Wall Street Crash. Black Thursday (1929) Black Friday 1929

Wall Street Crash

It was the best of times.

It was the worst of times.

The roaring, roaring 20s. Lindy Hope. Negroes from New Orleans playing what is now called jazz. Whites from Chicago, “soaking” the constitutionally “dry” America, importing smuggled alcohol from Canada under the protection of their Thompsons.

Sinclair Lewis wrote "Main Street". Fridtjof Nansen received the Nobel Prize for promoting peace. Little Ruth hit the big jackpot. Alexander Graham Bell has died.

Nicola Sacco and Bartolomeo Vanzetti were executed for a murder they almost certainly did not commit. Charles, Lindbergh has flown to Paris. Maria Callas is born. Paavo Nurmi set a world record by running the mile in 4 minutes 10.4 seconds.

Pius XI ruled in the Vatican. Joyce wrote Ulysses, and Magritte wrote his surrealist paintings. Show Boat opened on Broadway. Marilyn Monroe is born. Corinth was destroyed by an earthquake. The British elected their first Labor government. Lenin died.

The first issues of Reader's Digest appeared. George Gershwin composed "Rhapsody in Blue." The BBC went on air. In Tennessee, John Scopes was fined one hundred dollars plus court costs for teaching the theory of evolution in school.

Al Johnson became the "King of Jazz." Rudolph Valentino became the "sheikh". Jack Dempsey became heavyweight champion. Bill Tilden won Wimbledon.

And the stock market crashed.

It was truly a golden age for millionaires in the red.

The "Gay" Decade began in September 1920, when a bomb exploded on Wall Street, killing dozens of working people, and ended in October 1929 with the collapse of the "Great American Dream", when stocks depreciated so much that people were literally thrown out of business. windows

It was a time when success was determined by luck, and it belonged to people like the one whose middle name was “Luck”9.

Thomas Fortune Ryan, the son of poor Scots-Irish immigrants, was born in Virginia. In his youth, he worked in a clothing store in Baltimore, after which he moved to New York, where he managed to get a job on Wall Street. In 1885, while working as a stockbroker, he discovered some hidden opportunities in the railway and tramway industry. Within a year, he became friends with a man who had investments in this area. This was William S. Whitney - from the New York Whitneys, the son-in-law of the largest shareholder of Standard Oil and the US Secretary of the Navy in the first term of President Grover Cleveland.

At the time, New York's public transportation system was a diverse collection of independent companies. Each of them, naturally, looked after their own interests. Complete confusion reigned. In a word, the harvest was ripe, and Ryan and Whitney collected it to the last grain.

Starting with horse cars, they quickly moved to electric streetcars and overground trains, manipulating the stocks and securities of these independent companies with such skill and dexterity that long before the opening of the New York subway in 1904, they almost completely monopolized the city's public transport. They called their company Metropolitan Street Railway. Its total capital was $260 million - $144 million belonged to shareholders, and the rest was bond debt. After $236 million in stock was sold, Whitney described Ryan as “the most adroit, gracious, and gentle man in the American financial world.”

Unfortunately for New York, what Ryan and Whitney were doing was not even legal by any stretch of the imagination. And the fact that they managed to pull this off, and on such a gigantic scale, only once again confirms the old saying: if you stole a pound, then you are a thief, but if you stole a hundred million pounds, then you are clever, courteous, a gentle and perhaps even romantic business man.

However, their tricks did not go unnoticed. The press entered the battlefield, and it was its attacks that prompted the authorities to take decisive action. Investigations began, which, as usual, dragged on for many years. It turned out that ninety million dollars had disappeared somewhere and that several people suddenly became very rich. And above all, Whitney and Ryan, who, in those crazy times when instant wealth was not particularly uncommon, found themselves the owners of two of the largest and “fastest” fortunes, in addition, leaving the New York public transport system in terrible chaos and disorder. But by the time the commissions and committees finally got around to doing anything more substantial than meetings and discussions, Whitney was already dead and the statute of limitations on suing had expired. The grand jury dismissed the case, noting that the takeover of the trucking companies was dishonest and perhaps even illegal, but not necessarily actionable. Not a single person was prosecuted. Whitney's fortune has long been mixed with Guggenheim's capital and is currently used to finance hospitals and museums.

And Ryan, who was rumored to be worth $50 million by that time, was successfully involved in the tobacco business and was familiar with the Vanderbilts. In 1906, King Leopold II of Belgium hired him to manage royal financial affairs in the Congo. A few years later, Ryan exercised control over the Life Insurance Company, bypassing the powerful Harriman clan. Ryan died in 1928, and newspaper obituaries praised the charming rogue as the last financial titan of the 1890s. The New York Times even called his career "one of the best examples in American history of the opportunities that can open up in this country for a poor, uneducated boy."

Allan A. Ryan was born to live in this America.

Like most first-generation Americans who themselves were not always able to obtain a formal education, Thomas F. Ryan provided his son Ellan with the best education that money could have. He studied at private schools and then at Georgetown University. In 1915, when Ellan was thirty-five and had already successfully completed the Wall Street science course under his father's supervision, Thomas awarded him a seat on the New York Stock Exchange. And three years later, when Thomas began to think about retiring from business, he turned to Charles Schwab of US Steel (later renamed Bethlehem Steel) with a request to look after Ellan. With the support of her father and the patronage of his cronies, Ellan A. Ryan & Co. began to play a prominent role on Wall Street.

To Ellan A.'s credit, it must be said that he was not like his father in everything. Although young Ryer was considered a “tough” businessman and a full-fledged member of the Wall Street fraternity, (for better or worse) the son did not inherit his father’s pirate inclinations. Ellan could match his father's toughness with competitors and financial savvy, but somewhere in between he still managed to get an idea of ​​what was decent in business and what was not, which knowledge was by no means one of the virtues of old Thomas F. This a sense of decency was clearly manifested in 1917, when Ellan’s mother died and the grieving widower became involved with some kind of trick within two weeks. Ellan couldn't hide his disapproval. The gap between father and son deepened. They stopped talking to each other. And soon Ellan was left without protection.

At the turn of 1919-1920, the largest bull run of all time began on Wall Street. Stock prices skyrocketed. Allan Ryan, the eternal optimist, was always willing to play long. But in the meantime, bears are lurking in ambush, ready to bet that the price of certain stocks will fall. The tactic of the bears is that by selling shares at a cheap price, they thereby cause a decrease in their value on the market, hoping that at some point they will be able to buy them back even cheaper. When the market falls, they make money. When the market goes up, they lose them. But when bulls and bears try to corner each other, life becomes difficult for both.

“Bulls” see their task as buying up as many shares as possible and, becoming a monopoly on the market, dictating the price. The Bears are trying to prevent this from happening, driving down prices with all their might. It's a bit like playing high-stakes poker. You need the same strong nerves and composure. But such maneuvers in minefields also require the imagination of a world-class chess grandmaster. The risks are enormous. Failure is fraught with complete financial ruin. But victory promises fabulous trophies. Cornell Vanderbilt conducted three very successful transactions throughout the 1860s, including the acquisition of the New York Harlem Railway. He bought up all the shares of Harlem, deliberately spreading rumors about the impending ruin of the company. He froze prices at nine dollars per share, then inflated them and sold them back to the defeated bears for $197. But when Jay Cook tried to do the same thing with the Northern Pacific Railroad, the bears won and Cook burned out like a candle.

Among the companies where Ryan had a controlling stake was the Stutz Motor Car Company, the manufacturer of the legendary Stutz Bearcat. At the beginning of 1920, Stutz shares began to rise sharply in price. If at the end of 1919 their average price was one hundred dollars, then in February 1920 it was already $134. Many considered this price too high. Therefore, in an effort to invest money in these stocks, the bears went on the attack and drove down prices. Sales orders poured in.

