock market, and those who wanted to lower them to support the Europeans.
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I liked the bit about Florida real estate, I remember a plot line about that in Boardwalk Empire. An often overlooked part of the Great Crash was the impact of argrarian real estate prices. The depression had already hit rural America by 1929. I subscribe to the theory that it was a crash in agrarian land prices, which took a few years to ripple through the economy that was the underlying cause.
I do like the emphasis on speculuation, that seems to be the basis of all of the biggest depressions. Where all of a sudden people don’t own as much as they though they did. Theoretically stocks should be a self-correcting market. Corporations are able to issue new stock when they consider it over valued, and buy up stock when its undervalued. But banks wouldn’t finance it, thanks in large part to the collapse in the money supply and the inflexibility of the gold standard.
The depression is in some ways inexplicable. There were a lot of people who wanted things that could be supplied by labor, there were a lot of people looking for work. What was missing that made it so that supply couldn’t meet demand?
I agree with what you say, except I’d argue it wasn’t a fall in land prices that hurt farmers, but a fall in crop prices. You may recall me quoting my wife’s grandparents, who were farmers, to the effect that for farmers, the Great Depression began as soon as the Great War ended. As for what was missing, the short answer is: demand. If everyone stops buying at the same time, nothing sells, producers cut back, GDP shrinks. That’s by definition, more or less. It becomes a vicious circle, where shrinking production scares everyone into further spending cuts.
I’ve finally caught up with your podcast and just wanted to say thanks for all your work thus far, it’s been quite a ride.
And I love that you’re doing the ’29 crash in October, a lot of this episode seems oh so similar to the current orgy of speculation we’re going through right now.
Glad to hear you’re enjoying it. Yes, there are a lot of parallels between the crash of 1929 and subsequent stock bubbles, although nothing since has been nearly as calamitous as that one. That’s because it was just the first in a series of shocks, as we will discuss.