11 ms·

I'm reading the FT and WSJ from 100 years ago each week leading to 1929

323 points by roaring20s 5y ago

deleted 5y ago
[deleted]
hogFeast 5y ago
There is already a book that does this (although I would definitely recommend doing what you are doing): Russell Napier's Anatomy of the Bear. Tangentially, it is kind of interesting that very few people in markets use this kind of historical information to learn more about markets. Russell Napier runs a library in Edinburgh that is composed solely of economic and financial history books. You can have all the technical information in the world, it won't help you avoid the impact of human psychology. I suppose this is why financial cycles happen, the old guys retire, the new guys who have only known a bull market get into it...same mistakes over and over. To give you a concrete example, I did my thesis on US monetary policy in the 50/60s. The understanding of this period within economics is based almost entirely on the view that economists have of themselves today. If you read the minutes, you see that the Fed understood why inflation was rising in the late 60s but were unable to do anything about it. This grey area of political independence is, of course, totally forgotten today (when you have a former Fed chair as Treasury Secretary, alarm bells should be going off...but, of course, this is all long forgotten).
- awinter-py 5y ago
  ohhh good rec
- ozzythecat 5y ago
  > when you have a former Fed chair as Treasury Secretary, alarm bells should be going off...but, of course, this is all long forgotten Can you elaborate on this point? I would think a cabinet member going to the fed and not coming from the fed would be more alarming. What am I missing?
  - hogFeast 5y ago
    What is the difference? The reason why it is alarming is because there is no political separation. It doesn't really matter which way it goes. This happened in the 70s. Nixon politicized the role with Burns (who came from the CEA), then Carter appointed Miller (who went onto become Treasury Secretary). And btw, Miller was (with hindsight) one of the worst Fed chairs of all-time. Tbf, Volcker came from Treasury, Geithner went into Treasury (after FRBNY) but, in both cases, they operated with Presidents who respected the distinction in functions. This distinction weakened significantly under Trump, and is now non-existent.
    - jjoonathan 5y ago
      Is the big deal primarily that the Fed needs to be able to spike rates (like Volcker) to get rid of inflation and close a business cycle, but that tanks asset prices and forces Zombie businesses to finally die, which is politically toxic, so it doesn't happen if there is too much political control of the Fed?
      - hogFeast 5y ago
        Correct. In 1957 or 58 (I can't remember which), the Fed increased interest rates to remove excess out of the economy. Economy went into a fairly mild recession. The Fed gets blamed for causing the recession (the Fed Chair at the time said the Fed should to take away the punch bowl...that stopped happening). Nixon loses to JFK (remember he was Eisenhower's VP, so Nixon blamed the Fed when he lost). And the cycle that led to the inflation of the 70s (where monetary and fiscal policy is timed to the election cycle) begins, tacit political involvement). Also, before 1951 (and for a period of years after, although the formal break was 1951), the Fed wasn't functionally independent from govt. Because the war debt was so large, the Treasury used the Fed to press interest rates down so the debt could be paid down (it continued after 1951 because the debt was still really huge, note the similarity with your hypothetical). So the period at the end of the 50s was the first real test of Fed independence. Again, I don't think people today understand that Fed independence is clear legally but has been more flexible in practice. Why? Because setting interest rates is inherently political. And there is an asymmetry: the incentive is always to be loose. The lesson is that there is no real way to get around political control, because the temptation is too great. I also think that policymakers should rely more heavily on macroprudential policy to take the heat out of markets (this is happening in the UK) because normal monetary policy is so asymmetric.
- deehouie 5y ago
  there are at least three books on this period, Lefevre, E. (2004). Reminiscences of a stock operator (Vol. 175). John Wiley & Sons. Kramer, C. (2000). " Devil Take the Hindmost: A History of Financial Speculation" by Edward Chancellor (Book Review). Finance and Development, 37(1), 53. Mackay, C. (2012). Extraordinary popular delusions and the madness of crowds. Simon and Schuster.
  - hogFeast 5y ago
    You don't understand...there are thousands of books on this period (for some reason, only one of the books you mention are about this period...Mackay was written several decades before the 20s, Chancellor is a general history, Lefevre is interesting but not really going to give you the information you need as it is a personal story). The book that I cite is identical to the OP. The author goes through newspapers from the period leading up to 1929 (and iirc, through to the late 30s).
- JackFr 5y ago
  I took a fabulous course in grad school on Monetary Theory and Policy and at one point the class was discussing how laughably bad the policies of (I think) Arthur Burns were. The professor scolded us pointing out that all the stuff we were being taught had to be learned somehow and what we were describing as laughably bad was this learning.
  - hogFeast 5y ago
    Right, that is exactly the wrong thing to take from it, that is exactly the kind of misinterpretation of history that people still have (generally speaking, you cannot view history in terms of the present, economists think you can do it because economics is a science...it isn't). The reason why Burns' policies were poor was because he wasn't making policy within a context that makes sense today. From the mid-60s onwards (before inflation took off), monetary policy was formed politically. The economy used to cycle around elections for this reason. Burns really took this to its logical conclusion...and to be totally clear, a lot of the mistakes that Burns made were made in other countries. Burns was actually fairly hawkish, compared to Miller, but the problem was (partly for reasons of political expediency) people believed that wage restraint policies would be effective. To loop back, the lesson of the 60-70s is that monetary policy should be free of political influence. Look at what is happening now. Has the lesson been "learned"? And, more importantly, can it ever be "learned"?
- john_miller 5y ago
  Do you have a link to the fed's minutes or to your thesis?
  - hogFeast 5y ago
    You can get the Fed minutes (iirc) back to the 80s on the main website. To get earlier ones (they go back all the way iirc), you can get them from ALFRED (there is tons of interesting data on there).
riazrizvi 5y ago
> If one bought and held the Dow from 1921 to present, the total return would be 500,000% (5,000x)! If we can use hindsight in our trades, I'd recommend using the numbers 60, 54, 36, 24 and 7, on last week's Powerball lottery that paid out $211mm. That's a 100,000,000x return!!
- yreg 5y ago
  Sidenote: Dow Jones Industrial average is an incredibly archaic and dumb metric. It weights companies by price per share, not by market cap. So when Apple does a 1 to 4 stock split its influence on DJI nonsensically falls by 75%.
  - dheera 5y ago
    Don't they adjust for that when splits happen?
    - dmurray 5y ago
      No. Lots of other measures do, but not the DJIA.
    - christophilus 5y ago
      Nope. It’s price weighted. Hence the comment on how dumb it is.
      - dheera 5y ago
        Sounds like a simple thing to solve if they just let me make a pull request for the function getDJIAValue() or wherever the hell it lives. Based on price is fine -- when splits happen just adjust the weight by the split factor. Are they really that incompetent at coding?
        yreg 5y ago
        >Based on price is fine -- when splits happen just adjust the weight by the split factor It's not fine since companies have varying counts of shares, nevermind the stock splits. The proper solution is getSharePrice() * getShareCount(). Which is what most other indeces do.
FreeRadical 5y ago
This is a really interesting concept
okareaman 5y ago
It's a cool concept. I follow "World War I as it happened (1914)" https://twitter.com/WarHappened https://twitter.com/WarHappened
- rland 5y ago
  There's this one for World War 2 also: https://twitter.com/RealTimeWWII https://twitter.com/RealTimeWWII
  - roaring20s 5y ago
