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In the 1920s, Wall Street operated under an assumption of government protection, a notion that would prove illusory. But while it lasted, it created a mood of intoxication such as the Street had never known before and helped to trigger a decade of dreams that ended in the 1929 crash.
Ever since the 1911 revolution, power had been divided between an official government in Peking and a nationalist one in Canton, with warlords ruling over Manchuria.
Secretary of State Hughes opposed diplomatic recognition of Mexico,
the radical diputado would become a staid conservative the moment he came into possession of property.
When challenged, he often cited a favorite Arab proverb: “The dogs may bark, but the caravan moves on.”
In the most potent form of default imaginable, the Germans expanded their money supply, ran large budget deficits, and depreciated the mark.
hyperinflation. The Allies felt betrayed as German monetary policy undermined reparations payments.
In January 1922, about two hundred marks equaled one dollar. By November 1923, it took over four billion marks to buy a dollar.
in a final absurdity, prices doubled hourly.
the world was trapped in a circular charade in which American money paid to Germany was handed over as reparations payments to the Allies, who sent it back to the United States as war debt.
so long as the United States demanded war-debt payments, the Allies couldn’t be flexible on German reparations.
Young Ivy Leaguers turned away from the social protest of the late teens and flocked to Wall Street.
it mattered a great deal that the bank always paid its bills promptly,
the bank thrived because it was cautious in boom times and aggressive in bad times.
he perpetuated the Morgan tradition, started by Charles Coster, of heroic exertion and premature death.
Joe Kennedy, who finally slipped into the House of Morgan through a back door.
Like king and country, the gold standard was an abstraction that made British bankers feel snug and cosy.
“Keynes . . . is flirting with strange gods and proposing to abandon the gold standard forever and to substitute a ’managed’ currency . . . it is better to have some standard than to turn our affairs over to the wisdom of the publicist-economists for management.”
Ben Strong, depressed American interest rates. This was no small technical matter: it would be blamed by some for causing the 1929 crash on Wall Street.
One life couldn’t encompass his dreams,
“Most people have exaggerated ideas about sleep. If I can get two solid hours I’m all right.”
The euphoria was also generated by a liquidity boom of historic proportions. Cash was everywhere. In 1920, Ben Strong sharply raised interest rates to cool off an inflationary commodity boom. This created not only a recession but disinflationary conditions that lasted for several years. Money fled hard assets. As commodity bubbles burst—ranging from Texas oil to Florida land—the money poured into financial markets. Stocks and bonds floated up on a tremendous wave.
The day before the 1929 crash, the Wall Street Journal reported, “There is a vast amount of money awaiting investment. Thousands of traders and investors have been waiting for an opportunity to buy stocks on just such a break as has occurred over the last several weeks.”
In the 1920s, small investors leapt giddily into the stock market in large numbers. They frequently bought on a 10-percent margin, putting only $1,000 down to buy $10,000 worth of stock.
some businesses had so much surplus cash that they engaged in stock speculation and margin lending
major motivating factor behind the Glass-Steagall Act’s separation of the banking and securities businesses.
Wall Street was being swept by new forms of leveraging.
(Joe Kennedy later said he sold stocks after hearing his bootblack touting them.)
he blamed excessively low interest rates for the speculation in stock.
When the discount rate was belatedly raised in August 1929 from 5 to 6 percent, it was too late to cool off the boom.
Professor Irving Fisher of Yale, high priest of academic hope, rallied the faithful: “Stock prices have reached what looks like a permanently high plateau.”
Hoover knows nothing about finance, nothing about exchange and nothing about economics.”
Hoover wanted the Exchange to curb speculation—a plea that was ignored.
Winston Churchill stood in the visitors’ gallery of the New York Stock Exchange.
Having bought on margin, many investors were ruined outright.
There had been terrifying moments that morning when no buyers appeared. So they pledged $240 million to buy up assorted stocks and stabilize the market.
The 1929 crash unfolded in two stages, with a weekend in between.
He bought up to $100 million in government bonds per day
Harrison confirmed the principle of government responsibility in financial panics.
Herbert Hoover wasn’t quite as passive or impotent as legend suggests.
the principle of government action to ease economic misfortune was enshrined before the New Deal.
“there is something about too much prosperity that ruins the fiber of the people.”
In mid-1932, the market would bottom out at one-tenth of its September 1929 peak. So the yokels who sold in terror after the Crash fared better, in the long run, than the canny traders who scouted for bargains.
On June 17, 1930, ignoring the pleas of over a thousand American economists, President Hoover took up six gold pens and signed the Hawley-Smoot Tariff Act.
If debtors couldn’t export goods to the United States, how would they ever earn foreign exchange and pay off loans?
two dozen countries would retaliate against the Hawley-Smoot tariff by raising their own tariffs and slashing U.S. imports. The age of “beggar thy neighbor” economics had begun.
The biggest bank failure in American history, the Bank of United States bankruptcy fed a psychology of fear that already gripped depositors across the country.
the bank’s failure shook confidence across America. It was a failure that could have been easily avoided by the proposed merger.
Reparations continued to burden Germany’s economy and polarize its politics.
announced a one-year moratorium on war debt and reparations payments.