Ryan quickly realized that to save Stutz and, most importantly, himself, he had to raise prices until he managed to drive the bears out of the business. His fortune at that time was estimated at approximately thirty million dollars. He was not as rich as his father, but he was not a weakling either. He had the means to fight. He began to buy up all the shares of Stutz that just appeared on the market. This required a huge amount of cash, and the first month's campaign backfired on him. The Bears managed to bring down the price. From $134, Stutz shares dropped to one hundred. Realizing that further decline would lead to disaster, Ryan was forced to throw his last reserves into battle - he had to borrow money from banks using his personal fortune as collateral.

But this was enough.

In the second month of the battle, the Stutz share price began to rise again.

It quickly crossed the $134 mark.

The Bears were consumed by greed. They knew that if Ryan miscalculated, he would be swept away and his loss would be their gain. They convinced themselves that he couldn't keep Stutz's stock price at that level forever, so they continued to sell. And Ryan continued to buy. The faint of heart were left on the sidelines. Everyone who realized what Ryan was planning received their profit and stepped aside. And only the most powerful heavyweight bears continued to sell, betting anything that Stutz shares would collapse sooner or later.

The shares rose to two hundred dollars. Then up to 250.

The Bears continued to sell.

And he bought it.

The price rose to three hundred dollars.

Finally, there was no longer a single Stutz share left on the market. Ellan Ryan owned them all. But there were still “bears” who wanted to continue the game. Ryan stated that; if they want, he can lend them shares.

They borrowed them to sell them.

He loaned them out so he could keep buying.

At the end of March, prices rose to the dizzying heights of $391.

And on this day Ryan slammed his trap.

It was a classic stock combination, perhaps the most beautiful of all known in the history of the stock exchange. The Bears clearly underestimated Ryan's resources.

Now they had only two options left. Either buy back from him all those shares that they were obliged to sell to him under fixed-term sales contracts, or go to court for breach of contract. And Ryan, for his part, expressed full readiness to help them fulfill their obligations and offered them to buy shares from him, but... at a price of $ 750 apiece!

To put it mildly, he grabbed them firmly in one place.

The New York Stock Exchange's (NYSE) Business Ethics Committee tried to fight it out and charged Ryan with trading ethics violations. It was a weak ploy, but they had to do something, since several members of the committee were in debt to Ryan on fixed-term contracts. However, Ryan did not yield. The committee threatened to remove Stutz shares from the trading list. Ryan said that if they did, he would raise the price from $750 to $1,000. Then the control commission of the exchange declared “check” for Ryan, suspending trading in Stutz shares. Ryan really found himself in a difficult situation, since everyone knew about his debts to the banks. But he said that a contract is a contract and he intends to collect everything that is owed to him. In response, the exchange's legislative committee declared all of Ryan's contracts void. Adding insult to this stupidity, the legislative committee suggested that Ryan go to court if he did not like this decision.

Then Ryan informed all his debtors from among the committee members that if they wished, they could negotiate with him en masse, so that he did not need to waste time on each “bear” individually. He assumed, not without reason, that if they refused the contracts and he won the case in court, then the reputation of one of the most powerful financial institutions in the country (not to mention the personal capital of its most respected members) would be hopelessly damaged.

The NYFB shrugged off this danger. They also saw their trump cards. After all, if Ryan loses in court, he also risks complete ruin.

For some time the situation became stalemate. Lawyers hired by the NYFBA argued that Ryen's contracts were unenforceable. The lawyers hired by Ryan, on the other hand, assured him that the NYFB members would have to pay their debts.

At this point, to everyone's surprise, Ryan resigned from the NYFB.

The control commission puzzled over this unexpected move for a long time, until it dawned on them: leaving the NYSE freed Ryan from complying with its unwritten rules. True, there was still hope that Mr. Ryan would behave like a gentleman in any case. But Mr. Ryan destroyed this hope in a matter of hours - he published in the press the names of those members of the exchange who tried to abandon their contracts.

The NYSE had to tone down, and now it turned out that no one had any intention of not fulfilling their obligations under the contracts, they had something completely different in mind, they were supposedly talking only about how to fulfill these obligations.

In short, the NYFB didn’t even have time to blink an eye when Ryan began removing her pieces from the board one by one. The horses fell first. Then the elephants. Then the queen flew. There were already a few moves left until checkmate, and Ryan officially demanded repayment of the debt.

Even if all the contracts were declared void and cancelled, the bears would still have to pay him back for the shares. They had to either return the shares themselves - which, naturally, they could not do, since Ryan owned all the shares - or he could set any price for them himself and present an invoice to the debtors. Moreover, all this was well within the framework of the rules established by the NYSE itself.

Pressed against the wall, the New York Stock Exchange established a conciliation commission, but there was nothing to agree on. Something had to be offered, and they offered $550 for each of the five and a half thousand outstanding shares.

Ryan accepted the offer and the game was over. He won. But this was by no means a bloodless victory. His debt to banks was several times higher than the profit received. In addition, his main capital was now Stutz shares, and it was very difficult to sell them when they were excluded from the trading list of the stock exchange.

True, there has always been a so-called “sidewalk exchange”. Its name came into Wall Street jargon from those stock traders who literally stood on the sidewalk in front of the New York Stock Exchange and conducted their trades without being guided by the regulations of the exchange. Today such trading is carried out using a telephone and a computer, but its essence remains the same. Something similar occurs in London, where purchases and sales of shares are carried out by brokerage companies before and after official trading hours, as well as by over-the-counter brokers whose activities are not regulated by the exchange. Thus, in order to sell Stutz shares, Ryan needed to go to this “sidewalk exchange.” But even if he valued each share at, say, $550 to $1,000, its price in that market could change unpredictably.

In addition, while this struggle was going on, which took up almost all of Ryan’s strength and resources, his remaining investments went into banks. And in the early summer of 1920, the market experienced a severe decline, and the value of these deposits began to quickly evaporate. Too fast. It seems that the dissatisfied “bears” have opened a second front to get even with Ryan and gradually extract their money from him dollar by dollar. When the prices of these shares fell, the banks demanded that Ryan raise the price of his securities to their upper limit. To do this, he again needed cash. His place on the stock exchange was sold for ninety-eight thousand dollars, and this money could have been very useful to him, but the New York Stock Exchange tried to hold on to it as long as possible. Seeking quick cash, Ryan filed a $1 million defamation lawsuit against the NYFW President and the Control Commission. He was confident that the matter would end in an amicable agreement and that this would partly reassure the banks. But no agreement was reached - he failed to scare them with his lawsuit. And the banks attacked him with renewed vigor - they literally hung on the back of his neck.

But he simply could not fulfill his obligations.

In November, the banks announced the creation of a commission to alienate Ryan's enterprises, although they hastened to add that they hoped that Ryan would make a profit and be able to repay his debts. But on Wall Street success comes only with a certain amount of trust, and at the time, few people had confidence in Ryan. Creditors lined up. His cash was disappearing before his eyes. He sold everything he could, but had to sell at bargain-basement prices.

Finally the money ran out.

Ryan's debts totaled $32.5 million, including $1 million to Harry Payne Whitney, the son of his father's partner, $3.5 million to Chase National Bank, $8.7 million to the Guaranty Trust Company, and $300,000 to his mentor Charles Schwab. . Ryan's personal assets were valued at $643,000, excluding 135,000 Stutz shares. The stock exchange did not exist for them, and the “sidewalk exchange” did not want to deal with them. Eventually, much to Charles Schwab's chagrin, they were sold at auction for about twenty dollars a share. In its heyday, Schwab was considered one of the largest steel producers in the world. But as soon as he switched to cars, things went from bad to worse. Stutz Bearcats were discontinued in 1920, and the company has not made a best-seller since then. In 1932, they were still holding on somehow, making vans for transporting food, and by 1938 they were already bankrupt. That same year, Schwab died a beggar, having lost everything he had in unsuccessful businesses like Schutz, and was forced to live out his last years on handouts from friends.

