The First Great Depression: Blow By Blow, From The BIS, And How It Mirrors Our Ongoing Second Great Depression

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Fri, 06/25/2010 - 14:12 | 433985 dhfry@yahoo.com
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Just reading Amity Shlaes, The Forgotten Man, gives you a pretty good and different summary of conditions politically and economically in the 1930s. Great read and lots of similar things going on today.

Fri, 06/25/2010 - 15:01 | 434071 Captian America
Captian America's picture

I just finished it, great read. I was spooked by how many similar things are going on now vs then. At least back then we could say that FDR was America's response to Stalin, Hitler, Mussolini et al. Bush/Obama was just our fat, drunk and lazy fail. It is shameful how many people are about to die in then upcoming war due to a lack of understanding of history/expedience.

Sat, 06/26/2010 - 11:26 | 435318 BumpSkool
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Well then remember Shlaes thought George Bush the greates thing since sliced bread, thought the invasion of Iraq a terrific idea, and basically kissed Cheyney's ass so much it left marks.

The woman is a moron.

Fri, 06/25/2010 - 17:07 | 434335 New_Meat
New_Meat's picture

Just started Amity.  Just finished Roth's "Depression Diary"--his dad's diary of Youngstown, OH 1929 to end-'30's.  It tracks above in a visceral way, imagine trading your passbook for scrip and speculators use these passbooks (original account owners can't get the dollars out) in aggregate to then buy houses at $0.25/$ or better.  Daily quote in newspaper of value of passbooks.

I didn't realize the enormous effect of the mortgage boom (1st, 2nd, even 3d mortgages) on the bust.  Subrogated mortgages wiped out.  Wow, and Bawney Fwank wasn't around (OK, in diapers maybe).

- Ned

Fri, 06/25/2010 - 21:48 | 434634 jeff montanye
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the line that gave me pause was in 1933 where it said that 2,000 million of british debt was converted from 5% to 3%.  what does this mean?  that the bank of england unilaterally changed the interest rate on outstanding debt from 5% to 3%?  if so it is of a piece with fdr's confiscation and revaluation of gold, but far less known.  anyone?

Tue, 06/14/2011 - 19:35 | 1369333 pong
pong's picture

Jeff-- Was my first thought too.  www.imf.org/external/np/seminars/eng/2011/res2/pdf/crbs2.pdf is a Reinhart presentation this year that has a reference to the event.  It was a conversion of WWI debts to a perpetual 3.5% annuity.  "Voluntary", they say.  But the Reinhart presentation makes reference that there was a domestic default on some of UK's obligations to the US because the debt was issued under domestic UK law.  Haven't checked that yet.  But per This Time is Different [...], the UK has not had an external default event in its modern history.

Tue, 06/14/2011 - 19:39 | 1369335 pong
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[dup; sorry-- crappy sbux connection]

Tue, 06/14/2011 - 19:45 | 1369338 pong
pong's picture

[dup #2-- really bad cxn]

Fri, 06/25/2010 - 14:16 | 433996 living on the edge
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How about that, an article that clearly shows us where we are today compared to a similar era "the great depression". Even tells us how this may play out because after all, history is sometimes our best guide to the future.

Fri, 06/25/2010 - 14:23 | 434004 Muir
Muir's picture

__

 

"Run for your life from any man who tells you that money is evil. That sentence is the leper's bell of an approaching looter. So long as men live together on earth and need means to deal with one another--their only substitute, if they abandon money, is the muzzle of a gun.

"But money demands of you the highest virtues, if you wish to make it or to keep it. Men who have no courage, pride or self-esteem, men who have no moral sense of their right to their money and are not willing to defend it as they defend their life, men who apologize for being rich--will not remain rich for long. They are the natural bait for the swarms of looters that stay under rocks for centuries, but come crawling out at the first smell of a man who begs to be forgiven for the guilt of owning wealth. They will hasten to relieve him of the guilt--and of his life, as he deserves. "

 

 

or 

 

 

http://www.facebook.com/pages/Plugging-the-Gulf-oil-leak-with-the-works-of-Ayn-Rand/125031037519289?v=wall

 

__

Fri, 06/25/2010 - 14:25 | 434008 bruiserND
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We were warned by William White of the BIS in Jackson Hole ,Wyoming in summer 2003.

