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Beggars going from house to house are getting more numerous and more bold. I dread what the coming winter will bring forth.
In the last 30 days the stock market has given one of the most strenuous rallies in its history. Even the N.Y. Times yesterday devoted considerable front page space to it. There is no tangible explanation for this by way of industrial revival and yet there is plenty of optimism and feeling that this fall will see a turn for the period.
In 1933 more than 40 percent of home mortgages were in default. Foreclosures, notes Roth, “are no longer a disgrace.” In the nonexistent real estate market of the Great Depression, banks often deferred foreclosure proceedings. Banks realized there would be no recoup on a seized property that they couldn’t sell, rent, or even afford to maintain adequately.
Farmers were the most vulnerable to foreclosure in the Depression. “In Iowa, the most heavily mortgaged state, nearly one-third of the value of farms was in thrall, mainly to banks and insurance,” describes Arthur M. Schlesinger Jr. With bread selling for three cents a loaf and milk at eight cents a quart, farmers organized an influential movement called the Farmers’ Holiday Association to protest, sometimes violently, price devaluation. In May 1932 hundreds of farmers disrupted the nation’s food supply by destroying their crops and blockading highways and rails to prevent trucks or trains
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There is also considerable discussion about the new science of “technography” which holds that new machinery and electricity have replaced many men in industry who will never find a job again. I am confident that new inventions and scientific discoveries will remedy this situation.
Again and again it is being proven that the only man who can survive this storm is the fellow who put his earnings into government bonds before the crash came or second to that—built up a large life insurance reserve on which he could borrow. So far life insurance has come thru with flying colors.
It is my judgment that in another year or so the time will be ripe to found new enterprises on a conservative basis and then expand slowly as the economic cycle again moves upward. I believe that a fortune in wisely selected stocks could be bought very cheaply just now. The opportunity is here—but no money.
Seven banks closed in St. Louis yesterday and a couple more in Kansas. The newspapers are suppressing news of this kind.
I am reading a book written by Claude Bowers entitled The Tragic Era. In it, he describes the panic of 1873 and I am amazed at the similarity to conditions today. He mentions the following high-lights all of which are true of this 1930 panic: 1. The 1873 panic was preceded by Civil War—then 8 or 9 years of hectic prosperity, speculation, rising prices, corruption in government—and then sudden panic, bank closings, etc. 2. In 1873 the farmers revolted for higher prices. 3. Organized movements to stop foreclosures. 4. Wild schemes to inflate currency, greenbacks, etc. 5. Talk against tariff. 6.
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During the boom in 1928 business men scorned to leave their money in safe investments yielding only 4 or 5%. They sold such securities and bought speculative common stocks. Today the situation is just the reverse. The average man today would place enough money in government bonds so that in any emergency the income from this source alone would provide bread and butter.
Today their outlook is gloomy, they think the depression will never end, the stock market is an abomination, real estate is no good, everybody is cynical, etc. Just as the public was mistaken in its excessive optimism of 1928 I believe it is mistaken in its excessive gloom. This situation, however, has created many opportunities for investment today for the man of faith, courage and a little capital.
I have done considerable reading about the depressions of 1837 and 1873 and I am struck by the similarity to the present crisis.
I am reading Beveridge’s Life of Abraham Lincoln. It contains some description of the panic of 1837. I am again struck by the similarity between conditions in 1837-1873-1893 and now. Sound currency at all times has been one of the main issues.
1. Giving President war-time powers. 2. Providing for opening of solvent banks and reorganization or closing of insolvent banks. 3. Permitting issue of U.S. currency based on notes, bank drafts, etc. Wide powers to pass this currency to members of Federal Reserve. 4. At 10:30 P.M. the President issued a new proclamation extending indefinitely the bank holiday and embargo on export of gold.
Consumers were then asked to do business only with companies that adhered to the National Recovery Act (NRA) policies, as signified by a blue eagle logo. The act also, as Roth notes, granted for the first time the permanent right of American workers to organize into labor unions. As a result, union membership expanded dramatically—it tripled over the course of the 1930s—but strikes also became more frequent as unions began to assert their power.
Roth himself was skeptical of the NRA from the very beginning yet, in what is clearly a transforming moment in his life, agrees to give multiple speeches on its behalf, all around the Youngstown area. It was, he wrote, “the only patriotic thing to do.”
Better public opinion seems to be veering against inflation now. It is beginning to be realized that only the speculator will profit and the consumer will lose.
Every person present—both men and women—had a pretty good understanding of the subject. In the past two years there has been an amazing change in American thought from cards and golf to national politics and public matters. Life has become simple. Women’s styles resemble the 1890s and even the bicycle is coming back into favor as a means of transportation.
