4 July on US Independence Day was re-opened access to the Statue of Liberty. For more than six months, the statue was repaired after Hurricane Sandy, which struck New York and its environs at the end of October 2012. But on October 1, 2013 was no longer allowed to tourists again to the statue due to the cessation of labor remuneration for all government officials, including guards of US monuments. The impact of visiting the main symbol of America on tourists financial hurricane was not weaker than the natural.
Under the banner of Americanism
Since 1 in October 2013, the US government and lawmakers, having failed to agree on a country's budget, stopped funding public servants, this day was declared a “black Tuesday”. Similar "black" days are not few in stories American finance. Especially a lot of them were in the fall of 1929. True, knowledgeable people say that it is impossible to draw an analogy between the events taking place now and those that happened 84 a year ago. They believe that the United States and other countries of the world have drawn serious lessons from the events that took place at that time. They insist that now the world market economy is reliably insured against the repetition of such disasters. There are known grounds for such statements. At the same time, it is useful to recall that confident statements about the impossibility of the fatal upheavals in the American economy sounded 84 a year ago.
By the end of the 19th century, the United States had become the richest country in the world. Then one of the US steel magnates E. Carnegie published the book "Triumphant Democracy", which said: "65 of millions of Americans existing now could buy 140 of millions of Russians, Austrians and Spaniards, or, having bought rich France, would save even pocket money for acquisitions of Denmark, Norway, Switzerland and Greece. "
Carnegie expressed confidence that the day would come when "500 of millions, all as one Americans having one citizenship, will dominate the whole world for its own good."
During the First World War, the United States became even more enriched. By November 1922, the total debt of foreign countries to the United States reached 11,6 billions in unpaid interest 4,7. Of these, the UK owed 3,8 billions of dollars, France - 1,9 billion, Italy - 0,5 billion, Belgium - about 20 billion. Together with other types of investment, economic support provided by the USA to European countries amounted to almost XNUMX billions of dollars. The repayment of this huge debt at the then prices should have been stretching for decades. The largest countries in Europe were the tributaries of the United States for at least two generations.
Relying on increased economic power, the rulers of the United States made an application for world hegemony, resorting to a messianic tone. In his memoirs, British Prime Minister Lloyd George described the behavior of US President Woodrow Wilson at the 1919 Paris Peace Conference: “I think that the idealistic president really looked at himself as a missionary whose mission was to save poor European pagans ... Especially the explosion of his feelings was astounding when speaking of the League of Nations, he began to explain the failure of Christianity in attaining high ideals. "Why," he asked, "Jesus Christ did not make the world believe in his chenie? Because he preached only ideals, and did not show a practical way to achieve them. I propose a practical scheme to bring the aspirations of Christ to the end. "Clemenceau silently opened his dark eyes wide and looked around at those present."
US rulers were convinced of the unshakability of their power and their right to dictate their terms to the world. While the 1921 crisis of the year did not greatly affect the US economy, Western Europe was struggling to recover from its adversity and the consequences of a world war. Germany was suffocated by inflation. In the opinion of the English writer H. Wells, Russia, ravaged by the Civil War, was "in the darkness". At this time, the United States again experienced an economic boom. From 1913 to 1929, US industrial production grew by 70% a year, while industrial production in England fell by 1%. By 1928, total US production exceeded production across Europe. While the car in Europe was then a luxury item, in the US already 4,5 million families had their cars.
In one of his 1922 reports of the year, E. Hemingway described how, taking advantage of a significant difference in exchange rates and exhausted by the “dry law” introduced in the USA in 1919, Americans “relaxed” in restaurants in Paris. In turn, the English writer D. B. Priestley, in his novel Street Angel, described how European youth sought to imitate Americans in dress, behavior, and style of speech. Even the appearance of the young Englishwoman Edna’s heroine, “her grimaces and gestures, were copied by her from an Americanized Polish Jew who, thanks to Hollywood, imprinted her appearance and her manners on young girls of the whole world.” The ensuing Americanization further convinced the US rulers of the right of their country to rule the whole world.
Warren Harding, who replaced Wilson, said: "We Americans have done more for the development of mankind in a century and a half than all the nations of the world together in their entire history ... We proclaim Americanism and welcome America."
In the 1928 election of the Republican Party, Herbert Hoover was nominated as a candidate. During his election campaign, he promised every American family a car. After winning the election, Hoover became an ardent apologist for "Americanism." As the historian L. Denny wrote, Hoover "saw the future of America as an empire of a new type, an economic world empire created on the basis of an advanced business, bound by trade and credit, penetrating all countries conquering all other nations."
"Everything is fine, beautiful marquise ..."
