The decade of the 1920s was characterized by an unprecedented economic expansion, which resulted in a huge bull market on Wall Street. Business leaders and economists told Americans it was their duty to buy stocks. John J. Raskob, Chairman of the Board of General Motors, wrote in his book “Everyone Ought to be Rich” that a person who invested $15 in a good common stock per month would have $80,000 within 20 years. (Shepley, The Roaring 20s and the Wall Street Crash: Good Times, Deep Pockets, and Poverty, Andrews UK Ltd, 2011, Intro.) Four million Americans were lured into the market through margin accounts. These financial instruments allowed investors to purchase stocks by making a small down payment and borrowing the rest from a broker. This allowed many people to own stocks and become investors—but on credit.
Millions more Americans than just the investors followed stock prices. The stock market resembled a Las Vegas casino as stock prices increased at twice the rate of industrial production. Paper value outran real value. People believed that every one was going to get rich, and that the stock boom was going to go on forever. President Calvin Coolidge said: “It would seem perfectly plain from recent events that [the stock market] is determined to go forward.” (Hakim, p. 272.) Individual investors bought billions of dollars worth of stocks with their own—and borrowed money. According to the Mellon theory of wealth, had some of that money been invested in new products instead of stocks, the market likely would not have crashed—leading to The Great Depression.
Joseph P. Kennedy, patriarch of the famous Massachusetts Kennedy clan, is known to have said that it was time to get out of the market when his shoe shine boy asked him what he thought of a particular stock.
The Stock Market crashed on October 24, 1929, and that date went down in history as “Black Thursday.” More than 30 billion dollars in stock value was lost in few days. (Jennings and Brewster, p. 149.) The value of Radio Corporation of America (RCA) stock went from $505 per share on September 3, 1929 to $28 per share on November 13th. (Hakim, p. 272.) By 1932, the index of stock prices had fallen from a 1929 high of 210 to a low of 30; that means that stocks were valued at just 12 percent of their 1929 value. Between September 1929 and June 1932, the nation’s stock exchanges lost $179 billion in value. (Jennings and Brewster, p. 149; Reader’s Digest, Carrol C. Calkins, Ed., The Story of America, p. 63.) Variety magazine printed a banner headline on October 30, 1929 that stated “Wall Street Laid an Egg.”
The dynamic of the market sell off was exacerbated by the existence of so many margin accounts. When prices began to fall, stock brokers called on those who had purchased stocks on credit and required them to reduce their debt balances. Those who owed money on margin had two sources of funds to raise cash to meet the margin calls: they could sell their stocks at a loss, and/or they could withdraw deposits from bank accounts. People who did not have money in the stock market, but had money in banks, became afraid that banks would fail (“a bank panic”) and rushed to remove their cash from the banks. Multiplied by thousands upon thousands of people, the downward pressures on the market and the stresses on banks turned out to be beyond the capacity of the system.
The United States experienced unprecedented Depression conditions. Banks closed, companies shut down and laid off workers, families went hungry and much human energy was spent searching for hope for a resolution. “Herbert Hoover’s America was a dismal place in 1931.” (Robt. Cohen, p. 3.)
“The Panic is On,” sung by Hezekiah Jenkins (1931), describes some of the conditions that faced the people in the early days of the Depression. (https://youtu.be/wmFCELxpTfE)
Well, what this country is a-coming to,
I sure would like to know,
If they don’t do something by and by,
The rich will live and the poor will die,Doggone, I mean the panic is on.
Can’t get no work, can’t draw no pay,
Unemployment getting worser every day,
Nothing to eat, no place to sleep,
All night long, folks is walkin’ the street,Doggone, I mean the panic is on.
Saw a man this morning walking down the street,
In his BVD’s, no shoes on his feet,
You ought to seen the women curvin’ in they flat,
I could hear them saying, “What kind of man is that? ”Doggone, I mean the panic is on.
All the landlords done raised the rent,
Folks that ain’t broke is badly bent,
Where they get dough from, goodness knows,
But if they don’t produce it in the street they goes,Doggone, I mean the panic is on.
Some play the numbers, some read your mind,
They’ve all got a racket of some kind.
Some trimmin’ corns off ‘a people’s feet,
They got to do something to make ends meet,Doggone, I mean the panic is on.
Some women are selling apples, some selling pies,
Some selling gin and rye,
Some selling socks to support they man,
In fact, some are selling anything they can,Doggone, I mean the panic is on.
I pawned my clothes and everything,
Pawned my jewelry, my watch and my ring.
Pawned my razor, an’ my gun,
So if luck don’t change, there’ll be some stealing done,Doggone, I mean the panic is on.
Old prohibition ruined everything,
That’s why I’m forced to sing,
Here’s one thing I want you all to all to hear,
Until they bring back light wine, gin and beer,Doggone, the panic will be on.