But perhaps the story of Piggly Wiggly is even more impressive.

Clarence Saunders never hid his craving for everything ostentatious. He was generous to such an extent that it aroused suspicion, and at the same time he mastered the art of putting himself forward quite early. He was born in 1881 and by the outbreak of the First World War had already made a fortune in retail trading. In Memphis and Tennessee he was known as "the man who builds the Pink Palace." He built this building - of pink marble, with a huge white marble portico and a golf course - according to his own design and assumed that it would last a hundred years. Although Saunders never finished construction, the palace was so extravagant that it remained so more than half a century later, when Elvis Presley lived at Graceland and any estate in the South was no less interesting.

During the post-war boom, Saunders organized a chain of self-service grocery stores, where shoppers walked through aisles stacked with groceries, pushing carts in front of them, and then paid for all their purchases at a checkout near the exit. Today it seems commonplace, but at the time such an idea seemed completely new and unexpected. Perhaps without realizing it, Saunders created the model of the modern supermarket back in those years.

He had a sense of humor, and when asked why he named his stores Piggly Wiggly, he would answer, “So people would ask me about it like you just did.”

By 1922, there were already 1,200 Piggly Wiggly stores, mostly located in the southern and southwestern states, although there were a few stores in the north. About 650 of them were owned directly by Piggly Wiggly Stores Inc., the rest were licensed.

In June of that year, Saunders' company became a public company. Piggly Wiggly stock appeared on the New York Stock Exchange at a price of about fifty dollars. That figure remained steady until November, when some Piggly Wiggly stores in New York, New Jersey and Connecticut experienced serious problems. These were shops operating under license. They did not belong to Saunders, and it would seem that their difficulties should have nothing to do with him. But when a rumor spread that a number of Piggly Wiggly stores were on the verge of liquidation, the bears had their eyes on the entire company. They believed that since its shares had not risen since listing on the stock exchange, rumors about the company's difficulties could lead to a decrease in their price. The bears began selling, rumors began to spread, and the stock actually dropped to forty dollars.

Saunders, who had never dealt with listed securities before Piggly Wiggly, decided to prop up his stock price. He put his entire personal fortune on the line, plus ten million dollars borrowed from Southern banks, just to beat the Yankees at their own game. He wanted to settle scores with the Northerners for Robert E. Lee, for Gettysburg, for the burning of Atlanta and for Gone with the Wind. These Southerners, if you haven't noticed before, are a special breed of people.

Years later, stories were told of Saunders heading north with a valise stuffed with ten million dollars in small checks. He always denied it. However, whether he stayed in the South or actually came to New York, the fact remains that he hired the legendary Jess Livermore to lead his battle with the Bears. It was an odd choice to say the least, since Livermore was probably the most famous Bear of his time.

Of the two hundred thousand shares that were publicly traded, Saunders bought thirty-three thousand on the first day. A week later he already had 105 thousand. At the same time, he transferred the battle to the pages of newspapers, which he bought in whole pages, so that no one would have any doubts about who was good and who was bad. One ad was headlined: “Will the sharpie rule?” Its text, quite consistent with the style of a man who could call his business Piggly Wiggly, read: “He rides in on a white horse. Bluff is his armor, protecting a vile and cowardly heart. Fraud and overexposure of his helmet. His spurs ring with treachery. Destruction and ruin are carried by the sound of his horse's hooves. Will honest business really retreat? Are we going to tremble with fear? Are we really going to become prey to stock market speculators?”

By February 1923, Saunders had raised his stock to seventy dollars. And then he turned to the newspapers again. His offer was stunning. He said he would sell the shares to anyone for fifty-five dollars. At first glance, it looked as if he was giving away fifteen dollars per share. It seemed like he was just a little crazy.

“Chances! Possibilities! - the advertisement screamed. - They are knocking on your door! They're knocking! They're knocking! Can't you hear? Do you really not understand? What are you waiting for? Why are you inactive? Didn't the new Daniel appear and the lions tear him to pieces? Did the new Joseph come with his parables and did they turn out to be understandable? Was a new Moses born and promised a new promised land? Why then, skeptics ask, is Clarence Saunders so generous to the public?

Saunders was very far from mad. He simply invented a new gambit in the stock market chess game. He understood what could happen in the endgame and did not want to repeat Ryan's mistake. The last thing he wanted was to be left with a pile of worthless shares that couldn't be sold. By offering about 25% of the shares for sale now, even before he was declared the winner, he expected to save a lot of money by doing so when he finally won the first prize. But at the same time, he needed to prevent these stocks from falling into the hands of the bears, and not give them a weapon against him. The trick was that he offered shares in installments. He wanted to receive twenty-five dollars immediately, and spread the remaining three ten-dollar payments over the next nine months, only after which he intended to transfer the stock certificates to the buyers. Thus, he would not only be able to pay off the debt to the banks (this very large debt was due to expire in September), but also not release shares to the market until the end of the year.

It was completely unusual. The NYFBA has never encountered such tactics before. Even Livermore admitted to being somewhat embarrassed.

Although the public was quite skeptical of his proposal, Saunders repeated it in March.

Now Livermore has already expressed his attitude to what is happening. As Saunders put it, Livermore “gave me the impression of a man who was somewhat frightened of my financial situation and did not want to be involved in any stock exchange scandals.” The paths of these two diverged.

By Monday, March 19, Saunders, at the head of the rebel southerners, had the right to claim 95% of the shares of Piggly Runaway. It was already clear that he had won. Therefore, the next day he demanded that the debtors provide him with all the shares belonging to him before noon on Wednesday. The price initially jumped to $124, but soon settled at eighty-two dollars due to rumors that the New York Stock Exchange was preparing to suspend trading in the stock.

On Wednesday morning before the opening, the New York Stock Exchange did announce that it was suspending trading in Piggly Wiggly shares, which automatically delayed the time for their return to Saunders. Saunders later explained: “Basically, they tried to take me by the throat, and so I decided to knock the stools out from under the asses of this gang of hustlers and market speculators. The question was: either I would survive and preserve my business and the fortunes of my friends, or I would be thrown into the trash heap and remembered as a fool from Tennessee. The result was that the methods of the arrogant and seemingly invulnerable Wall Street tycoons were overthrown by well-laid plans and swift action.”

He said that, regardless of any decisions by the New York Stock Exchange, he is moving the deadline for the bears to grant shares to Thursday, March 22. Moreover, before this date the share price will be $150, and after that it will be $250. In response, the New York Stock Exchange approved a ban on transactions with Piggly Wiggly shares and gave permission to the “bears” to settle their affairs until Monday, March 26.

There were very few shares coming in on Thursday. Most of the debtors went in search of those widows and orphans who kept fifty-five dollar shares of Piggly Wiggly in their stockings, and would gladly part with them for the sake of some profit. The Bears knew that if they could get enough stock this way, they could pay Saunders in stock and save their own skins.

On Friday, Saunders realized what was happening and changed tactics once again. Now he announced that he would accept shares not at 250, but at one hundred dollars. He was least interested in being paid in shares. He needed real money.

The mousetrap swung open and the “bears” slipped out. Some paid a hundred dollars, but most preferred to buy shares with the same money and give Saunders a paper instead of money. For the “bears” this represented a double benefit, since it made it possible to significantly weaken his position. Meanwhile, in September he had to pay off the banks, to which he owed five million. He had no more cash - only shares of Piggly Wiggly remained. But now it was no longer possible to sell them.

