Out of Our City Season on BBC2: The Financial Lesson of 1929

Introduction

• Discussion of the Great Depression following the 1929 stock market crash.
• It was the biggest stock market crash recorded, leading to immense financial loss and emotional trauma.

The 1929 Stock Market Crash

Initial Events

• Date: October 23, 1929
• Sudden and dramatic decline in share prices on the New York Stock Exchange.
• October 24, 1929: Known as Black Thursday; panic selling began.
• Resulted in crowds gathering outside the stock exchange, stunned by the unfolding events.

Causes of the Crash

• Speculation: First-time investors borrowed heavily to invest in the market.
• Installment Buying: The culture of buy now, pay later fueled consumer spending.
• Brokerage Firms: Encouraged ordinary people to invest in stocks, removing the stigma associated with them.
• Margin Buying: 90% of stock purchases were made with borrowed money by the late 1920s.

Economic Context Leading to the Crash

Post World War I Prosperity

• Post-war optimism after 1919; U.S. emerged financially strong while Europe struggled.
• Electrification and new technologies transformed American life, leading to consumer culture.

Investment Culture

• Liberty Bonds encouraged ordinary Americans to invest in securities, creating a new investing culture.
• Charles Mitchell: Changed Wall Street dynamics by marketing stocks to average Americans.

The Role of Wall Street

Wall Street's Influence

• Wall Street was historically an elite circle but became more accessible to ordinary investors.
• Technology (ticker tape) made stock prices widely available, increasing public interest.
• Speculative frenzy led many ordinary people to invest, spurred on by stories of quick wealth.

Key Figures

• Celebrities like Groucho Marx and Joseph Kennedy became figures of inspiration in Wall Street speculation.

Warning Signs Ignored

• Warnings from financial leaders about the unsustainable nature of the stock market were dismissed.
• Paul Warburg warned of a potential collapse, but his concerns were disregarded.

The Crash Unfolds

October 24, 1929

• Massive sell-off of shares; market lost confidence.
• Wall Street elite attempted to stabilize it but failed.

Consequences of the Crash

• By the end of the crash, $25 billion in personal wealth had been lost, leading to widespread despair.
• Social and emotional impact on Americans, including suicides and economic ruin.

Aftermath of the Crash

The Great Depression

• The crash triggered a decade-long global depression.
• Unemployment soared, banks failed, and poverty spread.

Changes in Policy and Regulation

• Franklin D. Roosevelt’s New Deal introduced regulations to stabilize banking and the stock market.
• Establishment of the SEC to oversee financial markets.

Long-Term Impact

• The crash led to skepticism of capitalism, rise of authoritarian movements globally.
• Reflects on whether lessons were truly learned from the past.

Modern Implications

• Parallels drawn between the speculative practices of the 1920s and modern financial crises.
• Importance of regulation and oversight in preventing similar economic disasters in the future.