Dear Friends,

On 24 October 1929 the end of what was known in history as the Roaring Twenties, a period of excess and speculation following on from the horrors of WWI. October 1929 saw the end of a period of increasing stock market yields and the great five-year “Bull run” that ended with a period of fluctuation and panic.

The initial crash started on what became known as Black Thursday (24 October 1929); and five days later, on what became known as Black Tuesday (29 October 1929), came the crash that caused general panic in the market.

The crash was really a symptom of the depression rather than the cause of it. However, what eventuated was a series of financial reforms and trading regulations. Up until that time we had seen the increase of the power of the United States and the emergence of New York City as the major financial capital of the world.

Despite warnings of speculation and excess, those involved in the market believed that it could sustain high price levels, and that it had reached what was termed (by Irving Fisher) a “permanently high plateau”.

Over-investment and speculation on the market saw share prices on the NYSE collapse, and they fell for a whole month.

The Bull run had seen prices increase five-fold, peaking at 381.17 on 3 September 1929, six weeks before the crash.

The end of the great Bull run saw periods of instability and panic selling with high trading volumes, which in turn saw periods of recovery and rising prices. The recovery of the Dow Jones Index in early 1930 was only temporary and the Great Bear market of 1932 saw levels fall by July 8 1932 to below those in the 1800s. The market did not recover until late 1954. People buying in mid-1929 did not get back to those levels until 1954, and many people were dead before that happened.

The market fell by 17% in the month from 3 September to 3 October 1929 in what was described as the initial leg down. They recovered over half those losses in the week following, and then by the following week turned downwards again and accelerated into the collapse of 24 October 1929. Panic set in and record trading of 12.9 million shares occurred on that day.

This panic situation had been seen before in 1907 and several Wall Street bankers met on 25 October at 1 p.m. and adopted the same strategy of placing large purchases of blue-chip stocks that had been used in 1907.

Wikipedia records that the meeting consisted of Thomas W. Lamont, acting head of Morgan Bank; Albert Wiggin, head of the Chase National Bank; and Charles E. Mitchell, president of the National City Bank. They chose Richard Whitney, vice president of the Exchange, to act on their behalf. With the bankers' financial resources behind him, Whitney placed bids on U.S. Steel at well above market price and then on several other “blue chip” stocks. The panic was halted that day but continued.

On Monday 28 October 1929, largely as a result of newspaper dramatisation, and following a rumour over the weekend that President Herbert Hoover would not veto the Smoot-Hawley Tarriff Bill, investor panic set in and a mass exodus from the market began with some 13% falls in the Dow resulting in Black Tuesday the following day, with 16.4 million shares traded, breaking the record of five days earlier and which was not broken again until 1969, a full forty years later.

In spite of wealthy families and consortiums allegedly trying to stop the slide by large-scale share purchases the collapse continued, losing a further 12% that day – and was permanent for years. On that day, the loss was $14 billion and the loss for the week was $30 billion. To put things into perspective, that was ten times the annual budget of the Federal Government of the US and far more than the US spent on WWI.

It continued to bottom until 13 November 1929 with the Dow at 198.6 that day, with a temporary rise to 294.0 in April 1930 which lasted until April 1931 when it slid to the all-time low in July 8 1932. On that day the Dow bottomed at 41.22, declining 89% from its peak three years previously. This level had not been seen since the 19th century.

Wikipedia notes: “Salsman observed that ‘As late as April 1942, U.S. stock prices were still 75% below their 1929 peak and would not revisit that level until November 1954—almost a quarter of a century later."’(http://en.wikipedia.org/wiki/Wall_Street_Crash_of_1929)

See chart at Economic fundamentals


What lay behind the crash was a speculative boom over the Bull run of the 1920s which saw massive borrowings to buy stock. By August 1929 the brokers lent at two-thirds the face value of the stock. By that time 8.5 billion dollars was out on loan, a figure that exceeded the entire amount of currency in circulation in the US.

Speculation thus created what was an economic bubble. The average price-to-earnings ratio of S & P Composite stocks was 32.6 in September 1929, well above historical levels.

People all over the US and elsewhere had been encouraged into speculative investment in the hope of quick returns. Most were small investors and were severely financially prejudiced by the crash. However, the real problem was actually caused by the banks and the financial regulators themselves.

The depression was largely a man-made affair by the massive restriction of credit and profiteering, both real and anticipated.

The ensuing bankruptcies and business closures – with the consequent firing of workers and other economic repression measures resulting in mass unemployment – and the depression are seen as a direct result of the crash. However, it is not the reason for it, but a consequence of the entrapment of the middle-class by speculators and an unregulated industry that is inherently speculative.