Saunders again decided to resort to the help of the press. He again bought up advertising pages and began offering shares at fifty-five dollars. The reaction was pathetic. Without losing his entrepreneurial spirit, he organized a charity campaign to distribute shares. He appealed to Southern civic pride. Boy Scouts and respectable matrons scoured the entire Memphis area, carrying stock from house to house as if it were Addis's brushes. The campaign was sponsored by the Chamber of Commerce, and even the American Legion took part. The motto of the new battle with the northerners was the slogan “Piggly Wiggly shares - to every home.” But unlike the slogan “a chicken in every pot,” it didn’t work. Local bankers were too suspicious and preferred to stay away. In addition, one Memphis newspaper expressed bewilderment that Saunders was spending money on the Pink Palace while half the city was working for him for free to distribute the stock. In short, the charity campaign failed miserably.

Having failed with the shares, Saunders began to sell stores, trying to at least pay off the banks in this way. But this was already a bad omen and did not bode well. He beat the Yankees on their field, but somehow it turned out that he ended up losing. By mid-August, Saunders gracefully admitted defeat and resigned as president of the company. He also parted with all his personal property, including the Pink Palace. The company's shares were sold at auction. They went for one dollar. The Pink Palace became the municipal property of the city of Memphis. The city authorities completed its construction and set up a museum in it.

And Clarence Saunders was declared bankrupt.

For several years he tried to rise from the dust. In 1926, a federal grand jury indicted him for mail fraud. They didn't like the way he ran his fifty-five dollar shares through the mail. But soon this matter was closed. Two years later, with the support of several friends, he opened a new chain of grocery stores with the even stranger name of Clarence Saunders, sole proprietor of his own name. The shops. Incorporated." The trade took off, he was rich again, moved into a new mansion, and even became a sponsor of the Memphis professional football team, the Soul Owner Tigers. Then came October 1929 and the stock market crash. By 1930, the Great Depression had bankrupted his stores and Saunders was once again bankrupt.

He rose twice, fell twice, and nevertheless decided to try his luck a third time.

He clearly did not take into account the sad fate of his previous extravagant names like “Piggly Wiggly” and “Clerence Saunders, sole owner of his own name. The shops. Incorporated" and this time performed under the name "Kiduzl". These were supermarkets again, but with some innovations in terms of automation. Instead of displaying items on counters, Saunders hid them behind small glass doors. Each buyer was given a special key with a built-in mechanism, which, when the glass door was opened, punched the price of the goods on the ticker tape. At the control, the seller took this tape, inserted it into the counter and totaled the purchases, and meanwhile the purchases passed along the conveyor and were packed into bags or boxes for the convenience of buyers.

Can you imagine how amazed Clarence Saunders was when this idea didn't work?

Then he also came up with “foodelectric”, a supermarket in which everything was supposed to be done like in “Kiduzl”, but only without a salesperson in control.

Saunders died in 1953, before he could bring this plan to fruition.

Richard Whitney was much more careful in choosing titles.

Richard had no relation to William S. Whitney. His ancestors were descended from the families of the first American settlers, who sailed from England in 1630 on the Arenelle, a ship that followed the Mayflower across the ocean. Richard was born in 1888 into the family of a Boston banker who had long-standing ties to the House of Morgan, the legendary investment bank of J.P. Morgan. Having received degrees from Groton and Harvard universities by 1912, Richard borrowed money from his family to buy a place on the NYFB, and already in 1916 he created Richard Whitney & Co. He was mainly involved in securities. His elder brother George, one of the ablest and most respected partners in the House of Morgan, secured his future by marrying the elder Morgan's daughter. Richard followed his brother's example and, in turn, secured his social position by marrying a girl from a wealthy family who belonged to the Union League Club. With all the necessary connections, Richard quickly became known as the “Morgan Broker.” But unfortunately, the high-profile title did not give him any real income.

And this tall, distinguished man lived large. He was always very well-groomed and impeccably dressed. He spent the work week in his New York home, and on weekends he usually went to New Jersey. There he had an estate of 500 acres, where he was engaged in breeding Ayrshire cattle and hound hunting, which naturally required a large staff of servants. It was also known that from time to time he would sneak into Baltimore on dates with a certain lady for whom he provided a certain standard of living. He once admitted that his monthly expenses exceeded five thousand dollars even during the Great Depression. And this figure most likely indicated only the lower limit.

By the age of forty, Whitney had taken the post of vice president of the NYFB. But his snobbery, arrogance, stubbornness and self-absorption earned him the reputation among ordinary members of the exchange as “the most unpopular of all who have ever held this post.” And although he moved in the highest spheres - he dined at the White House with President Hoover, often met in New York with the Morgans, Bernard Baruch, the head of General Motors Jacob Raskob, etc. - his business qualities were certainly lower than the level that his social connections implied.

To call a spade a spade, Richard Whitney was essentially a fraud.

No matter what he did, he never had enough money to maintain the standard of living to which he was accustomed. And he preferred to solve his financial problems mainly with the help of loans and not very honest deals. He began borrowing money from his brother as early as 1921. However, he repaid most of his debts from that time. But by the middle of the decade, the loan amounts began to increase, and he repaid them less and less. In 1926, Richard extorted $100,000 from George to buy a house in New York. Two years later, he “borrowed” 340 thousand dollars from him for some dubious investments, which his brother never saw again. However, the next year, George and a broker he knew lent Richard almost six hundred thousand dollars more to buy shares in several risky businesses. This money was also not returned.

In any case, no one could accuse this man of being a shallow swimmer.

Among other financial “castles in the air,” Richard acquired a large number of shares in a Florida agricultural fertilizer company. But these shares soon turned into manure. He donated approximately the same amount to a Florida mining concern. And again irrevocably.

Constant loans allowed Richard to lead a luxurious lifestyle. But with each new loan, George became more and more worried that sooner or later one of the older Morgans would see the real state of affairs. And then Richard’s reputation will go to hell, and with it his business. Naturally, George considered himself responsible for his younger brother's future. When Richard asked George for almost half a million more dollars in 1929 to buy himself a new position on the stock exchange, George wrote Richard a letter in which he tried to explain how he should handle the money. He tried to warn his brother from the obvious danger. However, I have enclosed the check.

Throughout 1929, Whitney's financial situation worsened further. He was already almost two million dollars in debt. And just at this time, NIFC President Edward Harriman Simmons, whose term in this post was already coming to an end, announced that he considered Whitney the only candidate who could run for this position.

The "Morgan Broker" has now emerged as a likely heir. This opened up opportunities for him to take out new loans.

Fate decreed that during the October stock market crash, the elderly Simmons and his young wife were enjoying the delights of a honeymoon in the Hawaiian Islands. Moreover, it was known that before leaving he sold a large number of shares. So when all this chaos began, Dick Whitney turned out to be the actual president of the exchange. And oddly enough, while the ashes of the exchange were smoldering at his feet, he unexpectedly began to be considered a hero. After major disasters, heroes always appear, and there is obviously a reason for this. Admiration for the hero's deeds helps people survive the horror of the tragedy. The New York press (mainly tabloids) claimed that on Black Thursday, October 24, Dick Whitney personally saved US Steel. If you believe the newspapers, then it was Whitney who, with his head held high, came to the collapsing stock exchange and purchased a large batch of shares of this company at a price higher than the market price. According to one version, Whitney, at the direction of a consortium of banks, spent no less than $250 million to restore confidence in the exchange. Another, later and less romantic version suggests that in fact nothing of the kind took place - he tried to spend the money, but was never able to.