Greenspan blew him off like he was some retard.

I will go to my grave KNOWING that this CDS/CDO / no reserve requirement financial system melt down was a crisis by design; engineered by social engineers in collaboration with financial engineers who were paid for the "Greenspan Put" by a prearranged trade known as "TARP".

 

The only thing tht will purify America is civil war.

 http://www.thisismoney.co.uk/markets/article.html?in_article_id=506901&in_page_id=3

Sat, 06/26/2010 - 01:22 | 434894 agrotera
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bruiserND,

Here is my Pollyanna alternative scenario that could purify America: the criminals that were purchased (many elected officials)  by the interests (anything owned by the owners of the privately held federal reserve--many hedge funds, some say half the DOW, the big banks, etc) of the privately held federal reserve to enact laws to legalize criminality will be voted out of office, and then these elected criminals will be prosecuted for treason along with certain people who lobbied for TARP in the name of keeping liquidity flowing instead of admitting that we the people were forced to turn over the good name of our country (the validity of our currency lost by the trillions printed and stolen) all for a lie...honest prosecution of these crimes would purify America. 

Sat, 06/26/2010 - 16:02 | 435590 Charley
Charley's picture

"the validity of our currency lost by the trillions printed and stolen"

What validity is there for a thing which can be created on a computer terminal in hundreds of billions? Just wonderin'

Sat, 06/26/2010 - 12:24 | 435393 illyia
illyia's picture

ditto (not to be confused with **-head)

Thanks for the link.

Fri, 06/25/2010 - 14:34 | 434030 Innocent Bystander
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Thank you, a sobering reminder. Gold it is, then?

Fri, 06/25/2010 - 14:38 | 434033 Anonymouse
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Highly recommend you read "The Great Depression: A Diary" by Benjamin Roth.  He was a lawyer in Youngstown who kept a diary of the depression as it unfolded.  His intention was to document what happened as he was trying to learn more about economics and investing and how it hit the local (steel-driven) industry.

The parallels to today are eerie, especially how the media spun the events as they unfolded.

It is particularly instructive to see the events without the benefit of hindsight, which is the best you could ever get from an historian (even an honest one).

Fri, 06/25/2010 - 17:11 | 434344 New_Meat
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sorry, stepped on you. my bad - Ned

Fri, 06/25/2010 - 17:18 | 434358 Trundle
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Except that everyone in Youngstown now has tatoos and there is no steel industry- or any industry for that matter.

Fri, 06/25/2010 - 17:26 | 434377 Anonymouse
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That's just the point.  The diary was from the 1930s when the steel industry died

Fri, 06/25/2010 - 14:38 | 434039 DoctoRx
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Nicely done, Tyler!  Reading the language used at time rather than the retrospectoscope allows us to better understand the past.

"There is nothing new under the Sun" comes to mind . . . until a black swan is sighted. 

Fri, 06/25/2010 - 14:39 | 434042 Roy Bush
Roy Bush's picture

Chilling

Fri, 06/25/2010 - 14:43 | 434045 curbyourrisk
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Gold it is if you believe we are heading into inflation and you want a store of value for your money.  Gold is only a hedge during times of deflation.  We are in a deflationary period whether all the pundits (idiots) out there want to admit it or not.  So yes ( I can't believe I am saying this) Gold it is.  You are not going to get rish with gold, but it will be a positive return during our deflationary period.  So for everyone out there chasing positive returns.....go at it.  Jst don't don;t bid it up, eventually you might be selling it for those pesky margin calls everyone eventually gets during deflationary sell offs.  (YES...it is a double edged sword)

Fri, 06/25/2010 - 14:51 | 434051 Lets Hang Parliament
Lets Hang Parliament's picture

Depressingly similar but essential reading is "Lords of Finance" (1929, the Great Depression, and the bankers who broke the world). Change a few names and it would sound like a current affairs prog. Here are some quotes. Observations on the Senate Banking Committee 1928 -"It was painful to watch the good senators flailing around trying to understand the workings of a complicated financial system and hurling foolish questions at expert witnesses."