The rapidly wealthy middle-income Americans sought to become owners of shares that brought regular profits, as well as to take possession of land ownership. The cost of land in the Florida resort grew with each month, but the number of buyers has not decreased. However, when it turned out that under the guise of plots located "a stone's throw away from a luxurious beach", swampy marshlands located miles in 30 from the sea coast, housing and roads were sold, then in the summer of 1929, there was a sharp drop in the price of land on Florida sale. It was found that the "weave" of Florida was trafficked by people who themselves had recently become their owners and were trying to resell them at a higher price to other lovers of easy money. The exposure of land speculation led to a decrease in shares on the New York Stock Exchange on 9 points 5 September 1929 of the year. (Then the points were counted on hundreds, not on thousands, as it is today.)
On the same day, prominent American economist Roger Babcock, speaking at the annual National Conference of Business People in the USA, announced that Florida-like speculations were characteristic of the entire stock market. He warned: "Sooner or later, the collapse will come and it will be terrible." He predicted a sharp drop in stocks, closing of factories, rising unemployment. Babcock argued: "The economy will fall into a vicious circle and the consequence will be a serious depression."
However, Babcock was ridiculed by his colleagues and those from the business world. It would seem that they were right: in the evening of September 9, shares began to grow rapidly. Newspapers wrote that the temporary suspension of growth was due to purely technical reasons. The exposure of Florida swindlers did not sober business America, which, having ceased to trade in areas covered by water, continued to vigorously speculate in stocks that had a lot of air, and borrow money on dubious security.
15 October 1929 President of National City Bank, one of the leading US banks, Charles Mitchell said: "The situation in the American industry is excellent. The markets are in excellent condition."
On the same day, prominent American economist Irving Fisher assured that the stock market would experience a boom for at least another few months. (These and subsequent events of the autumn of 1929, were vividly described on the basis of documents and eyewitness accounts in the book of the great American economist John Galbright "The Great Collapse.")
On Saturday, 19 in October in various parts of the country have problems with cash, which caused concern on the stock exchanges of the country. The value of the shares of the most influential industrial companies fell by 12 points. But on Sunday, the newspapers published statements by authoritative experts that "the worst is over," and "organized support" for the securities market will restore their previous value in the coming days.
Yet on Monday morning, 21 October shares continued to fall. However, in the evening the panic subsided and Charles Mitchell, who arrived the next day in the USA, declared that "the market is perfectly healthy," admitting, however, that "the fall in the value of shares has gone too far." According to I. Fisher, the panic on the stock exchange had a healing effect on the stock exchange, as it helped get rid of unbalanced investors. No one doubted the rightness of the richest financiers and scientists with doctoral degrees, especially since October 22 shares began to rise in price.
And yet, October 23 stock decline resumed. Many speculators decided that they should no longer be tempted by fate in anticipation of even greater profits and tried to get rid of the shares. By 3 hours of the day 6 374 960 shares were sold. In the entire history of the United States before, only once the volume of sales was large. The price for them quickly fell - from 100 to 20 dollars per share. However, "knowledgeable people" claimed that the expected "organized support" would arrive at the stock exchange the next day.
But October 24 1929 of the year has come Black Thursday. In the morning, long before the opening of trading, a crowd of shareholders surrounded the New York Stock Exchange.
According to an eyewitness, "people just stood and looked at the stock exchange building. It was like the silence that happens before the start of a big race."
In 10 hours trading began. Someone shouted: "Rising courses!" Indeed, the shares of companies that have become “thinner” the day before have grown in a few minutes in price from 50 cents to 11 dollars. In 10 hours 10 minutes, someone immediately bought 13 thousands of Packard shares. The following 15 minutes prices were stable. But all of a sudden, the price of General Motors shares fell on 80 cents. Five minutes later, the brokers began to receive orders from their customers: "Sell at the highest possible price!"
The rules of the New York Stock Exchange stated that brokers should not "run, swear, push each other and take off their jackets." However, in 11.30, these rules were violated by all bidders. Teletype reporting news about the deals, did not keep up with the events, and the information about the falling of the shares was hopelessly behind the real rate.
In 12.30, shareholders on the street saw how magnificent
C. Mitchell without a jacket on foot hurried to the home of multimillionaire P. Morgan. Soon he was joined by other well-known financiers of the country. After a brief meeting, “global capital sharks” decided to “organize” to save the stock market from collapse. Meeting participants immediately allocated 50 millions of dollars to support the stock price. The rise game has borne fruit. Although on a black Thursday a record number of shares were sold in the entire history of the New York Stock Exchange - 12 894 650, but by the end of the day the losses incurred in the first half of the day were largely offset. In the evening, a statement from 35, the largest bank street bank house, was announced, stating that the situation on the stock exchange was “generally stable” and that “from a financial point of view, the state of affairs is better than ever in recent months.” The statement ended with the phrase: "The worst is left behind."