However, when it comes to heroes, it is not so important how everything actually happened. The legend is important, and legends are built on what people believe. And as long as the press glorified him and people believed what they read in the press, it was not difficult for him to become a hero. Perhaps at that time he was the only suitable person for this role. Or maybe he really could have saved US Steel. The main thing is that America wanted to believe it. With an innate penchant for self-promotion, Whitney took all the praise for granted, while managing to hide the fact that the crisis had torn another $2 million hole in his pocket.

In the spring of 1930, he successfully marched to the throne as president of the NYFB for the first of four one-year terms that followed. However, within a year he found himself in such a difficult financial situation that he literally fell into despair. His company, which once operated in millions, was valued at a measly thirty-six thousand dollars.

Once again, Whitney decided he could save the day with a half-million dollar loan.

But like most loans, this one also disappeared very quickly.

Around this time, Whitney came up with an investment plan that seemed almost reasonable. Richard understood that sooner or later Prohibition would be repealed and, when this happened, a boom in alcohol would begin. So he made a large investment in a New Jersey company that was about to make big profits from an apple vodka called Jersey Lightning. This “noble” drink was widely produced at home before the abolition of Prohibition, and Whitney expected that after the abolition of Prohibition, with proper advertising and competent marketing, Jersey Lightning could well become a national drink. Richard could have been wrong about other things, but he was right about the abolition of Prohibition. This happened in 1934, and in the first few weeks the share price of Whitney Distilled Liquors Corp. rose to forty-five dollars. He could sell them left and right and actually made some money from it. But in America, a taste for real drinks quickly began to appear. Huge stocks of whiskey have accumulated in Canadian warehouses, ready to flood thirsty America. And the more Scotch whiskey was sent across the border, the faster they forgot about the Jersey Lightning. Stock prices fell to ten dollars. Richard Whitney lost again.

He found himself in that classic situation where he was forced to take out new loans just to pay the interest on the old ones. Apart from this game of “catch-up”, he now had nothing left to do. The money that came into the company's client accounts was too tempting and soon migrated to Whitney's personal accounts. Twice he used client property entrusted to him to secure loans. In 1936, while treasurer of the New York Yacht Club, he embezzled $150,000 in club securities, which he used as collateral for a $200,000 bank loan. He then used in the same manner more than a million dollars in securities and cash belonging to the New York Stock Exchange Incentive Fund.

First borrowing and then stealing, Whitney tried in vain to improve matters. Each such step forward threw him two steps back. He mortgaged everything he could and made another half a million dollars from his houses and racehorses. But that didn't help either. The financial quagmire sucked him deeper and deeper. Millions were squandered. Now it's the turn of fixed assets.

It is believed that between November 1937 and February 1938, Whitney made over one hundred loans totaling more than twenty-seven million dollars. He owed about three million to his brother and about half of that amount to his other friends. Moreover, most of these loans were issued to him without any collateral. “For beautiful eyes,” as he called it. One of the studies about his ruin mentions that towards the end, Whitney could approach a complete stranger on the stock exchange and ask for a loan of one hundred thousand dollars.

In the end there was a reckoning.

Two days later, New York District Attorney Thomas E. Dewey, the man who nearly became President of the United States, filed charges against Whitney. This was immediately followed by expulsion from the NYSE. This shocked America. The hero was toppled from his pedestal. The Nation magazine wrote: "Even if J. P. Morgan had been caught trying to steal money from the collection plate at St. John's Cathedral, it could not have embarrassed Wall Street more."

Dewey's indictment was followed by a guilty verdict from the criminal court.

April had not yet ended, and Richard Whitney had already settled into a building overlooking the Hudson River in Ossening, New York. For the next three years, his address was Sing Sing Prison.

After his release from prison, he lived very quietly, not to say humbly, and died in 1974. Its financial collapse marked the end of an era. However, its story is unique to a certain extent. In those years when everyone with money and social status could without much effort increase both, when all sorts of illegal transactions and speculation in securities flourished on the New York Stock Exchange, fail to take advantage of all this, as the “hero of Black Thursday” managed to do. , meant raising the bar of human stupidity and mediocrity to new heights.

The final calculations showed that in total Dick Whitney had wasted more than six million dollars.

The British have been appearing in our story since the 20s, with a rich history of financial collapses behind them.

The first was related to the South Sea scam.

At the turn of the 17th and 18th centuries, Parliament established several companies, giving them exclusive rights to develop new lands, trade, banking and insurance, so that these companies would take on part of the public debt. According to legislators, this was supposed to strengthen Britain's status as a world trading power, as well as somewhat ease the burden of taxes.

In 1711, Robert Harley, whose name is today associated with the London street where private clinics and doctors' offices are located, was Chancellor of the Exchequer. It was he who devised a plan for reducing the national debt by creating a company with a combined capital called the Manager and Company of British Merchants. Enterprise and Fisheries in the South Seas and Other Parts of the Americas." Through Parliament, Harley secured for the company exclusive trading and fishing rights in the Caribbean, South America and the South Pacific, which promised fabulous profits. In exchange for these rights, the company agreed to assume ten million pounds of the national debt.

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8. Cinemalogy: “Wall Street”

They say that after the crash of 1929, all exchanges adopted rules that should prevent this from happening in the future. However, no rules seem to have been developed for economic analysts and experts. But in vain.

These days 86 years ago, October 24-29, 1929, the Great Stock Crash occurred on Wall Street in New York, which gave rise to the Great Depression - a global economic crisis that affected half the world and was to some extent overcome only thanks to the New Deal. F. D. Roosevelt and the beginning of World War II.

There are probably no adults in the world who have never heard of this event, which left a deep mark in the memory of mankind. Many people also know the main milestones of this grandiose stock exchange collapse: “Black Thursday” on October 24 - the beginning of panic on the stock exchange and the fall in stock prices, “Black Friday” on October 25 - a continuation of the fall, “Black Monday” on October 28 - another jump in stock prices downwards and “Black Tuesday” on October 29 - a complete collapse, 16 million shares worth $10 billion were forced to be sold - 2 times more than the United States spent on the First World War.

Some people know that the crash of 1929 was preceded by an unprecedented increase in speculation on the stock exchange, in which, in the pursuit of easy money and the “long dollar,” millions of ordinary Americans, who did not understand economics very well, but had great confidence, took part (with borrowed money!) speeches by economists and experts, as well as advertising the opportunity to get rich quickly by playing on the stock exchange.

And very few people want to understand that the responsibility for the Stock Market Crash of 1929 and the Great Depression that followed it lies with those same economists and experts, the expert community, as they would say now, who categorically did not want to notice reality and, in spite of everything, continued to deceive citizens before, during and long after the stock market crash.

Quotes from “experts” “War and Peace” - The reader can himself guess the motives that prompted these experts to speak out in this way.

Everything is fine, beautiful marquise...

“There will be no more crashes in our time,” John Maynard Keynes, 1927.

“I cannot help but object to those who claim that we live in a fool’s paradise, and the prosperity of our country will inevitably decline in the near future,” H.H.H. Simmens, President of the New York Stock Exchange, January 12, 1928.

“There will be no end to our continued prosperity,” Myron E. Forbes, president of Pierce Arrow Motor Car Co., January 12, 1928.

“Never before the Congress of the United States, assembled to consider the state of affairs in the country, was such a pleasant picture revealed as today. In domestic affairs we see peace and contentment... and the longest period of prosperity in history. In international affairs, peace and goodwill based on mutual understanding." - Calvin Coolidge, December 4, 1928.

“Security prices may fall, but there will be no catastrophe,” Irving Fisher, prominent American economist, New York Times, September 5, 1929.