Or the 1920's equivalent of the predatory squid - "The zeal with which foreign bankers promoted their wares led to a great many imprudent investments and a lot of waste - one small town in bavaria, having decided to borrow $125,000, was persuaded by its investment banks to increase the amount to $3 million."

Nothing has changed - and the denoument this time around will be bigger and nastier...

Fri, 06/25/2010 - 14:58 | 434065 dantes1807
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At best, the Federal Reserve will give us a Japan like recession for 20 years. Or we'll get the 30s playbook as described above. Hard to see us getting out of this one.

Fri, 06/25/2010 - 14:58 | 434066 trav7777
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Hmm...I could be wrong here, but I don't think FDR seized gold in 1993.  I definitely was drunk a lot in college but I surely would have remembered that.

Fri, 06/25/2010 - 15:07 | 434080 Alcoholic Nativ...
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Were we in a war during the 1st one?   The taliban want to know why all these useless mercs are occupying their land pretending to be U.S. soldiers.

Fri, 06/25/2010 - 15:08 | 434082 AUD
AUD's picture

"While the international movement of goods registered an unprecedented decline in 1932, gold movements reached proportions never before experienced."

Yes, rather than bills of exchange, denominated in gold, for international trade being simply cleared through London, the physical gold was on the move.

The day the physical gold stops moving, that is the day the lights go out.

Fri, 06/25/2010 - 15:11 | 434083 Innocent Bystander
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Point Taken.

The road to inflation is thru deflation, or to put it another way deflation (under misguidance/ quick solution seekers) may foster inflation.

You have deflation for how long (?) before you hit (hyper)inflation is anyone’s  guess.   Another outcome of deflation maybe geopolitical instability (wars), that may help avoid inflation altogether, a possibility one has to consider.

Be it inflation, deflation, wars, what have you, the way I see it, Gold is a hedge against the Unknown (uncertain future).  and why do I say this, well its simple, we all have heard history repeats it, so if there is any truth to it, Gold is your best bet, for it has always held its own thru out history...

Fri, 06/25/2010 - 15:20 | 434107 ella
ella's picture
"News from 1930

Being a daily summary based upon my reading of the Wall Street Journal from the corresponding day in 1930."  Also see the blog's archive, some of the news from then is uncanny as well frightening

http://newsfrom1930.blogspot.com/search?q=

____

Ahh the comparision between now and then is best seen in the charts. Make sure you scroll to the bottom.  http://www.voxeu.org/index.php?q=node/3421

Fri, 06/25/2010 - 15:22 | 434110 RSDallas
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Note the reference to debt in 1937.  Here we are again. 

Fri, 06/25/2010 - 15:41 | 434152 Magua
Magua's picture

A couple thoughts:

1) This time around the Dollar is Sterling and the Yuan is the Dollar

2) They can't go off the gold standard this time, but the can make it illegal to buy or sell it.

3) Short selling will be banned - so make some money now while you can

4) Companies will be forced to put some % of their employees 401k in treasuries - Roth IRAs become taxable, but slowly at first

Fri, 06/25/2010 - 21:56 | 434641 jeff montanye
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i think particularly your first point is well taken.  additionally, the u.s. had foreign reserves in 1929 like china has today.  only other example: japan in 1989.  spooky.

Sat, 06/26/2010 - 02:23 | 434931 dnarby
dnarby's picture

They can't make gold illegal, unless they make it illegal everywhere.  Otherwise, gold will flow to where it is treated best.  Likewise, they can't tax it punitively for the same reasons.

They can't go off the gold standard, but they can essentially do the same thing:  revalue the currency (we didn't go off in '33, it was just made illegal to own gold while the gov't devalued the dollar vs. gold).