    I have a twitter here if you want to follow: https://twitter.com/Roaring20sTate https://twitter.com/Roaring20sTate
anconia 5y ago
Cool! Are you planning on doing any other time periods like this?
maerF0x0 5y ago
> If one bought and held the Dow from 1921 to present, the total return would be 500,000% (5,000x)! One of the great challenges of human existence is we do not live 100 yrs to see those returns. Instead we're living, blind to the exact details, on the choices of those 100 yrs prior to create the X% returns of their choices _for our lives_ . One way to get people to make such choices is to create a love for whomever comes next. Children used to be a "skin in the game" sort of scenario where you didn't want to mess up the future cause you had a vested interest in it. Between selfish culture and few people having children, i'm not sure the solution . While many say that ending aging / increasing life span to 100s or 1000s of years would be disastrous, I actually think it might fix a lot of issues as we'd have that timespan of a personal interest to optimize across.
- baybal2 5y ago
  There is 1000 year gold, but no 1000 year people
- deleted 5y ago
  [deleted]
cm2187 5y ago
Today no one seems to care about inflation in Europe or in the US. It seems to be a subject confined to economists that every day people don’t care about, if they even understand the concept (no one under 50 has really witnessed it in their adult life). So people are all for unlimited money printing. It is interesting to find old articles and read what people cared about at the time. Inflation was often a top concern, and politicians running their campaign on curbing it. Some old movies also refer to it (that stolen money which will melts away while you await behind bars). Our current complacency in term of budget deficits and monetary policy will wake up that sleeping dragon.
- sanp 5y ago
  Perhaps inflation was a concern in an economic system where 1) A physical commodity (Gold) was the store of value, and 2) Debt was not easily accessible. Neither of these are true anymore and inflation now will be a reflection of true scarcity of a good / service (e.g., housing) as opposed to the transaction costs associated with procuring it...
  - bequanna 5y ago
    The familiar refrain of hubris the has preceded pretty much every crisis: “This time is different.”
  - leppr 5y ago
    Access to debt is still difficult for those that will be hurt most by inflation of consumption goods (CPI in the US). Furthermore it's also more accessible proportionally to existing wealth, which means inflation is in effect an inequality amplifier.
- carnitine 5y ago
  Probably because inflation has never been particularly bad post-QE. We had inflation north of 10% in the 70s, it’s averaged a couple of percent in the last two decades. Also, despite what the Fed probably wants you to think, QE is not money printing, it is a duration swap between different forms of existing money.
VinLucero 5y ago
Does anyone know where I can find a digital version of historical FT / WSJ articles? I’d love to run some NLP over that history to track sentiment over time.
- roaring20s 5y ago
  Good idea. The market sentiment in 1921 was very bad for stocks. In fact, a week ago in 1921, Andrew Mellon (Treasury Secretary) suggested retail investors avoid stocks. This was covered in my post last week. Sentiment is going to flip around 1923-1924 (once we clear the 1920 top) and only strengthen into 1929.
  - VinLucero 5y ago
    @roaring20s I have read through all of your current Substack articles and would love to catch up on your own background and data sources. I think pre-computer data extraction powers the best ML insights. I am working at a YC Fintech company exploring economic opportunity over time and think there are some deep relationships here around human psychology and markets.
    - anconia 5y ago
      Interesting - What company? If you can't say, no worries.
- deleted 5y ago
  [deleted]
- deehouie 5y ago
  WSJ has a link to its digital archive, which only goes back to May 1996. And unfortunately it doesn't have API so getting articles out of site for NLP is a pain. Let me know if you have code for that. I'm working on something similar
- otterley 5y ago
  ProQuest is the digital provider for Wall Street Journal historical archives. Many public libraries provide free access; often all you need is a local library card and login.
aazaa 5y ago
> Writers at the FT ponder how to spend their day while equity and commodity markets vacillate listlessly. ... This is what a lot of people don't get about market bottoms. Nobody cares. It's not like they hate an asset class. They just could not care less. This is one of the reasons that buying market bottoms is so hard. There's no story. You tell somebody what you did, and they just look at you with a blank stare. Then you get to wait while ... nothing at all happens. Good news that should turn prices around - nobody cares. Or worse, a surprise snap lower that makes you question your "value" stance. During the transition period from bear to bull, nobody believes it's real. The bears from the previous cycle who called the top and made the right choice to sell will not believe the bull is real and so will stay on the sidelines. As the market rises, everyone - even the bulls - will expect the inevitable return to baseline. Rinse and repeat. Maybe for years. Not many people will continue to hold on during that period. Near market tops, of course, it's exactly the opposite. You will be congratulated from here to Timbuktu and back for your "wise" investment when buying into a market shooting higher. You'll look like a star. Somebody who knows what they're doing. There will be lots of talk about new paradigms and how this time it really is different, and why. You should be selling, but your own brain and the brains of the people around you will make you buy, buy, buy instead. It's so predictable as to be laughable, except for the pain and chaos that happens when an especially monstrous bull goes to the slaughterhouse.
- anonu 5y ago
  What? Market timing has always been a thing. Whether it's a bottom or a top or a head and shoulders pattern. This is the whole point of technical analysis and there's enough people out there to care about every single thing the market does at any stage in it's cycle.
  - EMM_386 5y ago
    > Whether it's a bottom or a top or a head and shoulders pattern. This is the whole point of technical analysis I'll let you in on a little secret. Technical analysis is a lot of smoke and mirrors. I was in this industry. You can draw all the head and shoulder patterns you want, if Elon posts a Tweet about price targets of 420.69, Apple doesn't sell enough iPhones, the company you are charting causes a major oil spill, or the weather gets warmer, those patterns vanish in an instant. Millions of global traders do not obey lines drawn on charts. The market is too complex for that.
anonu 5y ago
Highly suggest reading "reminiscences of a stock operator". Which I'm guessing was written about 100 years ago about punting and gambling in the stock market... What you'll notice is "plus ça change, plus c'est la même chose"... It's all self similar. The same concepts and patterns back then are the same concepts that people chase today.
ourmandave 5y ago
John Tuld from Margin Call movie... So you think we might have put a few people out of business today. That its all for naught. You've been doing that everyday for almost forty years Sam. And if this is all for naught then so is everything out there. Its just money; its made up. Pieces of paper with pictures on it so we don't have to kill each other just to get something to eat. It's not wrong. And it's certainly no different today than its ever been. 1637, 1797, 1819, 37, 57, 84, 1901, 07, 29, 1937, 1974, 1987-Jesus, didn't that fuck up me up good-92, 97, 2000 and whatever we want to call this. It's all just the same thing over and over; we can't help ourselves. And you and I can't control it, or stop it, or even slow it. Or even ever-so-slightly alter it. We just react. And we make a lot money if we get it right. And we get left by the side of the side of the road if we get it wrong. And there have always been and there always will be the same percentage of winners and losers. Happy foxes and sad sacks. Fat cats and starving dogs in this world. Yeah, there may be more of us today than there's ever been. But the percentages-they stay exactly the same.
- birdyrooster 5y ago
  I’m going to go ahead and sort of disagree with you there. What you are describing is a logical fallacy. By redefining winners and losers to be an arbitrary condition instead of a fixed set of attributes (homeless, hungry, lack of class mobility, poor health), you can claim some notion of relativism but it’s not helpful for understanding anything. It’s a bit of circular reasoning.