The events of the next day seemed to confirm the optimism of the financiers. In the morning the stock price began to grow. For brokers, this was a day of hard work: they had to sum up yesterday’s losses. In addition, they had painful conversations with their clients who had gone bankrupt the day before. The victims were rudely insulting the stockbrokers because they did not have time to sell their shares in a timely manner. The accusations were usually unfair, the investors simply tried to put their grief on brokers.
On Saturday, 26 October, the exchange worked only two hours, but the stock price remained stable, as on Friday.
On Monday morning, 28 October, the mood on and around New York Stock Exchange was restrainedly optimistic. There were rumors of huge stock purchase orders. By the beginning of work, thousands of people had gathered around the stock exchange. Along with the curious, people came with money to purchase stocks.
I didn’t have time to hear the gong announcing the start of trading, as brokers learned about the fall of United States Steel shares - for 1 dollar 25 cents. The stock price of General Electric fell by 7 dollars 50 cents. The fall in prices and the volume of sales of shares accelerated. By one o'clock the teletype information lagged behind the real prices for 58 minutes. By the time the auction ended, 9 212 800 shares were sold - less than on Black Thursday, but the depreciation was much larger. For the first time in the history of the New York Stock Exchange, stocks fell 29 points in one day. The total value of securities declined by 14 billion dollars.
In the evening, Wall Street financiers again gathered at Morgan. This time, world bankers announced that although their goal was an “orderly stock market”, they did not intend to “maintain the course of someone’s shares” and “protect someone’s profits.”
This meant that the great directors of world financial performances under the guise of "non-interference" in the affairs of the securities market agreed among themselves about the redistribution of property of industrial corporations whose shares were traded.
"Do you have room for lodging or for jumping?"
The next day - Tuesday 29 October 1929 - went down in history as the day of the greatest stock market disaster. Eyewitnesses claim that this time the sound of the gong was drowned out by the shouts of brokers: "Twenty thousand shares - at the maximum price!" "Thirty thousand to sell!" "Fifty thousand - sell!" Shares of "Westinghouse" lost weight by two dollars per minute. General Electric's stock price dropped one dollar every ten seconds. For the first 30 minutes of the exchange, 3 259 800 shares were sold, and their total value depreciated by more than two billion dollars.
In the hall of the exchange brokers lost control of themselves: people swore and beat each other. The messenger, making his way through the crowd, suddenly felt himself being lifted by the hair. The man, clinging to his hair, shouted that he was ravaged. The young man escaped, leaving in the hands of a distraught man the shreds of his hair, and, screaming in pain, rushed out of the stock exchange building. Two clerks, apparently temporarily out of their mind, pounded each other with their fists. The president of the exchange, William Crawford, was pushed aside by the pressure of the crowd. He later recalled that "people roared like a pack of lions and tigers ... they yelled and shouted, tearing apart the collars from each other."
Meanwhile, the fall in stocks continued. In a matter of minutes, shares of steel companies, railroads, coal and automobile corporations depreciated.
Brokers, not hesitating, sobbed sob. Some of them, falling on their knees, prayed to God in the operating room. Many rushed to the nearest church of the Holy Trinity and offered prayers, hoping for salvation from above.
Usually, the church, which was empty on weekdays, was already crowded from noon, and the crowd of worshipers remained in the temple until the end of the day.
By one o'clock, the number of shares passed from hand to hand had reached 12 652 000. The country's leading bankers met twice for meetings, but no communique on the outcome of their consultations was published. At the end of the day, the value of a number of stocks rose slightly. This meant that, speculators, buying up shares at the lowest possible price, tried as quickly as possible to get rid of them, selling them with some profit. Summing up the day, the stock exchange teletype operator printed: "Today 16 383 700 shares were sold. Good night." In one day, shares of leading companies fell on the 43 item. The total value of shares sold on the New York Stock Exchange was reduced by 10 billion dollars, which is two times higher than the money supply at that time in circulation. Across the country, losses from falling stocks amounted to 74 billions of dollars.
The unprecedented collapse of the stock market did not cause an automatic collapse of the economy. Moreover, many Americans reiterated that "the worst is over." Already October 30 speculators continued to inflate the price of shares purchased at bargain prices, and it rose an average 31 point. Newspapers cited the words of President G. Hoover that "the main forces of American business are in perfect order." John D. Rockefeller made a special statement in which he reported that his family was actively buying up shares of various companies. These authoritative statements diverted attention from the message that the body of a stockbroker was caught in the waters of the Hudson River in New York. In his pockets telegrams from customers and 9 dollars 40 cents were found in small change.