Fri, 06/25/2010 - 15:49 | 434179 scratch_and_sniff
scratch_and_sniff's picture

Granted, the similarities are quite awful (i was just about to go to the pub, dont think i will bother now), but although the similarities are awful, has anyone got anything to say about how we are positioned differently this time around? Has anyone got anything to say on that? Surely something is different this time, no matter how small i would like to hear it.

Fri, 06/25/2010 - 16:02 | 434202 technovelist
technovelist's picture

The difference is that this time things are INFINITELY worse. No more cheap energy, no gold reserve, no way out other than complete repudiation.

Fri, 06/25/2010 - 16:09 | 434225 scratch_and_sniff
scratch_and_sniff's picture

Cheers technovelist, thats cheered me up no end.

Fri, 06/25/2010 - 16:16 | 434239 technovelist
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Always glad to help!

Fri, 06/25/2010 - 16:40 | 434291 Innocent Bystander
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Ok let me see if this will cheer you up, Equilibrium will be reached much quicker this time around - why? because information and education is more widespread and easily available now as compared to 1929, thanx to the net and blogging..so it may get really bad but people will not be in the dark, and world over will demand more accountability from the suits they elected.

Fri, 06/25/2010 - 16:35 | 434278 cougar_w
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Difference: There is no current stand-in for Adolph Hitler.

Yeah yeah I know, Iran and NK and Texas. Just not in the same league, folks. Nukes don't change things much. I don't think we're headed into anything nearly like WW2 turned out.

Not that it will be pretty. It will be a nightmare. But there won't be gas chambers.

Maybe.

And I was kidding about Texas.

Fri, 06/25/2010 - 16:39 | 434289 scratch_and_sniff
scratch_and_sniff's picture

que drum roll.

Fri, 06/25/2010 - 20:37 | 434491 three chord sloth
three chord sloth's picture

Well, history doesn't repeat exactly of course, but keep in mind Hitler was a non-entity to pretty much everybody at the beginning of the Great Depression.

If we put ourselves today at roughly 1931, he was still just the leader of some minor party. He didn't become chancellor 'til 1933... and even then, at first, few saw him as a world class danger. It wouldn't be until the late 30's that the rest of the West began to wise up to his plans.

If we are to follow the Great Depression/ WWII track, we won't know the new Hitler until 2015 or so. He could be out there right now, only appearing as a bit player in little 3 paragraph articles in the international section of big city newspapers.

Fri, 06/25/2010 - 21:37 | 434609 Hedge Jobs
Hedge Jobs's picture

bring on the new Hitler i say! he would sort out all these crooked scumbags currently running the show

Sat, 06/26/2010 - 13:26 | 435454 scratch_and_sniff
scratch_and_sniff's picture

Okaaaaaaaaaay.

Sat, 06/26/2010 - 13:28 | 435459 scratch_and_sniff
scratch_and_sniff's picture

Hummm, i wonder where he could be?

Fri, 06/25/2010 - 23:31 | 434766 Jean Valjean
Jean Valjean's picture

One way this time is better... Empty houses. This time we have lots of empty houses for people to live in.

Sat, 06/26/2010 - 07:39 | 435126 scratch_and_sniff
scratch_and_sniff's picture

Nice one Jean...we have houses.

Fri, 06/25/2010 - 16:16 | 434240 Clayton Bigsby
Clayton Bigsby's picture

boom

Fri, 06/25/2010 - 16:22 | 434252 cougar_w
cougar_w's picture

K-winter, only more so. It's like this stuff is wired into our DNA or something.

There will be no escape. Breathe in. Breathe out. Sigh. Say good-bye.

Fri, 06/25/2010 - 16:29 | 434260 cougar_w
cougar_w's picture

[dup]

Fri, 06/25/2010 - 23:26 | 434754 whiteshadow
whiteshadow's picture

History never repeats, HISTORY RHYMES...

so lets see, who will fill in the blanks to rhyme what happened in the depression?

Bear gone

lehman gone,

many many gone,

yet more to be gone,

-------,----------,-------- are to be gone....

 

So long

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