  - remontoire 5y ago
    His whole comment is a quote from the movie
    - birdyrooster 5y ago
      I know it was a quote. I was disagreeing with the sentiment. Why even repeat that? It’s like saying “did you even read the article?”
      - 5y ago
cperciva 5y ago
If one bought and held the Dow from 1921 to present, the total return would be 500,000% (5,000x)! On the other hand, CPI has gone from 17.6 to 271.7 in the past century, so that 5000x total return is really 324x after adjusting for inflation -- also known as 6%. Now, 6% after inflation is nothing to sneeze at; but it started at a cherry-picked low point in the market and it comes with a lot of market volatility... and it's still not dramatically better than the 4-5% which ultra-long term investors (e.g. university endowment funds) aim to receive after inflation.
- pg314 5y ago
  That ignores dividends. That will add a couple of percentage points to the return. If I rerun the calculation from the cherry-picked peak of about 360 in 1928, I get around 4.5% after inflation, without dividends.
  - IshKebab 5y ago
    I'm pretty sure they use a price that accounts for dividends. Or they should anyway unless they're doing it wrong.
    - roaring20s 5y ago
      Compounding works best when dividends are immediately reinvested... it also pushes up the total return considerably.
  - cperciva 5y ago
    The article says "total return", and the price index only increased by 513x (from 68.63 to 35,208). so I'm pretty sure they're including dividends.
    - pg314 5y ago
      True. I missed that. The calculator at [1] gives totally different returns with dividends reinvested, though: 7.6%. [1] https://dqydj.com/dow-jones-return-calculator/ https://dqydj.com/dow-jones-return-calculator/
I_am_tiberius 5y ago
I recently bough an FT subscription for one year and am really disappointing that I'm still exposed to really annoying ads. Is this normal for subscriptions in this cost range?
cptnapalm 5y ago
Best use of a time machine for stocks: Monster Beverage. In 20 years it increased more than 100,000%.
JohnJamesRambo 5y ago
This will be an interesting journey. I got a real jolt yesterday when I read about one of the top value investors (Morningstar’s International Stock Manager of the Year in the past) that jumped off a Manhattan skyscraper recently. His fund had gone from 20 billion to 1 billion AUM because everyone was leaving for bigger gains. It’s the opposite of the speculators jumping off we get in a crash and I think this means something. https://en.wikipedia.org/wiki/Charles_de_Vaulx https://en.wikipedia.org/wiki/Charles_de_Vaulx
JackFr 5y ago
One reason I would imagine prices were so low (and soon might get so high) was that information on these companies was scattershot and very incomplete. There was no SEC. There were no legal reporting requirements and what few reporting requirements there were were mandated by the exchange.
deehouie 5y ago
The view expressed in this blog and many of the comments on HN is a prime example of survivorship bias[1]. In 1921, you did not know DJI would have done so well over the next 100 yrs. A very real counter example is the Japanese stock market. The Nikkei peaked at 39,000 in 1989. Thirty yrs later, it's only 28,000. Many blue chip stocks on Tokyo Stock Exch have never recovered their previous high. [1] https://en.wikipedia.org/wiki/Survivorship_bias https://en.wikipedia.org/wiki/Survivorship_bias
- G3rn0ti 5y ago
  That’s interesting: Nikkei‘s bad long term performance is due to Japan‘s bad economic policies in the last three decades. Many years of quantitative easing have given rise to a high public debt, a large unemployment rate and an uncompetitive, stagflationist economy after being one of the most innovative producers (“all the cool stuff comes from Japan”). This is what happens when a central bank keeps on preventing moderate recessions necessary for correcting a nation’s economic failures. The US and Europe should study the case of Japan very closely these days. https://en.m.wikipedia.org/wiki/Economy_of_Japan https://en.m.wikipedia.org/wiki/Economy_of_Japan
  - neffy 5y ago
    I suspect most countries would prefer Japan's problems to their own. An alternative view might be that the excessive returns in the US are due to outright financial manipulation using share by backs funded by low interest rates (amongst other things) leading to an insane concentration of money in the stock market and financial sector to the detriment of large sections of US society, its basic infrastructure, and its democracy. This is what happens when white collar crime is institutionalised.
    - andreilys 5y ago
      This is what happens when white collar crime is institutionalised. Buying back shares is neither "financial manipulation" nor is it a "white collar crime". When interest rates are low and you are bullish on the company, it makes perfect sense to buy back shares.
tornato7 5y ago
Interesting that it talks about the hardships that Germany has paying war reparations. This is one of the main contributors to the rise of Nazis some years later; Germans were sick and tired of their paychecks going to pay England.
rossdavidh 5y ago
For those who like this sort of thing, "The Great War" on YouTube followed WW1 week by week, 100 years afterwards. No reason you couldn't do the same with 107 year delay or something. It was very well done.
- tkgally 5y ago
  In a similar vein, I recommend the 2008 book Human Smoke: The Beginnings of World War II, the End of Civilization by Nicholson Baker. He summarizes news reports and other real-time accounts from the years leading up to World War II and the Holocaust. An excerpt, from page 34: “The New York Times reported, on page one, that the Central Union of German Citizens of the Jewish Faith, a group with sixty thousand members, had issued a statement saying that the reports of atrocities by Nazis against Jews were ‘pure invention.’ It was March 25, 1933. “Anti-Semitism existed, and it was, the society said, a matter of grave concern, but it was a domestic affair. ‘Let us take an energetic stand against everybody attempting criminally to influence the shaping of Germany’s future through foreign newspapers.’ ”
fighterpilot 5y ago
A side effect of 1929 was the popularity of the Nazis. They went from low single digit support to 35-43 range levels of support in two years, in part due to the huge unemployment and disaffection. The ripple effects of seemingly disconnected events thoughout history never cease to amaze me. It makes me more aware how damaging seemingly once-off things can be (act of terrorism, discriminatory or unfair policies, economic hardship) due to the spiralling effect that can happen.
FabHK 5y ago
Book recommendation: Lords of Finance: The Bankers Who Broke the World by Liaquat Ahamed. It is more interesting than the title, I think. It covers WW I, great depression, and the beginning of WW II, with a focus on monetary policy (gold standard, etc.), but also gives general political and economic background. My main take-aways: 1. Things were slower. The Governor of the Bank of England wanted to confer with his counterpart in the US. So, he'd board a boat to the US anonymously, travel there over the course of several weeks, chat with his pal for a few weeks, and travel back for a few weeks. 2. Things are hard to predict (market collapse, inflation, fascists taking over your country). In particular, by the time it becomes clear that the threat is real, it is too late to protect yourself against it.
- roaring20s 5y ago
  Fascinating, right? What I did not realize until going back in time was how these German reparations are dragging on and on. Armistice is signed in 1918, and reparations are agreed upon in late 1919. In 1920, the payment plans are put forth. By 1921, it's clear Germany can't repay in full. For the next 3-4 years, the entire calamity will stumble in fits and starts. Until the US gets involved in the mid-1920s (Dawes and Young Plans). Even then, war reparations aren't completely paid back until 2010. It reminds me a lot of the Greek situation in the 2010s. Three bailouts, several different rounds of negotiations, etc.
  - jbay808 5y ago
    I'm not sure things have really gotten faster. The increased communication rate might be balanced out by the higher inertia of a more interconnected global economy. I feel like the ripples from 2008 are still catching up with us -- look at how interest rates have been cranked low ever since. That's thirteen years.
- ruggeri 5y ago