“The situation in American industry is excellent. Markets are in excellent condition." - Charles Mitchell, President of National City Bank, October 15, 1929.

“The quotes have risen, so to speak, to a wide mountain plateau. It is unlikely that they will fall by 50 or 60 points in the near future, or even at all, as the bears predict. I think the stock market will rise considerably in the coming months." - Irving Fisher, prominent American economist, October 17, 1929.

“The fundamental economy of the country—the production and distribution of goods—is on a sound and favorable basis,” US President Herbert Hoover, October 24, 1929.

“This decline will not have a significant effect on the economy,” Arthur Reynolds, president of the Continental Illinois Bank of Chicago, October 24, 1929.

The stock market is "generally sound" and "from a financial point of view the state of affairs is better than at any time in recent months... The worst is behind us," Statement of the 35 Largest Banking Houses on Wall Street, October 24, 1929.

“Yesterday's fall will not be repeated... I am not afraid of such a decline,” Arthur A. Losby, President of the Equitable Trust Company, October 25, 1929.

“We believe that the fundamentals of Wall Street are unaffected, and those who can afford to pay outright will get good shares cheaply,” Goodboy & Company Bulletin, quoted in The New York Times, October 25, 1929.

“There are smart people who are buying stocks now... Unless there is a panic, and no one seriously believes in it, the stocks will not go lower,” R. W. McNeil, financial analyst, October 28, 1929.

“Now is the time to buy shares. Now is the time to remember the words of J.P. Morgan... that anyone in America who is short will go broke. Perhaps in a few days there will be a bear panic rather than a bull panic. There will probably not be such low prices for many years for many of the stocks that are now being sold hysterically." - R. W. McNeil, market analyst, quoted in the New York Herald Tribune, October 30, 1929.

“Buy reliable, proven stocks, and you won’t regret it,” - Bulletin E.A. Pierce, quoted in the New York Herald Tribune, October 30, 1929.

“Prices for securities are falling, not for real goods and services... America is now in its eighth year of economic recovery. Previous such periods have lasted an average of eleven years, which means we still have three years left before the collapse." - Stuart Chase, American economist and writer, New York Herald Tribune, November 1, 1929.

“The Wall Street Crash does not mean that there will be a general, or even a severe, economic downturn... For six years, American business devoted a significant part of its attention, its energy and its resources to the speculative game... And now this inappropriate, unnecessary and dangerous adventure is over . Business returned home to its work, thank God, uninjured, healthy in mind and body, and stronger financially than ever before,” Business Week, November 2, 1929.

“Although stocks have fallen greatly in value, we believe that the decline is temporary and not the beginning of an economic downturn which will lead to a prolonged depression...” - Harvard Economic Society, November 2, 1929.

“We do not believe in a serious recession: according to our forecasts, the economic recovery will begin in the spring, and the situation will become even better in the fall,” Harvard Economic Society, November 10, 1929.

“The downturn in the stock market is unlikely to last long, but will probably end within a few days,” Irving Fisher, professor of economics at Yale University, November 14, 1929.

“Panic on Wall Street will have no effect in most cities of our country,” - Paul Block, president of the Block newspaper holding company, editorial, November 15, 1929.

“It is safe to say that the financial storm is over,” Bernard Baruch, telegram to Winston Churchill, November 15, 1929.

“I do not see anything threatening or pessimistic in the present situation ... I am confident that the economic recovery will come in the spring, and the country will develop steadily during the coming year” - Andrew W. Mellon, US Secretary of the Treasury, December 31, 1929.

“I am convinced that by the measures taken we have restored confidence,” Herbert Hoover, December 1929.

“1930 will be an excellent year for employment,” U.S. Department of Labor, New Year's Forecast, December 1929.

“Stocks have a bright prospect, at least for the immediate future,” Irving Fisher, Ph.D., early 1930.

“There are signs that the worst phase of the recession is behind us...” - Harvard Economic Society, January 18, 1930.

“There is absolutely nothing to worry about now,” Andrew Mellon, US Secretary of the Treasury, February 1930.

“The spring of 1930 saw the end of a period of serious concern...American business is gradually returning to normal levels of prosperity,” Julius Burns, head of President Hoover's National Business Research Conference, March 16, 1930.

"Prospects continue to be favorable..." - Harvard Economic Society, March 29, 1930.

“Although the disaster occurred only six months ago, I am confident that the worst is behind us, and with continued joint efforts we will quickly overcome the recession. Banks and industry are almost unaffected. This danger also passed safely,” Herbert Hoover, US President, May 1, 1930.

“By May or June the spring recovery which we predicted in the November and December bulletins of last year must appear...” - Harvard Economic Society, May 17, 1930

“Gentlemen, you are sixty days late. The Depression is over." - Herbert Hoover, US President - in response to a delegation that petitioned for a public works program to speed economic recovery, June 1930.

“The chaotic and contradictory movements of business must soon give way to a continued expansion...” - Harvard Economic Society, June 28, 1930

“The forces of the present depression are already at their wane...” - Harvard Economic Society, August 30, 1930

“We are approaching the end of the downward phase of the depression process,” Harvard Economic Society, November 15, 1930.

However, the quotes above... are all too familiar. And not because we all know the story of the Stock Market Crash of 1929 so well, but because similar phrases, together or separately, can be read in any economic review, in any article or note on economics in the media today, although they are written by new people - probably the great-grandchildren of those legendary experts and economists who “accompanied” the beginning of the Great Depression in the USA. And this leads to dark thoughts...

American tragedy

The Great Depression was preceded by the events of the US stock market crash of 1929: a collapse in stock prices that began on Black Thursday, October 24, 1929. After a short-term slight rise in prices on October 25, the fall took on catastrophic proportions on Black Monday (October 28) and Black Tuesday (October 29). October 29, 1929 is the day of the Wall Street stock market crash.

"Bull market"

October 24, 1929 went down in US history as “Black Thursday”. But the unprecedented drop in shares on the New York Stock Exchange was not a bolt from the blue. Financiers knew in advance about the inevitable consequences of a speculative bull market. For example, the co-owner of the largest investment company Merrill, Lynch & Co, Charles Merrill, got rid of his shares at the peak of their value a year and a half before the stock market crash. Ordinary shareholders, like the familiar victims of financial pyramids, were left with nothing.

What was the background to the dramatic events of the late 20s? Having risen from military orders of the First World War, the American economy faced a recession after their cancellation. The practice of margin loans made it possible to buy company shares for a tenth of the cost. For $100, people were sold $1,000 worth of securities, but the loan could be required to be repaid at any time. If the broker made a margin call, the debt had to be repaid within 24 hours. This could be done by selling shares purchased on credit. But when demands for payment on margin loans became widespread, about 13 million debt shares were dumped on the stock exchange in one day. And when pillars like the U.S. collapsed. Steel, General Motors, Westinghouse, Paramount, Warner Bros and Fox, almost 16.4 million shares were dumped during the day, the issuers of which lost about $9 billion. This figure was twice the amount of all the money in American circulation! In total, by July 1932, shareholders had lost $74 billion - three times more than government spending on the First World War. From 1929 to 1933, American national income fell by more than half: from $87.8 billion to $40.2 billion. All public institutions without exception experienced the collapse, 135 thousand industrial, trading and financial companies closed. Due to a lack of funds, banks were forced to sell assets, of which 16 thousand went bankrupt, leaving their clients with nothing. International bankers warmed their hands to the general collapse, buying up competitors and large companies for pennies.

Devastation and unemployment

According to the American Federation of Labor, in 1932 only 10% of workers remained employed. By the beginning of 1933, 16-17 million Americans were left without jobs and livelihoods. If you count family members, then this is completely unemployed France or Great Britain.

