Saturday, February 8, 2020

Saturday Snippet: the 1929 stock market slams headlong into reality

In their book "The Day the Bubble Burst", Gordon Thomas and Max Morgan-Witts examine the human side of the 1929 stock market crash that precipitated the Great Depression.

There are many parallels between the behavior of markets and individuals prior to the Crash, and those we see today.  The divide between the "haves" and the "have-nots" is at least as pronounced today, if not more so, and of course there are many more people in the country - and the world - to be affected by such divisions.  Attitudes are also very materialistic, the focus entirely on worldly reward and material wealth.

I recommend "The Day the Bubble Burst" as a very well-written snapshot from our nation's history of what happens when greed and hubris slam headlong into reality.  I fear we may be close to another such episode in the not very distant future.  Sadly, I don't think those in charge of running our country have learned much in the interim.

Here's the book's view of the consumer society ninety-odd years ago.

     Many of the dubious advertisements appearing in the U.S. press urged readers to invest in bonds and stocks. The circle between Madison Avenue and Wall Street was complete; they were inexorably linked, in a relationship developed in ten short years, during which the ad men had created an ambience invaluable to the continuing popularity of stock speculation. The limitless, desirable, and expensive goods coming onto the market—often products of companies quoted on the Stock Exchange—could only be sold by determined advertising campaigns. If those campaigns failed, the market would slump.
     To maintain his place in consumer society, a man was told he needed a car, radio, icebox, and refrigerator; his wife required a washing machine, automatic furnace, and one of the modish pastel-hued toilets. To complete their domestic bliss they would have the latest in bathrooms: a shrine of stunning magnificence, containing, among other items, “a dental lavatory of vitreous china, twice fired.” To buy it would cost the average American six months’ salary. But paying was no problem; there were the installment plans. It was also part of the advertising philosophy that it was no longer enough to buy a car, radio, or refrigerator. People must have the latest model—junking the old one, even though it was still useful. Failure to do so would cause factories to close from the Atlantic to the Pacific, ending what some newspapers called “the golden era.” To protect it, they told their readers, was the patriotic duty of every American; one way to express that was, “to buy until it hurts.”
     The farsighted were even encouraged to spend while alive to ensure a better hereafter. They could, for instance, find in the current issue of The Saturday Evening Post this advertisement from a New York casket and vault manufacturer: “How often we find cause only for regret in our memories of the manner in which we disposed of the remains of our loved ones. We were thoughtless, perhaps. It would have been so easy to provide adequate protection against the elements. However, it is idle to dwell on things past. Let us look into the future calmly and follow the examples of thousands of families who rely upon the Clark Graves Vault to defeat Nature’s destructive forces. For never yet has this vault failed to protect its contents from the hurtful elements of the earth.”
     And so, with that promise of bodily immortality, the forward-looking would not just be buried in old-fashioned graveyards; they would be “lovingly interred” in Gardens of Rest and Vaults of Sleep, “resting” in silver- or gold-plated coffins in sepulchers resembling Greek-pillared mausoleums, equipped with specially sealed boxes in which, if one wished, the departed’s stock certificates might be placed. The boxes would be hewn from “immortal” granite. If that was too expensive, the Rock of Ages Corporation offered sculpted headstones, with extra angels available on demand. For those who could not afford even that, a range of cut-price funeral parlors offered “a Repose Room, Free, and use of Twenty Palms.”
     The twin pillars of American civilization were now the copywriter and the salesman. Between them they supported the stock market. To do so they committed many sins in the name of prosperity. But the age of plenty seemed destined to go on forever as the manipulators continued to think of new ways to create still bigger gains in the Dow Jones and Times “averages.” The nation was being coerced and cozened by forces it blindly trusted—business, advertising, and journalism. The few voices that protested were ignored.
     Wall Street constantly encouraged Madison Avenue to persuade the public to extend its mortgage on the future. If it was necessary to buy a new car every year, it was far better to purchase two. A home should not merely have one bathroom—preferably with a dental lavatory—it needed a second. A radio was essential for every living room. Even the American Association of Wholesale Opticians had joined the clamor, urging people to wear one style of glasses for work, another for leisure, a third for sport. The jewelers urged brides to insist on platinum wedding rings, preferably encrusted with diamonds. If they had any doubts about the wisdom of not wearing plain old-fashioned gold bands, the advertisements informed them that by buying fancier and more expensive rings, they were giving employment to more American craftsmen than would otherwise be working. Patriotism was always a clincher. And it all helped to keep the market booming.
     By 1929 the Greeting Card Association of America was ready to play its part. In a few sickening verse-years, the association had come a long way from simply selling birthday and Christmas cards. Now they had get-well cards, sorry-I-forgot-your-anniversary cards, and even sorry-you-have-been-run-over cards. Under the benevolent gaze of the stock market, the association was out to make America anniversary conscious. And so it became necessary to create new ones.
     Mother’s Day was born.
     Combining the talents of the card makers, the candy manufacturers, and the florists, Mother’s Day became the perfect rip-off. Florists had always been in the van of advertising; they had also mounted a successful campaign to remove the unhappy phrase from newspaper death notices: “No flowers by request.” It had been replaced by the far more positive—and profitable—slogan: “Say Farewell with Flowers.”
     In a mother-orientated nation, no son, however cynical, could refuse to send flowers on that special day; the many florists in and around Wall Street—established originally to provide the carnation boutonnieres favored by fashion-conscious brokers—did a record business during the week before the bogus anniversary. As the day drew closer, the price of blooms soared—a practice perfectly understood in the countinghouses; it was known as pushing the price as high as the market would bear. In fact, candy manufacturers saw the price of their shares rise as a result of Mother’s Day. Western Union and other telegraph companies witnessed similar results. Western Union even prepared a selection of messages for those unable to think of what to say. The most popular one in 1929 was: “I send a blessing for every thread of silver on my mother’s head.”