  I've been reading [The Price of Peace: Money, Democracy, and the Life of John Maynard Keynes](https://www.amazon.com/Price-Peace-Democracy-Maynard-Keynes/dp/B082QSLGG5 https://www.amazon.com/Price-Peace-Democracy-Maynard-Keynes/...) which I imagine covers similar material. I like it so far.
NotSammyHagar 5y ago
I'd pick a different time to compare 2021 to than 1921, because I keep feeling similarities to the first 4 decades of the last century. I see echoes of the 1930s, where unfortunately the US and the rest of the world will eventually battle it out with China instead of Japan in a decade or so, while the questionable or overinflated stock market in the us feels like we are in 1928. There are a lot of reasons why a failure of our financial system isn't likely (federal deposit insurance on banks being one reason), but the increased disparity between highly paid people like many readers here who are software engineers who benefit from stock market growth while the vast majority of regular wage earners do not portends poorly for any near term unification of the us - instead I see in increasingly fractious times with actual insurrectionist behavior unlocked by Trump. So it's 1935 in terms of war, 1928ish in the macro economy, 1858 in terms of nationalism, 1900 in terms of trusts? I console myself by thinking about my grandfather in 1935 when his family lost their farm and it was the Great Depression and he had no money and he somehow started college the next year and graduated as an engineer right into the teeth of world war II - but he made it.
Skrisiloff 5y ago
I did something similar with TIME magazine several years ago--Read every issue from 1923-2000. You should check out notes at this site: https://www.thetimeproject.org https://www.thetimeproject.org Curious if you'll reach the same conclusions from WSJ/FT on the key causes of the bubble and crash. TIME's coverage of the 20s seemed to suggest that the bubble was caused by loose monetary policy from the Federal Reserve over the course of the decade. There were a few key turning points during the decade 1) Fed lowers rates to help Calvin Coolidge get re-elected in 1924 "Easier money was the most significant development of the past week..We have more gold, less active business in many lines, and a Presidential election ahead. No good Republican would particularly enjoy seeing the brakes applied to the money market as hard as to cause a skid downhill similar to that experienced last year. As long as the Federal Reserve Board consists of political appointees, it is somewhat beside the point to declare that politics has nothing to do with business tendencies." --February 1924 2) The Fed tries to raise rates after the election in 1925 but decides not to in order to help Britain return to the gold standard "When the New York Reserve Bank raised its rediscount rate from 3 to 3 1/2 % (TiME, Mar. 9), financial London at once showed something nearly akin to excitement...when the Wall Street money merchants snap the whip, Lombard Street must jump." --March 1925 "The rates of the Reserve Bank of New York and the Bank of England are made cooperatively in order that the British rate may always be slightly higher and thus avoid heavy gold exports to this country. New York Reserve rate is now 3 1/2%, and a rise to 4% would consequently threaten the British gold supply and the sterling gold standard. Hence, after all these alarms and excursions, the money outlook in America is still for stable and relatively low rates. This in turn facilitates stable security prices and commercial prosperity." --October 1925 3) This attempt to keep rates low to help England leads to a schism in the Federal Reserve Board in 1927. Tight money interests in Chicago break from NY loose money proponents. "the [Chicago] Journal of Commerce charged last week, "The little New York group that dominates the Federal Reserve System came to Chicago and tried to induce the directors here [of the Chicago Federal Reserve Bank] to cut the [re-discount] rate and afford pretext to New York. The request was flatly and somewhat indignantly refused. Continued the Journal of Commerce: “Europe and particularly England wants, and no doubt needs, a very low money market in this country so that American bank funds in large totals may be' attracted to England; and to that end our re-discount rates are to be reduced, and probably Federal Reserve securities are to be sold, and easy credit is to be manufactured." --August 1927 4) The Chicago contingent takes control of Fed policy [One week after forcing the Federal Reserve Bank of Chicago to lower its rediscount rate] "Daniel Richard Crissinger, governor of the Federal Reserve Board, tendered his resignation. Though bankers and lawyers were still dis- puting whether or not he had been "domineering" in forcing a reduced re-discount rate on the Chicago Federal bank (TIME, Sept. 12), Mr. Crissinger said that this dispute had nothing to do with his withdrawal" --September 26 5) Speculation runs wild in 1928 even though the Fed begins to tighten. Retail investors lead the charge. "The Chicago Federal Reserve Bank last week increased its rediscount rate from 3½ to 4%. At once the Richmond Federal Reserve Bank did likewise. It was the first time since August, 1926 that any of the 12 Federal Reserve Banks had increased their rates." -February 1928 ""[At the New York Stock Exchange] Every "record" of any shape or description was broken and rebroken. The explanation is simple. The "public" had finally come in, tardily, clumsily, "at the top," as always, with the greatest reservoir of cash of all, compared to which Wall Street's organized money force is small. It astonished nobody, because 7,000 tickers are now hypnotizing greedy eyes in 40 states, leaving scarcely a middle-sized town from Maine to California where citizens may not actually see their savings bank withdrawals dance past their giddy eyes in strange, cryptic abbreviations three minutes after passing their checks to the broker." --April 1928 6) Low interest rates lead corporations to lend excess deposit money on margin. Bankers warn that this is dangerous but only act as intermediaries. "With $500,000 surplus cash to put aside until it is needed, a corporation usually does one of two things. It may bury the money, either in gilt-edged securities, yielding from 3 to 4%, or in its bank account, where it draws 2% as a commercial deposit. Or it may ask the bank to lend the money out on call, at interest rates ranging from 5 to 10%. As the bank asks only a small commission for this service and generally assumes all the risk, the conversion of surpluses into call loans has become a popular feature of corporation financing. In the last year, the total of such loans has risen from $906,144,000 to $1,808,645,000. To the corporations, this practice seems both obvious and admirable. But to the paternal superbankers, guarding the money market, it appears highly hazardous, deeply disturbing" --August 1928 7) In 1929 the Fed begins to actively fight speculation. The all out assault eventually bursts the bubble. "Toward Wall Street last week the Federal Reserve Board shook a threatening finger, spoke a warning word. With loans to brokers standing at $5,669,000,000, the Board felt that too much money was being absorbed by the stockmarket, that other interests were being forced to pay too much for money they borrow, that indus-try as a whole was suffering from diversion of funds to brokers and speculators. It therefore expressed the opinion that a member of the Federal Reserve Banking System is "not within its reasonable claims for rediscount facilities" when it borrows Federal Reserve money to be used in "making or maintaining speculative loans." Further, the board threatened to "restrain the use of Federal Reserve credit facilities in aid of the growth of speculative credit." Taken at face value, this statement would mean refusal of loans for speculative purposes, plus a rise in the rediscount rate, which in turn would mean a stockmarket afflicted with scarce money and falling prices." --February 1929 "For so many months so many people had saved money and borrowed money and borrowed on their borrowings to possess themselves of the little pieces of paper by virtue of which they became partners in U. S. Industry. Now they were trying to get rid of them even more frantically than they had tried to get them. Stocks bought without reference to their earnings were being sold without reference to their dividends. At around noon there came the no-bid menace. " --November 1929
j7ake 5y ago
If you selected 100 companies in 1929 to invest in, how many of those companies would even still exist today? If only 5 percent or so of those companies still exist (optimistic percent), it would mean you lost most of your money in 95 percent of your original investment if you just bought and held.