There was no government support for the unemployed, the authorities dumped this burden on state authorities and poor municipalities (most industrial cities went bankrupt), and bankers were supported with funds from the treasury: for example, the Trust Company of Chicago and Central Republic Bank received $90 million in financial assistance and did not had to pledge their assets. It was only in the third winter of the Great Depression, when famine set in, that states were lent $30 million to pay unemployment benefits, but the federal aid program was soon curtailed again.

To prevent a fall in prices for agricultural products, the state allocated $500 million for the purchase of wheat and cotton. But this did not save a million farmers from ruin, whose products became unaffordable for the impoverished population.

Not only workers who lost their earnings, but also the middle class who lost their savings moved into the category of lumpen. The homeless dreamed of being in prison for at least a day so they could eat some soup. Unable to pay for housing, people left their homes and moved into shacks. Outside the city limits, families with children spent the winter in cold and hunger in hastily cobbled together shacks, while the owners of empty houses razed them to the ground to avoid paying property taxes. This is what Bethleem Steel did, for example, when it evicted 6,000 laid-off workers from their apartments and destroyed their housing, which it itself had built.

And the children must die

In the interests of agricultural capital, 10 million hectares of land were plowed with harvest and 6.5 million pigs were destroyed.
In his revealing novel The Grapes of Wrath, future Nobel laureate John Steinbeck described the tragedy this way: “What the roots of the vines and trees worked for must be destroyed so that prices do not fall. Whole wagonloads of oranges are dumped on the ground. People travel miles to pick up discarded fruit, but this is completely unacceptable! Who will pay twenty cents a dozen for oranges when you can go out of town and get them for free? And the orange mountains are filled with kerosene from a hose, and those who do this hate themselves for such a crime, they hate the people who come to pick the fruit. Millions of hungry people need fruit, and the golden mountains are watered with kerosene. Burn coffee in steamer fireboxes. Burn corn instead of wood. Throw potatoes into the rivers and place guards along the banks, otherwise the hungry will catch them all. Slaughter the pigs and bury the carcasses in the ground, and let the soil become saturated with rot. Malnourished children must die because oranges are not profitable. This is a crime that has no name. Anger brews in the eyes of the hungry.”

The 1936 document is a historical photograph of a mother of seven with the photographer's original comment: “This woman is 32, they eat vegetables that were left in the fields after frost, and birds that the children manage to kill. They lived in a tent. We had to sell the tent to buy food for the children.”

Missing millions

People left penniless and homeless were officially called “migrants,” and there were at least 4 million of these Americans who wandered in search of a better life.

100 thousand Americans applied for 6 thousand jobs on construction sites in the USSR. Many were planning to leave for the country of socialism forever. “Left-wing” sentiments alarmed the authorities in the United States, where by the end of 1932 fears about a possible revolution grew stronger.

To this day, historians have not been able to find statistical data for 1932 - they are safely hidden or destroyed. It was officially announced that no statistics were kept that year. But later reports suggest that in one year (1932-1933) America was missing 7 million citizens! At the turn of 1930-31, the population growth rate fell exactly by half and only a decade later returned to its previous value. From the dynamics of population growth in the United States, it turns out that from 1931 to 1940 the country lost more than 8.5 million people. Assuming normal demographic trends continued, the minimum population of the United States in 1940 should have been about 142 million, but was actually less than 131.5 million. Of these, only 3 million can be attributed to migration. Where did the rest of the millions go? Demographers will answer that such a shortcoming is possible only as a result of mass mortality. The American authorities are silent about this, but older generations remember.

American repression

America had its own Gulag (labor camps), dispossession of kulaks, and expropriation of property. Any historian would accuse the “New Deal” of President Franklin Roosevelt, who was later praised, of a retreat from democratic norms and the principles of a market economy.

In 1933, two laws were passed that had nothing to do with the rules of free enterprise. The monopolization of the market was led to by the Industrial Recovery Act, which provided for the fixation of prices for products and the distribution of sales markets. Small and medium-sized businesses were sacrificed to large monopolies. And the Agricultural Adjustment Act provided for increased food prices with compensation to farmers for reducing crops and livestock. In 1935, the Supreme Court ruled both laws unconstitutional and restrictive of competition.

Only 5 years after the start of the crisis, in August 1935, a law on unemployment and old-age insurance was adopted, which not everyone lived to see. In addition, the adopted law did not apply to a number of categories of employed Americans: in particular, farmers. As in the Soviet Union, the state did not provide pensions to agricultural workers in America, but in our country collective farms paid them.

Do you know about the million farming families (5 million people) who have been forced off their land because they owe money to banks? This is 2.5 times more than those affected by “dekulakization” in Russia, caused by the same need to consolidate commercial agricultural production for its pre-war growth. But while our “special settlers” were provided with land or work in a new place, in America people were evicted to nowhere, and every sixth farmer, according to some studies, fell victim to hunger.

The American WPA (Works Progress Administration under the leadership of the Minister of the Interior G. Ickes) and CWA (Civil Works Administration) had a striking resemblance to the Stalinist Gulag. In order not to pay benefits to the unemployed, they were sent to hard labor to build canals, bridges and roads in hard-to-reach areas with difficult working conditions and pittance pay (of the $30 accrued salary, $25 were deductions). At one time, 3.3 million participants in public works fed malaria mosquitoes, and in total, 8.5 million “free slaves” passed through the American Gulag in 1933-1939, not counting prisoners.

Legalized robbery

Repressive measures were also envisaged for citizens evading the surrender of gold. Franklin Roosevelt issued a decree on its confiscation and ban on export in 1933 and gave less than three weeks for the exchange of coins and bars: on April 5, the decree was issued, and by May 1, all individuals and legal entities, including foreign ones, had to exchange gold for paper money according to priced at $20.66 per troy ounce. For disobedience - a fine of up to $10,000 and/or a prison term of up to 10 years. There have been many cases of persecution for hiding gold and attempts to transact with it. All securities and contracts denominated in gold were declared illegal - they could only be paid in paper money at the prescribed exchange rate. And the gold confiscated from the population ended up in the national depository of the Federal Reserve System, created by the end of 1936. Its price rose sharply to $35 per ounce.

Roosevelt said the purpose of this financial action was to support the banking industry and prevent the export of gold from the country. But a similar decision also applied to government obligations tied to gold reserves before the confiscation law was issued. This meant the actual refusal of the state to fulfill financial obligations.

The dollar stabilized at 59% of the original rate. It turned out to be devalued by 41%.

The price of gold was fixed until 1971. The main banking precious metal has ceased to serve as a means of payment in the United States. Having legally abandoned the gold standard, the state resumed the circulation of securities denominated in gold only in 1964, but for another 10 years it was impossible to physically obtain gold from them (commodity turnover of gold was restored only in 1974).

Officially, the economic crisis in the United States ended in 1940, when the country reached the levels of 1929. But the unemployment rate was still 14% (there were 7.5 million extra people). In reality, America will improve its affairs only after World War II, having traditionally received a resource for development from the war.

years and took on catastrophic proportions in the years that followed Black Monday(October 28) and Black Tuesday(29th of October). This stock market crash, also known as Wall Street crash, marked the beginning of the Great Depression.

While millions of people lost their entire livelihoods to the stock market, businesses lost lines of credit and closed, causing unemployment to rise.

The stock market crash of 1929 had a devastating impact on an already poor economic situation and was the most significant cause of the Great Depression.