There was a credit squeeze throughout the entire country. Banks stopped lending money to businesses and individuals. (Epstein, p. 39.) Without loans from banks, businesses could not finance their operations. They had to lay off workers. Without wages or loans, working people stopped spending money. They could not pay for items they bought on credit. Banks and business suffered additional stresses due to these situations. There were more bank and business failures. It became a vicious cycle.
In 1930, 26,000 business failed, in 1931 another 28,000 went under. (Jennings and Brewster, p. 149.) By 1932, between 3,500 to 5,000 banks holding billions of dollars (the life savings of the common man) in uninsured deposits closed. (Jennings and Brewster, p. 149; Reader’s Digest, p. 63.) Twelve to fifteen million people were unemployed—25 percent of the work force (although unemployment was 50 percent in Chicago and 80 percent in Toledo). (Jennings and Brewster, p. 149; Hakim, p. 272; Reader’s Digest, p. 63.) The Gross National Product (GNP) declined from $105 billion in 1929 to only $55 billion in 1932. Compared to pre-Depression levels, net new business investment was a minus $5.8 billion in 1932. Wages paid to workers declined from $50 billion in 1929 to only $30 billion in 1932. (Id.) By 1933, hourly wages dropped 60 percent from where they were in 1929. (The Great Depression in Washington State Project., http://depts.washington.edu/depress/ .
W. C. Handy, known as the “Father of the Blues,” wrote “Wall Street Blues” during the months following the 1929 stock market crash. The words were written by Margaret Gregory. (https://youtu.be/Tagruv3IA_Y)
I can sing the blues from the bottom of my heart,
I can sing the blues from the bottom of my heart,
All my profits gone ‘fore I even got a start.Never had the blues like the blues I’m blue with now,
Never had the blues like the blues I’m blue with now,
Oh! what I recall of the street called Wall and how!Wailing Wall, Oh, Jerusalem! There’s one in New York, too,
Where I got a-whaling Now I’m ailin’,
Wailin’ cause I’m blue.(“Patter”)
Margin callin’ brokers, miles of ticker tape,
Got a many poor old sap-head wearin’ crepe,
Wailin’ Wall Street, I just can’t enthuse,
Boo-hoo-hoo-in’, I’ve got the Wall Street Blues.More margin that’s the broker’s call,
More margin, I can’t meet his call,
No more margin, Now he’s got it all.
Oh Wall Street you’ve got me depressed,
Downhearted, you can guess the rest,
River’s East end, Graveyard’s at the west.I can’t meet this call,
No more margin, now he’s got it all.
Oh Wall Street you’ve got me depressed,
Down-hearted, you can guess the rest,
River’s East end, graveyard’s at the west.
For 40 million people, poverty became a way of life (TFC, Vol. 4, p. 46), meaning they were forced to follow the adage, “Use it up, wear it out, make it do, or do without.” Families practiced endless little economies, such as buying day-old bread, relining coats with old blankets, saving string, old rags, and wire in case they might come in handy someday, shopping creatively or bartering; simply watching every penny. More than that it meant constant anxiety for fear some catastrophe, large or small, might completely swamp the family budget. (http://historytogo.utah.gov/utah_chapters/from_war_to_war/thegreatdepression.html)
“Brother, Can you Spare a Dime,” lyrics by Yip Harburg, music by Jay Gorney (1931), was the anthem of the Depression. It was sung by Rudy Valle (https://youtu.be/vo8g98Au6rk), and also Bing Crosby (https://youtu.be/ovndTa7hQDE). “Brother, Can You Spare a Dime?’ is a bitter song written during the Depression that speaks directly to the facts of life of this difficult time. Former loyal soldiers and hard workers are reduced to begging in the streets. The song was introduced in the Broadway musical “Americana,” which opened on October 5, 1932, and ran for 77 performances.” (Liner notes from the album titled, “American Song during the Great Depression,” http://www.newworldrecords.org/linernotes/80270.pdf. )
They used to tell me I was building a dream
And so I followed the mob
When there was earth to plow or guns to bear
I was always there right on the jobThey used to tell me I was building a dream
With peace and glory ahead
Why should I be standing in line
Just waiting for bread?Once I built a railroad, I made it run
Made it race against time
Once I built a railroad, now it’s done
Brother, can you spare a dime?Once I built a tower up to the sun
Brick and rivet and lime
Once I built a tower, now it’s done
Brother, can you spare a dime?Once in khaki suits, gee we looked swell
Full of that yankee doodly dum
Half a million boots went sloggin’ through hell
And I was the kid with the drumSay, don’t you remember, they called me Al
It was Al all the time
Why don’t you remember, I’m your pal
Say buddy, can you spare a dime?Once in khaki suits, ah gee we looked swell
Full of that yankee doodly dum
Half a million boots went sloggin’ through hell
And I was the kid with the drumOh, say, don’t you remember, they called me Al
It was Al all the time
Say, don’t you remember, I’m your pal
Buddy, can you spare a dime?