323 points by roaring20s 5y ago

deleted 5y ago

[deleted]

There is already a book that does this (although I would definitely recommend doing what you are doing): Russell Napier's Anatomy of the Bear. Tangentially, it is kind of interesting that very few people in markets use this kind of historical information to learn more about markets. Russell Napier runs a library in Edinburgh that is composed solely of economic and financial history books. You can have all the technical information in the world, it won't help you avoid the impact of human psychology. I suppose this is why financial cycles happen, the old guys retire, the new guys who have only known a bull market get into it...same mistakes over and over. To give you a concrete example, I did my thesis on US monetary policy in the 50/60s. The understanding of this period within economics is based almost entirely on the view that economists have of themselves today. If you read the minutes, you see that the Fed understood why inflation was rising in the late 60s but were unable to do anything about it. This grey area of political independence is, of course, totally forgotten today (when you have a former Fed chair as Treasury Secretary, alarm bells should be going off...but, of course, this is all long forgotten).

awinter-py 5y ago
ohhh good rec
ozzythecat 5y ago
> when you have a former Fed chair as Treasury Secretary, alarm bells should be going off...but, of course, this is all long forgotten Can you elaborate on this point? I would think a cabinet member going to the fed and not coming from the fed would be more alarming. What am I missing?
- hogFeast 5y ago
  What is the difference? The reason why it is alarming is because there is no political separation. It doesn't really matter which way it goes. This happened in the 70s. Nixon politicized the role with Burns (who came from the CEA), then Carter appointed Miller (who went onto become Treasury Secretary). And btw, Miller was (with hindsight) one of the worst Fed chairs of all-time. Tbf, Volcker came from Treasury, Geithner went into Treasury (after FRBNY) but, in both cases, they operated with Presidents who respected the distinction in functions. This distinction weakened significantly under Trump, and is now non-existent.
  - jjoonathan 5y ago
    Is the big deal primarily that the Fed needs to be able to spike rates (like Volcker) to get rid of inflation and close a business cycle, but that tanks asset prices and forces Zombie businesses to finally die, which is politically toxic, so it doesn't happen if there is too much political control of the Fed?
    - hogFeast 5y ago
      Correct. In 1957 or 58 (I can't remember which), the Fed increased interest rates to remove excess out of the economy. Economy went into a fairly mild recession. The Fed gets blamed for causing the recession (the Fed Chair at the time said the Fed should to take away the punch bowl...that stopped happening). Nixon loses to JFK (remember he was Eisenhower's VP, so Nixon blamed the Fed when he lost). And the cycle that led to the inflation of the 70s (where monetary and fiscal policy is timed to the election cycle) begins, tacit political involvement). Also, before 1951 (and for a period of years after, although the formal break was 1951), the Fed wasn't functionally independent from govt. Because the war debt was so large, the Treasury used the Fed to press interest rates down so the debt could be paid down (it continued after 1951 because the debt was still really huge, note the similarity with your hypothetical). So the period at the end of the 50s was the first real test of Fed independence. Again, I don't think people today understand that Fed independence is clear legally but has been more flexible in practice. Why? Because setting interest rates is inherently political. And there is an asymmetry: the incentive is always to be loose. The lesson is that there is no real way to get around political control, because the temptation is too great. I also think that policymakers should rely more heavily on macroprudential policy to take the heat out of markets (this is happening in the UK) because normal monetary policy is so asymmetric.
deehouie 5y ago
there are at least three books on this period, Lefevre, E. (2004). Reminiscences of a stock operator (Vol. 175). John Wiley & Sons. Kramer, C. (2000). " Devil Take the Hindmost: A History of Financial Speculation" by Edward Chancellor (Book Review). Finance and Development, 37(1), 53. Mackay, C. (2012). Extraordinary popular delusions and the madness of crowds. Simon and Schuster.
- hogFeast 5y ago
  You don't understand...there are thousands of books on this period (for some reason, only one of the books you mention are about this period...Mackay was written several decades before the 20s, Chancellor is a general history, Lefevre is interesting but not really going to give you the information you need as it is a personal story). The book that I cite is identical to the OP. The author goes through newspapers from the period leading up to 1929 (and iirc, through to the late 30s).
JackFr 5y ago
I took a fabulous course in grad school on Monetary Theory and Policy and at one point the class was discussing how laughably bad the policies of (I think) Arthur Burns were. The professor scolded us pointing out that all the stuff we were being taught had to be learned somehow and what we were describing as laughably bad was this learning.
- hogFeast 5y ago
  Right, that is exactly the wrong thing to take from it, that is exactly the kind of misinterpretation of history that people still have (generally speaking, you cannot view history in terms of the present, economists think you can do it because economics is a science...it isn't). The reason why Burns' policies were poor was because he wasn't making policy within a context that makes sense today. From the mid-60s onwards (before inflation took off), monetary policy was formed politically. The economy used to cycle around elections for this reason. Burns really took this to its logical conclusion...and to be totally clear, a lot of the mistakes that Burns made were made in other countries. Burns was actually fairly hawkish, compared to Miller, but the problem was (partly for reasons of political expediency) people believed that wage restraint policies would be effective. To loop back, the lesson of the 60-70s is that monetary policy should be free of political influence. Look at what is happening now. Has the lesson been "learned"? And, more importantly, can it ever be "learned"?
john_miller 5y ago
Do you have a link to the fed's minutes or to your thesis?
- hogFeast 5y ago
  You can get the Fed minutes (iirc) back to the 80s on the main website. To get earlier ones (they go back all the way iirc), you can get them from ALFRED (there is tons of interesting data on there).

riazrizvi 5y ago

> If one bought and held the Dow from 1921 to present, the total return would be 500,000% (5,000x)! If we can use hindsight in our trades, I'd recommend using the numbers 60, 54, 36, 24 and 7, on last week's Powerball lottery that paid out $211mm. That's a 100,000,000x return!!

yreg 5y ago
Sidenote: Dow Jones Industrial average is an incredibly archaic and dumb metric. It weights companies by price per share, not by market cap. So when Apple does a 1 to 4 stock split its influence on DJI nonsensically falls by 75%.
- dheera 5y ago
  Don't they adjust for that when splits happen?
  - dmurray 5y ago
    No. Lots of other measures do, but not the DJIA.
  - christophilus 5y ago
    Nope. It’s price weighted. Hence the comment on how dumb it is.
    - dheera 5y ago
      Sounds like a simple thing to solve if they just let me make a pull request for the function getDJIAValue() or wherever the hell it lives. Based on price is fine -- when splits happen just adjust the weight by the split factor. Are they really that incompetent at coding?
      - yreg 5y ago
        >Based on price is fine -- when splits happen just adjust the weight by the split factor It's not fine since companies have varying counts of shares, nevermind the stock splits. The proper solution is getSharePrice() * getShareCount(). Which is what most other indeces do.