The over-reactions of governments to the crash did more harm than the crash itself, and the banks’ continual suppression of economic activity and normal borrowing suppressed trade and production.

In 1931, the US Senate ordered an investigation, called the Pecora Commission, to study the crash. As a result, congress passed the Glass-Steagall Act in 1933. The effect was to mandate a separation between commercial banks that take deposits and extend loans and those investment banks that underwrite, issue, and distribute stocks, bonds and other securities.

As a result of 1929, stock markets around the world moved to suspend trading in the event of rapid declines, hoping to prevent panic such as was seen in 1929 on Wall Street.

What ensued was the Great Depression, which lasted for ten years. As a result of the depression and the WWI reparations ordered on Germany, we saw the the rise of Adolf Hitler, which resulted in WWII.

The US and Britain were both forced to spend enough money on war production, and the banks could not stop that expenditure. Together with the Lend Lease agreement of Britain with the US the depression was halted and the banks, as a result of Keynsian economics, were no longer able to control and suppress the population.

The New World Order was able to use the aftermath of WWII to harness the female workforce and effectively destroy the family unit by forcing all post-1960s families into the workforce to simply house and educate themselves. This took control of the families into the hands of the social planners of the New World Order.

Investment was then stimulated, and overinvestment and speculation began post-WWII and built up to the crash of Monday 19 October 1987. That one-day crash was even more severe than that of 1929.

The Dow Jones Industrial Average fell a full 22.6%. However, using regulatory intervention, the markets quickly recovered, posting the largest one-day increase since 1932 only two days later.

A decade later, in October 1997, another collapse occurred followed by a recovery.

These two dates are significant. In 1987 we entered the last forty years of this Jubilee. In 1997 we entered the last thirty years of the Jubillee. The economic factors are tied to the Jubilees and the periods of repentance. From the fall of 1907 it was twenty years to the Jubilee of 1927. The economic bubble of post-WWI was burst in the second year of the next Jubilee.

What happened, and how do we relate it to the present?

The central issue of the debate over the depression is usally listed as one of two alternatives, i.e. did the crash cause the depression, or did it merely coincide with the bursting of a credit-inspired economic bubble?

Prior to Keynes, economists developed a theory of boom and bust economic cycles (per Joseph Schumpeter and Nikolai Kondratieff). In the view of economists like Milton Friedman, following the views of Keynes, it is explained that the Federal Reserve did not expand the the money supply and the recession turned into a depression.

The problem, however, is that the panic of investors causes the collapses because their investment is largely speculative gambling and not related to the actual production of the stocks and shares themselves.

The fact is that the market today is overvalued by reason of a number of issues. Compulsory superannuation investment into the stock market has contributed. Corporations are subject to a form of economic imperialism which is controlled by financial systems beyond the control of national governments.

We are currently seeing panic corrections similar to 1929, but of a far more wide-ranging type.

Relatively small incidents can cause panic reactions.

Recent Reactions

US stocks have fallen sharply in response to news that American employers shed 4,000 jobs last month.
The Dow Jones Industrial average fell by 269 points, or 2.02 per cent, to close at 13,093 points.
The technology-based Nasdaq also suffered, falling by 1.95 per cent to finish at 2,558 points.

The cycles over recent years have seen falls in October 1987 and October 1997 and following on from these two events 10-year cycles are argued to be established and thus one is expected in October 2007. The inherent weakness in the markets is not confined to the ten-year cycles but a major collapse is necessary to establish the balance of power shifts being orchestrated behind the scenes.

The real problem is that the market is propped up by compulsory superannuation funds investing in the market and expecting supernormal profits and returns. What has in fact happened is that the stock market has become a form of de facto imperialism that transcends national borders and is buoyed up by pension funds.

The wealth is manipulated and the majority are powerless to stop it. The family investors will be hit hardest in the coming economic problems.

The checks and measures put in place to stop automatic sell-offs in a slide have gone some way to stop a panic and then automated collapse, but people do behave like sheep and they are all investing in the hopes of supernormal profits.

The attack on the market is part of the planned orchestration of events over the next year or so in preparation for the major conflicts of WWIII.

The US debt is the one the west is most concerned about as it is simply huge and the US economy affects all nations, big and small. In 1940 the US National Debt was miniscule. In 1945 Australia ended WWII with a surplus. The US had a National Debt of a couple of hundred billion, which is the equivalent in 2007 terms of 2.5 trillion dollars. By 1950 it had settled down to below 2 trillion, in 2007-terms, and stayed steady until about 1983 when it began to rise exponentially. From 1983 it rose to over 1 trillion, or in 2007-terms, over 2 trillion dollars.

