This Day in 1930
When you hear ebullient business people say that the economy is poised to turn around in the 3rd quarter (aka, now), do you ever wonder if maybe they’re just deceiving themselves?
In today’s Wall Street Journal, we hear from Barclay’s economists:
"Fears have increased that the trend toward better economic data has stalled; we believe these are unfounded and still expect the economy to grow in the third quarter," said economists at Barclays Capital in a note to clients. "We think the turn in activity is happening now; we look for a big jump in auto assemblies and industrial production in July."
Now, this is completely unscientific and could mean nothing. But an enterprising gentleman has undertaken a fascinating avocation. Every day he posts top stories from the Wall Street Journal from 79 years ago—the dawn of the Great Depression—when prosperity was always just around the corner.
Here are some highlights from the past week (in 1930):
Major stocks hit new highs for the current rally; attributed to optimism on business conditions. Current seasonal slowdown hoped to be low point of the depression; market also considered technically stronger due to recent liquidation. Also some news of increasing construction activity in June and higher freight traffic for week ended June 28. Strength in major industrials, rails and utilities.
PaineWebber says low interest rates are a strong force for business revival. Anticipates rally first in bond prices, than in investment stocks, then secondary stocks. Bond price rally is therefore the first signal of the general recovery.
National City Co. says Bond market outlook is good – fewer new issues and wide spread between rates on short-term paper and high-grade bonds.
Some complaints of unavailable credit for business and agriculture, in spite of low rates and high supply of funds at banks. Blamed on risks of particular loans.
We learn that as far back as 1930, Hollywood’s liberals were blocking drilling American oil.
Lewis Stone, film actor, obtains restraining order preventing oil drilling in the surf off Venice Beach (Los Angeles, California).
But the topper was from Wednesday, July 8, 1930. Bill Hennessy spoke about the Goldman Sachs Bubble Machine at the July 4th Tea Party in Washington, MO. Bill had no idea at the time that in 1930 the WSJ had written about a book written almost a century earlier by Washington Irving about an event a century before that which spoke of bubbles. Here’s the WSJ 1930 excerpt:
Washington Irving’s book “The Great Mississipi Bubble” republished by Random House. "The story was written about a hundred years ago and the actual event occurred more than two hundred years ago, but the narrative … will interest many who witnessed the recent debacle of stock prices." A couple of quotes from the book: The boom – "Every now and then the world is visited by one of those delusive seasons when the ‘credit system,’ as it is called, expands to full luxuriance; the broad way to certain and sudden wealth lies plain and open … "; The bust – "a panic succeeds, and the whole superstructure built upon credit and reared by speculation crumbles to the ground, leaving scarce a wreck behind."
Many thoughts spring to mind when reading news written three quarters of a century ago during a similar economic period. But two stand out:
Optimism and Error Spring Eternal: Washington Irving perfectly captured man’s inability to defend against the exuberance of potential wealth validated by paper profits. What he missed, of course, was that an evil broker like the men and women (but mostly men) of Goldman Sachs would someday leverage (exploit?) this human flaw to its fullest profit potential.
How Sad: The men who wrote those 1930 headlines, the men quoted, the men who traded stock on July 10, 1930, the men and women who really believed that prosperity was just around the corner—after all, Paine Webber said so—are all gone from this earth. They endured another 10 years of dashed hopes, false optimism, artificial stock market runs. They ceded more and more power to a statist President who promised to fix everything if only he had total control of the economy, the courts, and the people and their passions. He lied. Then, those men and women endured a great world war. Millions never again saw earthly prosperity.
When we rail against government borrowing and spending, we are railing against our own ignorance of history. How this whole thing ends—what works and what doesn’t—is written for all to see. But we blind ourselves to the hard, cold fact that only diligence, work, frugality, and time will get us out of our hole. Prosperity cannot be leveraged.
ACTION
Take an hour to read through News from 1930. Bookmark it. Check it out every week or every day if you wish. You’ll learn something, and you’ll honor the men and women described and quoted in those pages. They, like us, were trying to make the best of a bad situation. Let our knowledge of their foibles and follies keep us on the right path.

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