FreeRadical 5y ago

This is a really interesting concept

okareaman 5y ago

It's a cool concept. I follow "World War I as it happened (1914)" https://twitter.com/WarHappened https://twitter.com/WarHappened

rland 5y ago
There's this one for World War 2 also: https://twitter.com/RealTimeWWII https://twitter.com/RealTimeWWII
- roaring20s 5y ago
  I have a twitter here if you want to follow: https://twitter.com/Roaring20sTate https://twitter.com/Roaring20sTate

anconia 5y ago

Cool! Are you planning on doing any other time periods like this?

maerF0x0 5y ago

> If one bought and held the Dow from 1921 to present, the total return would be 500,000% (5,000x)! One of the great challenges of human existence is we do not live 100 yrs to see those returns. Instead we're living, blind to the exact details, on the choices of those 100 yrs prior to create the X% returns of their choices _for our lives_ . One way to get people to make such choices is to create a love for whomever comes next. Children used to be a "skin in the game" sort of scenario where you didn't want to mess up the future cause you had a vested interest in it. Between selfish culture and few people having children, i'm not sure the solution . While many say that ending aging / increasing life span to 100s or 1000s of years would be disastrous, I actually think it might fix a lot of issues as we'd have that timespan of a personal interest to optimize across.

baybal2 5y ago
There is 1000 year gold, but no 1000 year people
deleted 5y ago
[deleted]

cm2187 5y ago

Today no one seems to care about inflation in Europe or in the US. It seems to be a subject confined to economists that every day people don’t care about, if they even understand the concept (no one under 50 has really witnessed it in their adult life). So people are all for unlimited money printing. It is interesting to find old articles and read what people cared about at the time. Inflation was often a top concern, and politicians running their campaign on curbing it. Some old movies also refer to it (that stolen money which will melts away while you await behind bars). Our current complacency in term of budget deficits and monetary policy will wake up that sleeping dragon.

sanp 5y ago
Perhaps inflation was a concern in an economic system where 1) A physical commodity (Gold) was the store of value, and 2) Debt was not easily accessible. Neither of these are true anymore and inflation now will be a reflection of true scarcity of a good / service (e.g., housing) as opposed to the transaction costs associated with procuring it...
- bequanna 5y ago
  The familiar refrain of hubris the has preceded pretty much every crisis: “This time is different.”
- leppr 5y ago
  Access to debt is still difficult for those that will be hurt most by inflation of consumption goods (CPI in the US). Furthermore it's also more accessible proportionally to existing wealth, which means inflation is in effect an inequality amplifier.
carnitine 5y ago
Probably because inflation has never been particularly bad post-QE. We had inflation north of 10% in the 70s, it’s averaged a couple of percent in the last two decades. Also, despite what the Fed probably wants you to think, QE is not money printing, it is a duration swap between different forms of existing money.

VinLucero 5y ago

Does anyone know where I can find a digital version of historical FT / WSJ articles? I’d love to run some NLP over that history to track sentiment over time.

roaring20s 5y ago
Good idea. The market sentiment in 1921 was very bad for stocks. In fact, a week ago in 1921, Andrew Mellon (Treasury Secretary) suggested retail investors avoid stocks. This was covered in my post last week. Sentiment is going to flip around 1923-1924 (once we clear the 1920 top) and only strengthen into 1929.
- VinLucero 5y ago
  @roaring20s I have read through all of your current Substack articles and would love to catch up on your own background and data sources. I think pre-computer data extraction powers the best ML insights. I am working at a YC Fintech company exploring economic opportunity over time and think there are some deep relationships here around human psychology and markets.
  - anconia 5y ago
    Interesting - What company? If you can't say, no worries.
deleted 5y ago
[deleted]
deehouie 5y ago
WSJ has a link to its digital archive, which only goes back to May 1996. And unfortunately it doesn't have API so getting articles out of site for NLP is a pain. Let me know if you have code for that. I'm working on something similar
otterley 5y ago
ProQuest is the digital provider for Wall Street Journal historical archives. Many public libraries provide free access; often all you need is a local library card and login.

aazaa 5y ago

> Writers at the FT ponder how to spend their day while equity and commodity markets vacillate listlessly. ... This is what a lot of people don't get about market bottoms. Nobody cares. It's not like they hate an asset class. They just could not care less. This is one of the reasons that buying market bottoms is so hard. There's no story. You tell somebody what you did, and they just look at you with a blank stare. Then you get to wait while ... nothing at all happens. Good news that should turn prices around - nobody cares. Or worse, a surprise snap lower that makes you question your "value" stance. During the transition period from bear to bull, nobody believes it's real. The bears from the previous cycle who called the top and made the right choice to sell will not believe the bull is real and so will stay on the sidelines. As the market rises, everyone - even the bulls - will expect the inevitable return to baseline. Rinse and repeat. Maybe for years. Not many people will continue to hold on during that period. Near market tops, of course, it's exactly the opposite. You will be congratulated from here to Timbuktu and back for your "wise" investment when buying into a market shooting higher. You'll look like a star. Somebody who knows what they're doing. There will be lots of talk about new paradigms and how this time it really is different, and why. You should be selling, but your own brain and the brains of the people around you will make you buy, buy, buy instead. It's so predictable as to be laughable, except for the pain and chaos that happens when an especially monstrous bull goes to the slaughterhouse.

anonu 5y ago
What? Market timing has always been a thing. Whether it's a bottom or a top or a head and shoulders pattern. This is the whole point of technical analysis and there's enough people out there to care about every single thing the market does at any stage in it's cycle.
- EMM_386 5y ago
  > Whether it's a bottom or a top or a head and shoulders pattern. This is the whole point of technical analysis I'll let you in on a little secret. Technical analysis is a lot of smoke and mirrors. I was in this industry. You can draw all the head and shoulder patterns you want, if Elon posts a Tweet about price targets of 420.69, Apple doesn't sell enough iPhones, the company you are charting causes a major oil spill, or the weather gets warmer, those patterns vanish in an instant. Millions of global traders do not obey lines drawn on charts. The market is too complex for that.

anonu 5y ago

Highly suggest reading "reminiscences of a stock operator". Which I'm guessing was written about 100 years ago about punting and gambling in the stock market... What you'll notice is "plus ça change, plus c'est la même chose"... It's all self similar. The same concepts and patterns back then are the same concepts that people chase today.

ourmandave 5y ago

John Tuld from Margin Call movie... So you think we might have put a few people out of business today. That its all for naught. You've been doing that everyday for almost forty years Sam. And if this is all for naught then so is everything out there. Its just money; its made up. Pieces of paper with pictures on it so we don't have to kill each other just to get something to eat. It's not wrong. And it's certainly no different today than its ever been. 1637, 1797, 1819, 37, 57, 84, 1901, 07, 29, 1937, 1974, 1987-Jesus, didn't that fuck up me up good-92, 97, 2000 and whatever we want to call this. It's all just the same thing over and over; we can't help ourselves. And you and I can't control it, or stop it, or even slow it. Or even ever-so-slightly alter it. We just react. And we make a lot money if we get it right. And we get left by the side of the side of the road if we get it wrong. And there have always been and there always will be the same percentage of winners and losers. Happy foxes and sad sacks. Fat cats and starving dogs in this world. Yeah, there may be more of us today than there's ever been. But the percentages-they stay exactly the same.