The crash of 1929 served as a lesson for the financial world, and since then many stock exchanges have practiced suspending trading if prices fall too quickly. Thanks to this practice, the consequences of the 1987 stock market crash were significantly milder than in 1929.

see also

Links

• Black Thursday 1929 (in English)
• Stock market crash of 1929 (in English)

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“Unlike Europe, the United States emerged from the war (World War I - Gazeta.Ru) stronger than it had ever been before,” the famous American economic historian writes in his book “A Brief Economic History from the Paleolithic to the Present Day.” Rondo Cameron. — If we talk about the purely economic side of the issue, the United States has turned from a net debtor into a net creditor, won new markets at home and abroad from European producers, and also achieved a highly favorable balance of trade. America, with its deep markets, growing population and rapid technological development, seemed to have found the keys to continued prosperity."

Indeed, during the First World War, the Allies owed the United States about $10 billion, and taking into account accrued interest, by 1922 this amount had grown to $11.6 billion (in terms of today's prices, $158 billion). The amount is not amazing in modern times, but it should be borne in mind that the entire GNP of the United States at that time was less than $50 billion.

This margin of safety, coupled with the accumulated industrial potential, provided the United States with almost a decade of continuous economic boom. The rapid growth of the country's population, which escaped the horrors of war, and the rapid increase in national wealth, the total value of which grew from $350 billion in 1922 to $450 billion in 1929, convinced post-war America that a “golden age” had arrived. In history these years are known as the “Era of Prosperity”.

A particularly important contribution to the prosperity of the 1920s was made by the emergence of new industries, primarily the automobile industry. In the 1920s, the car fleet in the United States grew by 250%, reaching 26 million by 1929 (out of a population of 120 million people). The auto industry employed one in 12 American workers.

The rapidly growing automobile industry has generated demand for products from related industries - the production of steel, rubber, glass, oil production and refining received a powerful incentive.

The widespread use of electricity also played a huge role. The electrified homes of Americans began to be filled with hitherto unseen appliances - refrigerators, radios, etc.

For those who could not afford to buy all these things at once, selling on credit was widely practiced. And to convince consumers of the need to purchase everything at once, modern advertising appeared.

The growth of industrial production was accompanied by a rise in the value of company shares, which became the coveted objects of millions of rapidly growing middle-class Americans. Securities were usually purchased on credit, which banks willingly provided at low interest rates. As a result, the Dow Jones Industrial Average rose from 80 points in the early 20s to 300 by the end of 1928. At its peak, September 3, 1929, it was 381 points.

Chronicle of a diving market

The first alarm bell sounded in the summer of 1929, when fraud was discovered in the Florida land market (another item of feverish demand). It turned out that, at best, swamps were sold under the guise of first-class land, and sometimes a plot that had managed to change a dozen owners turned out to be the ocean floor several meters under water.

As a result of this news, investors somewhat lost their taste for risk, and on September 5, shares on the New York stock exchange fell in price by 9 points. However, the thirst for profit took over, and by evening growth resumed.

The prevailing sentiments in society were best expressed by one of the most famous American economists of that time. Just days before the crash, he said the stock market was not overvalued and the stock exchange was in for at least a few months of growth. These words even made it into the headline of the editorial, which caused the growth of the depressed market.

However, it was no longer possible to save the inflated bubble.

On October 19, it became known that Secretary of Commerce Robert Lamont could not find $100 thousand to maintain the Corsair yacht, which he had recently donated to the government. The newspapers wrote about a very weak stock market. The trades ended in the red.

The next day the situation got even worse. 3,488,100 shares changed hands. Blue chips suffered serious losses, and the most popular stocks among speculators went into a steep dive.

Further events are colorfully described in his book “The Great Crash of 1929” (1929: The Great Crash) by the famous American economist John Kenneth Galbraith: “Thursday, October 24, was the first of those days that would later be dubbed a period of panic. And such an assessment is perhaps justified, given the state of uncertainty, fear and complete misunderstanding of the situation that gripped the public. 12,894,650 shares were traded that day, most of them for next to nothing. Of all the mysteries of the stock exchange, the most incomprehensible is that during the period of mass selling, someone else hopes to find buyers.

On October 24, 1929, buyers found it with great difficulty, and then only after the price had dropped to a minimum.”

Actually, in the first hours nothing foreshadowed a disaster. The opening of the exchange was quite calm, and prices remained at a stable level. However, trading volume was significant and the stock price began to decline.

“Then prices went into a steep decline, and the telegraph could no longer keep up,” Galbraith writes. “By eleven o’clock the frantic dumping of shares began.” Many securities dropped to historical lows. Brokerage offices across the country were filled with people trying to quickly get rid of securities that were visibly losing their value.

By eleven-thirty the entire market was in panic. One of the eyewitnesses wrote that on the faces of the people there was “not so much suffering as an expression of distrust combined with fear.”

The shares were given away almost for nothing. Exchanges in Chicago and Buffalo closed. A wave of suicides swept across the country - eleven large speculators committed suicide.

However, by lunchtime the panic in New York had subsided a little. At this time, the long-awaited “organized support” of the exchange began. At 12 o'clock it became known that in the office of J.P. Morgan and Company is holding a meeting of the country's largest financiers. The very fact of their meeting was intended to reassure investors. But the millionaires who felt threatened did not stop there and decided to pool financial resources to support the financial market.

After this, a break was announced, and Morgan senior partner Thomas Lamont came out to reporters, to whom he said: “There were some minor troubles on the stock exchange associated with the massive sale of shares, which was not due to fundamental, but purely technical reasons.” This statement was later called "the most striking example of underestimation of danger."

However, all this did not help. All attempts to resume growth were met with numerous orders to sell at different price levels (stop loss). “Yet the slowing of the catastrophic decline was as remarkable an event on Black Thursday as the selling crash to which it owes its name,” Galbraith notes.

In fact, on October 24, shares managed to win back a significant part of the daily decline. After the stock exchange closed, representatives of the largest wire services gathered at the offices of Hornblower and Weeks and, after conferring, told the press that “the fundamental indicators of the economy are in perfect order, and the technical indicators are even better than in many recent months.”

Hornblower and Weeks issued a statement saying that "today's trading has laid the foundation for constructive growth that we believe will shape the rest of 1930."

The rest is known. “Black Thursday” was followed by “Black Monday” and “Black Tuesday”; the monstrous collapse lasted for almost three years. In July 1932, when the Dow Jones Industrial Average hit its low, it stood at just 41 points, a decline of nearly 10 times. The Great Depression began.

True, notes Rondo Cameron, “the stock market crash did not cause the depression—it had already begun in both the United States and Europe—but it was a clear signal that the depression was already in full swing.”

Lessons and consequences

Depression, with varying degrees of intensity, lasted for ten years. In 1933, the American gross national product was almost a third smaller than in 1929. Only in 1937 did the physical volume of production return to the level of 1929, and then fell again. Until 1941, the dollar value of all output remained lower than in 1929. In fact, only a new war helped the United States recover from the consequences of the “Era of Prosperity.”

It cannot be said that the lessons of 1929 were in vain. It was under the influence of those events in 1934, when the stock market finally began to grow, that the decision was made to create the almost all-powerful U.S. Securities and Exchange Commission (SEC), which rules the US stock market with an iron fist.

The purchase of shares on credit was prohibited, mandatory registration of stock exchanges and brokers was introduced, and rules for conducting business by proxy were formulated. The Commission ordered publicly traded companies to disclose relevant information about themselves. Also, since then, exchanges have practiced suspending trading in case of too sharp movements in one direction or another. This does not allow the fall that has begun to go into a self-sustaining mode, as was the case in 1929.

However, all these measures did not help prevent either the Asian crisis of 1997-1998, or the “dot-com crash” in 2001, or the “mortgage crisis” of 2007, not to mention numerous more local crises.

And we can confidently say that as long as the stock market exists, new bubbles will be inflated on it every now and then. Although, thanks to the experience of 1929, their collapse will cost much less losses than 85 years ago.

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