By 1990 it has exceeded three trillion dollars, or 4 trillion in 2007-terms. For forty years it had remained more or less stable in real terms; then in ten years the National Debt had doubled in real terms. By 1999 the US National Debt had gone up again to 5.8 trillion, and whilst dropping slightly in the two following years it had reached almost 6.3 trillion dollars by 2002. In the four years from 2002 to 2006, it rose from 6 trillion to 8.5 trillion dollars uncorrected for inflation, and 5.5 to 7.1 trillion corrected for inflation. The US debt now stands at almost 9 trillion dollars.

The collapse of all societies comes from the misuse of the bureaucracy, and philosophers have always been concerned with the moral issues involved. Cicero (106-43 BCE) complained about the administration in Rome in the first century BCE. He said: “The budget should be balanced the treasury should be refilled; public debt should be reduced; and the arrogance of public officials should be controlled”.

So, what is new under the sun? The current administration of the US has, in its short term of office, lifted the deficit from six to nine trillion dollars. The rises and damage done to the US economy have been as follows.

The Richard Nixon era (1969-1974) saw the deficit rise from what had been fairly stable levels at well under the half-trillion dollar levels.

Gerald Ford (1974-1977) succeeded him and the deficit rose to almost ¾ of a trillion dollars.

President Jimmy Carter (1977-1981) left office with the deficit still under a trillion dollars. We might regard this as the end of what was relatively stable government, although these three had together more than doubled the National Debt.

President Reagan served from 1981 to 1989. Under his administration alone the National Debt almost trebled, reaching just under three trillion dollars.

George Herbert Walker Bush was president from 1989-1993. This man added another trillion dollars to the National Debt in just one term of office, reaching almost four trillion dollars.

President Clinton saw the debt rise over 1993–2001 from four trillion to over six trillion dollars. Now each four-year term of office is seeing deficit rises of a trillion dollars in the debt.

George W. Bush (2001 to present) saw the debt rise from over six trillion dollars to over eight trillion dollars in 2005, and to almost nine trillion dollars in mid-2007. The record of each succeeding president of the US from Reagan to the present G. W. Bush has done more damage in their terms of office than all the presidents before Reagan combined. This has seen the rise increase by almost 75% on the two previous presidents.

One is left wondering if these men were simply incompetent in the extreme or were pursing a deliberate policy to bankrupt the most powerful nation on Earth. What is even more puzzling is how the US people simply accepted it without analysis or objection, and even more puzzling again that it spanned both sides of the House, and that the majority of these presidents were Republicans elected on a platform of fiscal conservatism.

In relative terms, the most irresponsible president has to be Reagan, based on the record of the US National Debt. However, George W. Bush is not all that far behind him, and Clinton and Bush Snr are about equal, although in relative terms Bush Snr is worse. Certainly the Bush family alone have accounted for a rise in the deficit of over four trillion dollars – more than in the total history of the US since its federation. The incompetent presidencies of Reagan and Clinton did virtually the same, but they did it over four terms whereas Bush Snr and Jnr accomplished the feat over three. The administration of these four men together managed to virtually bankrupt the US economy, and people are trying to pretend it is not happening.

The tables of the rise of the US National Debt in both actual and inflation-adjusted terms are found at http://www.brillig.com/debt_clock/faq.html.

Some statistics in comparison are as follows: In the first year the US was in WWII, the economic stats were as follows:
Federal spending: $35.14 billion
Federal debt: $79.2 billion
Consumer Price Index: 16.3
Unemployment: 4.7%
Cost of a first-class stamp: $0.03

US debt is 40% in-house debt owed from the government agencies to itself. However, the sheer volume of the debt in real terms exceeds the volume of debt at the end of the Depression by almost twenty times or 2000%.
The financial position of the US is precarious to say the least.

The following chart is obtained from Infoplease and covers the GDP from 1930 to 2005 (in billions of dollars).
http://www.infoplease.com/ipa/A0104575.html

The level of National Debt is now over three quarters of GDP. The US is in big trouble.

The Socialists, as well as the Liberals under Malcolm Fraser in Australia, did the same thing over their terms of office, but not quite as spectacularly as in the US, and it has only been of recent years that the budget has been consistently in surplus in Australia. However, much of that is because of the boom in China and Asia generally, rather than genuinely good management.

The financial position of the hub of western capitalism is sick and in danger of collapse over the next twelve months, and panic and idiotic opportunism could easily set it off. We will see this as a factor in the coming lead-up to the destruction of the power of the United States and British Commonwealth, and the escalation of WWIII (see also the paper The Day of the Lord and the Last Days (No.192)).

Wade Cox
Coordinator General