birdyrooster 5y ago
I’m going to go ahead and sort of disagree with you there. What you are describing is a logical fallacy. By redefining winners and losers to be an arbitrary condition instead of a fixed set of attributes (homeless, hungry, lack of class mobility, poor health), you can claim some notion of relativism but it’s not helpful for understanding anything. It’s a bit of circular reasoning.
- remontoire 5y ago
  His whole comment is a quote from the movie
  - birdyrooster 5y ago
    I know it was a quote. I was disagreeing with the sentiment. Why even repeat that? It’s like saying “did you even read the article?”
    - 5y ago

cperciva 5y ago

If one bought and held the Dow from 1921 to present, the total return would be 500,000% (5,000x)! On the other hand, CPI has gone from 17.6 to 271.7 in the past century, so that 5000x total return is really 324x after adjusting for inflation -- also known as 6%. Now, 6% after inflation is nothing to sneeze at; but it started at a cherry-picked low point in the market and it comes with a lot of market volatility... and it's still not dramatically better than the 4-5% which ultra-long term investors (e.g. university endowment funds) aim to receive after inflation.

pg314 5y ago
That ignores dividends. That will add a couple of percentage points to the return. If I rerun the calculation from the cherry-picked peak of about 360 in 1928, I get around 4.5% after inflation, without dividends.
- IshKebab 5y ago
  I'm pretty sure they use a price that accounts for dividends. Or they should anyway unless they're doing it wrong.
  - roaring20s 5y ago
    Compounding works best when dividends are immediately reinvested... it also pushes up the total return considerably.
- cperciva 5y ago
  The article says "total return", and the price index only increased by 513x (from 68.63 to 35,208). so I'm pretty sure they're including dividends.
  - pg314 5y ago
    True. I missed that. The calculator at [1] gives totally different returns with dividends reinvested, though: 7.6%. [1] https://dqydj.com/dow-jones-return-calculator/ https://dqydj.com/dow-jones-return-calculator/

I_am_tiberius 5y ago

I recently bough an FT subscription for one year and am really disappointing that I'm still exposed to really annoying ads. Is this normal for subscriptions in this cost range?

cptnapalm 5y ago

Best use of a time machine for stocks: Monster Beverage. In 20 years it increased more than 100,000%.

JohnJamesRambo 5y ago

This will be an interesting journey. I got a real jolt yesterday when I read about one of the top value investors (Morningstar’s International Stock Manager of the Year in the past) that jumped off a Manhattan skyscraper recently. His fund had gone from 20 billion to 1 billion AUM because everyone was leaving for bigger gains. It’s the opposite of the speculators jumping off we get in a crash and I think this means something. https://en.wikipedia.org/wiki/Charles_de_Vaulx https://en.wikipedia.org/wiki/Charles_de_Vaulx

JackFr 5y ago

One reason I would imagine prices were so low (and soon might get so high) was that information on these companies was scattershot and very incomplete. There was no SEC. There were no legal reporting requirements and what few reporting requirements there were were mandated by the exchange.

deehouie 5y ago

The view expressed in this blog and many of the comments on HN is a prime example of survivorship bias[1]. In 1921, you did not know DJI would have done so well over the next 100 yrs. A very real counter example is the Japanese stock market. The Nikkei peaked at 39,000 in 1989. Thirty yrs later, it's only 28,000. Many blue chip stocks on Tokyo Stock Exch have never recovered their previous high. [1] https://en.wikipedia.org/wiki/Survivorship_bias https://en.wikipedia.org/wiki/Survivorship_bias

G3rn0ti 5y ago
That’s interesting: Nikkei‘s bad long term performance is due to Japan‘s bad economic policies in the last three decades. Many years of quantitative easing have given rise to a high public debt, a large unemployment rate and an uncompetitive, stagflationist economy after being one of the most innovative producers (“all the cool stuff comes from Japan”). This is what happens when a central bank keeps on preventing moderate recessions necessary for correcting a nation’s economic failures. The US and Europe should study the case of Japan very closely these days. https://en.m.wikipedia.org/wiki/Economy_of_Japan https://en.m.wikipedia.org/wiki/Economy_of_Japan
- neffy 5y ago
  I suspect most countries would prefer Japan's problems to their own. An alternative view might be that the excessive returns in the US are due to outright financial manipulation using share by backs funded by low interest rates (amongst other things) leading to an insane concentration of money in the stock market and financial sector to the detriment of large sections of US society, its basic infrastructure, and its democracy. This is what happens when white collar crime is institutionalised.
  - andreilys 5y ago
    This is what happens when white collar crime is institutionalised. Buying back shares is neither "financial manipulation" nor is it a "white collar crime". When interest rates are low and you are bullish on the company, it makes perfect sense to buy back shares.

tornato7 5y ago

Interesting that it talks about the hardships that Germany has paying war reparations. This is one of the main contributors to the rise of Nazis some years later; Germans were sick and tired of their paychecks going to pay England.

rossdavidh 5y ago

For those who like this sort of thing, "The Great War" on YouTube followed WW1 week by week, 100 years afterwards. No reason you couldn't do the same with 107 year delay or something. It was very well done.

tkgally 5y ago
In a similar vein, I recommend the 2008 book Human Smoke: The Beginnings of World War II, the End of Civilization by Nicholson Baker. He summarizes news reports and other real-time accounts from the years leading up to World War II and the Holocaust. An excerpt, from page 34: “The New York Times reported, on page one, that the Central Union of German Citizens of the Jewish Faith, a group with sixty thousand members, had issued a statement saying that the reports of atrocities by Nazis against Jews were ‘pure invention.’ It was March 25, 1933. “Anti-Semitism existed, and it was, the society said, a matter of grave concern, but it was a domestic affair. ‘Let us take an energetic stand against everybody attempting criminally to influence the shaping of Germany’s future through foreign newspapers.’ ”

fighterpilot 5y ago

A side effect of 1929 was the popularity of the Nazis. They went from low single digit support to 35-43 range levels of support in two years, in part due to the huge unemployment and disaffection. The ripple effects of seemingly disconnected events thoughout history never cease to amaze me. It makes me more aware how damaging seemingly once-off things can be (act of terrorism, discriminatory or unfair policies, economic hardship) due to the spiralling effect that can happen.

FabHK 5y ago

Book recommendation: Lords of Finance: The Bankers Who Broke the World by Liaquat Ahamed. It is more interesting than the title, I think. It covers WW I, great depression, and the beginning of WW II, with a focus on monetary policy (gold standard, etc.), but also gives general political and economic background. My main take-aways: 1. Things were slower. The Governor of the Bank of England wanted to confer with his counterpart in the US. So, he'd board a boat to the US anonymously, travel there over the course of several weeks, chat with his pal for a few weeks, and travel back for a few weeks. 2. Things are hard to predict (market collapse, inflation, fascists taking over your country). In particular, by the time it becomes clear that the threat is real, it is too late to protect yourself against it.

roaring20s 5y ago
Fascinating, right? What I did not realize until going back in time was how these German reparations are dragging on and on. Armistice is signed in 1918, and reparations are agreed upon in late 1919. In 1920, the payment plans are put forth. By 1921, it's clear Germany can't repay in full. For the next 3-4 years, the entire calamity will stumble in fits and starts. Until the US gets involved in the mid-1920s (Dawes and Young Plans). Even then, war reparations aren't completely paid back until 2010. It reminds me a lot of the Greek situation in the 2010s. Three bailouts, several different rounds of negotiations, etc.
- jbay808 5y ago
  I'm not sure things have really gotten faster. The increased communication rate might be balanced out by the higher inertia of a more interconnected global economy. I feel like the ripples from 2008 are still catching up with us -- look at how interest rates have been cranked low ever since. That's thirteen years.
ruggeri 5y ago
I've been reading [The Price of Peace: Money, Democracy, and the Life of John Maynard Keynes](https://www.amazon.com/Price-Peace-Democracy-Maynard-Keynes/dp/B082QSLGG5 https://www.amazon.com/Price-Peace-Democracy-Maynard-Keynes/...) which I imagine covers similar material. I like it so far.