Recognize any parallels between 1929 society and our own?



Old NFO said...

Yep, we are right back there again... sigh

Tal Hartsfeld said...

...either that, or American society has pretty much always been the same.
Pretentious, profit-obsessed and "ready-and-wiling-to fleece whoever they can"
...hedonistic and concerned only with satisfying immediate desires.

Oh ...and status-obsessed as well. Judging others via stereotyping and pigeonholing.

JoeWarrant said...

Peter, great recommendation.
I would add Frederick Lewis Allen's Since Yesterday and Only Yesterday as social histories of the 1920's and 1930's that show similarities between then and now.
I just completed financial journalist Joe Nocera's "A Piece of the Action" that describes how credit and financial products have become part of the life of middle class Americans over the past 50 years.

Beans said...

When you look at it, you can pretty much lay the blame on the Dems.


Maybe not in 1929, but dem fiscal policy back then sure helped.

I am referring to more recent times.

It was the Dems (and McCain) who forced the sub-prime lending/mortgage crisis that crashed the US economy in 2007/2008.

And it was the Dems (and McCain) who forced the same sub-prime (because of discrimination was the reason) lending process that has given us cars with 10 year loans, and once again, mortgages that are under water. And all sorts of new wage and earnings laws that make it impossible for the peasants at the bottom to climb out of their holes in order to become un-peasants. And changed student loan laws to encourage idiots to get idiot degrees at idiotic prices for a job serving fries that the idiots then protest minimum wage laws as being too low so the companies automate and the minimum wage jobs go away.

Whew. That was a finger-full of typing.


Create the impending crisis because 'fairness.' And then when the crisis hits blame it on 'the fat cat Rethuglicans.'

(Which is funny, because I didn't see Reagan or either of the Bushes come out of office significantly richer than the Clintons or Obamas, who came out of office 15-30 times richer than when they went in.

Hmmmm... wonder who the real fat cats are?

commoncents said...
This comment has been removed by a blog administrator.
Cederq said...

Oh, to be removed by a blog administrator must have been foul. I guess it was spanked. Good for you Peter 'iffn it was you. I firmly believe we as a society and country is heading for a Depression that will make the 20's/30's look like a school yard fracas. Prepare as best you can.

Andrew Smith said...

Oh, I could only dream of being removed by a blog administrator. Oh what wondrous prose I would have to come up with to achieve this.


I did my high school American History paper on the crash of 1929. The one thing that stands out in my mind was the phrase, used back then to dismiss people who were voicing concern, was that "We've reached a new, permanent high plateau".

Uh huh.

And I hear that today.

Shameless self-promotional plug:

I Feel Like Sarah Connor: The Coming Financial Collapse

And FYI, Peter, among the links I cite in support was one of yours. :)

OvergrownHobbit said...

Two books that might prove interesting:

An Old Fashioned Girl by Louisa May Alcott features a plot device in which a profligate family (No Madison Ave) was brought down by a Crash. Published 1869.

Cheaper By the Dozen tells the story (late 1800s - 1930s) of the Galbraiths with 12 kids and a world-famous efficiency business. The family never got trapped by Madison Ave.or destroyed by the 1929 Crash.

But they did have the rise of youth culture (jazz, dating, and trashy dress), Social Christianity and proselytizing Birth Control movements.

I wonder what that other book is leaving out? Quite a lot, I suspect.

Linda Fox said...

I'm thinking that the American economy will survive this time of chaos. They will jump into the void left by Chinese businesses gone bust, and take over manufacture (whether authentically in America, or in India/other places).

We have a lot of 'give' in our budgets. Smarter consumers/businesses are operating on a leaner model, paying down credit debt and upping savings. No one NEEDS cable or multiple family phones. Nor an "eat out" habit. The luxury industries - those that sell things we don't actually need - will go bust. Those workers will find actual jobs, now that they are not incentivized to enjoy a Funemployment payout.