“There seems little question that in 1929, modifying a famous cliche, the economy was fundamentally unsound. This is a circumstance of first-rate importance. In 1929 the rich were indubitable rich. The figures are not entirely satisfactory, but it seems certain that the five per cent of the population with the highest incomes in that year received approximately one-third of all income. The proportion of personal income received in the form of interest, dividends, and rent – the income, broadly speaking, of the well-to-do – was about twice as great as in the years following the Second World War.
This highly unequal income distribution meant that the economy was dependent on a high level of investment or a high level of luxury consumer spending or both. The rich cannot buy great quantities of bread. If they are to dispose of what they receive it must be on luxuries or by way of investment in new plants and new projects. Both investment and luxury spending are subject, inevitably, to more erratic influences and to wider fluctuations than the bread and rent outlays of the $25-week workman. This high bracket spending and investment was especially susceptible, one may assume, to the crushing news from the stock market in October 1929.”
John Kenneth Galbraith, The Great Crash of 1929
“Wall Street got the credit for this prosperity and Wall Street was dominated by just a small group of wealthy men. Rarely in the history of this nation had so much raw power been concentrated in the hands of a few businessmen.
Everything was not fine that spring with the American economy. It was showing ominous signs of trouble. Steel production was declining. The construction industry was sluggish. Car sales dropped. Customers were getting harder to find. And because of easy credit, many people were deeply in debt. Large sections of the population were poor and getting poorer.
Just as Wall Street had reflected a steady growth in the economy throughout most of the 20s, it would seem that now the market should reflect the economic slowdown. Instead, it soared to record heights. Stock prices no longer had anything to do with company profits, the economy or anything else. The speculative boom had acquired a momentum of its own.
On September 5th, economist Roger Babson gave a speech to a group of businessmen. ‘Sooner or later, a crash is coming and it may be terrific.’ The market took a severe dip. They called it the “Babson Break.” The next day, prices stabilized, but several days later, they began to drift lower. Though investors had no way of knowing it, the collapse had already begun.”
The market fluctuated wildly up and down. On September 12th, prices dropped ten percent. They dipped sharply again on the 20th. Stock markets around the world were falling, too. Then, on September 25th, the market suddenly rallied.
Practically every business leader in American and banker, right around the time of 1929, was saying how wonderful things were and the economy had only one way to go and that was up.
There came a Wednesday, October 23rd, when the market was a little shaky, weak. And whether this caused some spread of pessimism, one doesn’t know. It certainly led a lot of people to think they should get out.
And so, Thursday, October the 24th — the first Black Thursday — the market, beginning in the morning, took a terrific tumble. The market opened in an absolutely free fall and some people couldn’t even get any bids for their shares and it was wild panic. And an ugly crowd gathered outside the stock exchange and it was described as making weird and threatening noises. It was, indeed, one of the worst days that had ever been seen down there.
But Monday was not good. Apparently, people had thought about things over the weekend, over Sunday, and decided maybe they might be safer to get out. And then came the real crash, which was on Tuesday, when the market went down and down and down, without seeming limit…Morgan’s bankers could no longer stem the tide. It was like trying to stop Niagara Falls. Everyone wanted to sell.
In brokers’ offices across the country, the small investors — the tailors, the grocers, the secretaries — stared at the moving ticker in numb silence. Hope of an easy retirement, the new home, their children’s education, everything was gone.”
PBS American Experience, The Great Crash of 1929
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Perhaps, quote of the century.
Stock market is a sucker bet, put in place for the purpose of harvesting the wealth of the “little guy” stupid enough to take the bet.