NotSammyHagar 5y ago

I'd pick a different time to compare 2021 to than 1921, because I keep feeling similarities to the first 4 decades of the last century. I see echoes of the 1930s, where unfortunately the US and the rest of the world will eventually battle it out with China instead of Japan in a decade or so, while the questionable or overinflated stock market in the us feels like we are in 1928. There are a lot of reasons why a failure of our financial system isn't likely (federal deposit insurance on banks being one reason), but the increased disparity between highly paid people like many readers here who are software engineers who benefit from stock market growth while the vast majority of regular wage earners do not portends poorly for any near term unification of the us - instead I see in increasingly fractious times with actual insurrectionist behavior unlocked by Trump. So it's 1935 in terms of war, 1928ish in the macro economy, 1858 in terms of nationalism, 1900 in terms of trusts? I console myself by thinking about my grandfather in 1935 when his family lost their farm and it was the Great Depression and he had no money and he somehow started college the next year and graduated as an engineer right into the teeth of world war II - but he made it.

Skrisiloff 5y ago

I did something similar with TIME magazine several years ago--Read every issue from 1923-2000. You should check out notes at this site: https://www.thetimeproject.org https://www.thetimeproject.org Curious if you'll reach the same conclusions from WSJ/FT on the key causes of the bubble and crash. TIME's coverage of the 20s seemed to suggest that the bubble was caused by loose monetary policy from the Federal Reserve over the course of the decade. There were a few key turning points during the decade 1) Fed lowers rates to help Calvin Coolidge get re-elected in 1924 "Easier money was the most significant development of the past week..We have more gold, less active business in many lines, and a Presidential election ahead. No good Republican would particularly enjoy seeing the brakes applied to the money market as hard as to cause a skid downhill similar to that experienced last year. As long as the Federal Reserve Board consists of political appointees, it is somewhat beside the point to declare that politics has nothing to do with business tendencies." --February 1924 2) The Fed tries to raise rates after the election in 1925 but decides not to in order to help Britain return to the gold standard "When the New York Reserve Bank raised its rediscount rate from 3 to 3 1/2 % (TiME, Mar. 9), financial London at once showed something nearly akin to excitement...when the Wall Street money merchants snap the whip, Lombard Street must jump." --March 1925 "The rates of the Reserve Bank of New York and the Bank of England are made cooperatively in order that the British rate may always be slightly higher and thus avoid heavy gold exports to this country. New York Reserve rate is now 3 1/2%, and a rise to 4% would consequently threaten the British gold supply and the sterling gold standard. Hence, after all these alarms and excursions, the money outlook in America is still for stable and relatively low rates. This in turn facilitates stable security prices and commercial prosperity." --October 1925 3) This attempt to keep rates low to help England leads to a schism in the Federal Reserve Board in 1927. Tight money interests in Chicago break from NY loose money proponents. "the [Chicago] Journal of Commerce charged last week, "The little New York group that dominates the Federal Reserve System came to Chicago and tried to induce the directors here [of the Chicago Federal Reserve Bank] to cut the [re-discount] rate and afford pretext to New York. The request was flatly and somewhat indignantly refused. Continued the Journal of Commerce: “Europe and particularly England wants, and no doubt needs, a very low money market in this country so that American bank funds in large totals may be' attracted to England; and to that end our re-discount rates are to be reduced, and probably Federal Reserve securities are to be sold, and easy credit is to be manufactured." --August 1927 4) The Chicago contingent takes control of Fed policy [One week after forcing the Federal Reserve Bank of Chicago to lower its rediscount rate] "Daniel Richard Crissinger, governor of the Federal Reserve Board, tendered his resignation. Though bankers and lawyers were still dis- puting whether or not he had been "domineering" in forcing a reduced re-discount rate on the Chicago Federal bank (TIME, Sept. 12), Mr. Crissinger said that this dispute had nothing to do with his withdrawal" --September 26 5) Speculation runs wild in 1928 even though the Fed begins to tighten. Retail investors lead the charge. "The Chicago Federal Reserve Bank last week increased its rediscount rate from 3½ to 4%. At once the Richmond Federal Reserve Bank did likewise. It was the first time since August, 1926 that any of the 12 Federal Reserve Banks had increased their rates." -February 1928 ""[At the New York Stock Exchange] Every "record" of any shape or description was broken and rebroken. The explanation is simple. The "public" had finally come in, tardily, clumsily, "at the top," as always, with the greatest reservoir of cash of all, compared to which Wall Street's organized money force is small. It astonished nobody, because 7,000 tickers are now hypnotizing greedy eyes in 40 states, leaving scarcely a middle-sized town from Maine to California where citizens may not actually see their savings bank withdrawals dance past their giddy eyes in strange, cryptic abbreviations three minutes after passing their checks to the broker." --April 1928 6) Low interest rates lead corporations to lend excess deposit money on margin. Bankers warn that this is dangerous but only act as intermediaries. "With $500,000 surplus cash to put aside until it is needed, a corporation usually does one of two things. It may bury the money, either in gilt-edged securities, yielding from 3 to 4%, or in its bank account, where it draws 2% as a commercial deposit. Or it may ask the bank to lend the money out on call, at interest rates ranging from 5 to 10%. As the bank asks only a small commission for this service and generally assumes all the risk, the conversion of surpluses into call loans has become a popular feature of corporation financing. In the last year, the total of such loans has risen from $906,144,000 to $1,808,645,000. To the corporations, this practice seems both obvious and admirable. But to the paternal superbankers, guarding the money market, it appears highly hazardous, deeply disturbing" --August 1928 7) In 1929 the Fed begins to actively fight speculation. The all out assault eventually bursts the bubble. "Toward Wall Street last week the Federal Reserve Board shook a threatening finger, spoke a warning word. With loans to brokers standing at $5,669,000,000, the Board felt that too much money was being absorbed by the stockmarket, that other interests were being forced to pay too much for money they borrow, that indus-try as a whole was suffering from diversion of funds to brokers and speculators. It therefore expressed the opinion that a member of the Federal Reserve Banking System is "not within its reasonable claims for rediscount facilities" when it borrows Federal Reserve money to be used in "making or maintaining speculative loans." Further, the board threatened to "restrain the use of Federal Reserve credit facilities in aid of the growth of speculative credit." Taken at face value, this statement would mean refusal of loans for speculative purposes, plus a rise in the rediscount rate, which in turn would mean a stockmarket afflicted with scarce money and falling prices." --February 1929 "For so many months so many people had saved money and borrowed money and borrowed on their borrowings to possess themselves of the little pieces of paper by virtue of which they became partners in U. S. Industry. Now they were trying to get rid of them even more frantically than they had tried to get them. Stocks bought without reference to their earnings were being sold without reference to their dividends. At around noon there came the no-bid menace. " --November 1929

j7ake 5y ago

If you selected 100 companies in 1929 to invest in, how many of those companies would even still exist today? If only 5 percent or so of those companies still exist (optimistic percent), it would mean you lost most of your money in 95 percent of your original investment if you just bought and held.