October 31 stock price rose 21 point and it seemed that the price of these securities, much of which passed to other owners, will quickly return to their previous level. General Motors President Alfred Sloan said that "with business, everything is normal." Henry Ford announced price cuts for his cars.
The next day, Foshey, which owned factories, banks, wholesalers and hotels in 12 states of the USA, Canada and Mexico, went bankrupt. It was recalled that only three months ago, US Secretary of Defense James Good solemnly opened the 32-storey office of this company in the center of Minneapolis, declaring it a stronghold of prosperity in the Midwest. It turned out that the company went bankrupt during a stock market panic. After the October events, the rumor that the entrepreneur "suffered on the stock exchange" acted on people just like reporting a neighbor’s illness during the cholera epidemic. Now creditors tried to get debts as quickly as possible, and since during the years of prosperity many firms and private citizens lived in debt, ruin and bankruptcy followed each other like a forest fire.
Frequent suicides. Bankers shot, industrialists poisoned themselves with gas. Two New York brokers jumped out of the hotel room window, holding hands.
The receptionist in New York hotels darkly joked: "Do you need a room for housing or for jumping?"
The Great Depression
In the first months after the market crash, Americans reduced the purchase of expensive technical innovations. By the end of the year, the sale of radios in the United States halved. The volume of freight traffic fell sharply. Across the country began to reduce employment. Businesses closed. The temporary stabilization of the stock price was short-lived. 11 November stock price again plummeted. The fall continued for two more days, and the stock price fell over 11-13 in November by another 50 points.
Nevertheless, the official authorities continued to reassure the people. In December, US President G. Hoover spoke at a joint meeting of both houses of Congress, stating that "effective measures have been taken to restore faith in the economy." In March 1930, Hoover announced that the worst effects of a market crash on employment would be eliminated in the next 60 days. In May, the country's president said that "we have already overcome the worst and together we will soon restore the economy." In June, he said that by the fall of "things will come back to normal."
The opinion of the first man of America was supported by the most prominent experts in the field of economic science. 2 in November 1929. The Economic Society of Harvard University informed the world that "the current decline in stock values does not mean a weakening of business activity." 21 December "Economic Society" delighted the Americans, saying: "Depression is impossible; the economy will be restored in the spring, and a boom will begin in the fall." 30 August 1930 g. "Society" assured that "depression itself has exhausted." 15 November 1930 g. "Society" urged that the country "approached the end of the fall phase." October 31 1931 The pundits from the Economic Society came to the conclusion that "stabilization is very likely."
However, contrary to forecasts of optimists, the economic crisis continued. By the end of spring 1930, 15% of all able-bodied Americans remained without work.
Ironically, over the promise of President Hoover to give every American family a car, people who became homeless and forced to transport their belongings from place to place called their carts "Guver cars."
Homeless, sleeping on benches in the parks for the night, were called "Hoover blankets" old newspapers, under which they were hiding. In those years, on the outskirts of cities, numerous shelters for the unemployed and homeless grew out of empty boxes and construction trash. Accumulations of these "dwellings" called "guvervillami".
Frequent trips of the hungry. In the summer of 1932, the 25 of thousands of unemployed World War I veterans moved to Washington. Camps of hungry veterans, built near the capital, were defeated by troops. They were commanded by the future commander of the Second World War, and then of the Korean War, General Douglas MacArthur. His adjutant was the future commander of the Allied Expeditionary Forces in Europe and the future President of the United States, Dwight Eisenhower. During the rout of the camp there were casualties.
Meanwhile, the crisis continued to worsen. In July, 1932
US industrial production was halved compared with October 1929. In some industries, the decline in production was even more dramatic. By the beginning of 1933, steel production accounted for 12% of production capacity. Iron production reached the level of 1896 of the year. The number of unemployed exceeded 13 million people - more than a quarter of the entire workforce of the country. Millions of people were transferred to an abbreviated work week. Wages and real incomes have dropped by an average of two times. Stocks continued to fall. Starting a fall from 542 points, the stock price of leading US industrial companies was 1932 in July, only 58 points.
The dependence of a large part of the planet on the US economy contributed to the fact that the crisis swept the rest of the world, paralyzing from a third to two thirds of the industrial production of leading countries.
Japan’s industrial production declined by 1932% by 32. Industry in Germany and England was driven back to the level of 1896 – 1897. Everywhere, the real incomes of those employed in production fell to 40-50% of the pre-crisis level.
Did the lesson for the future?
The Great Depression, from which the world struggled and only partly emerged in 1933, left deep wounds. One of its consequences was the rapid movement of the planet to the Second World War. Another consequence was the development of measures to prevent such economic disasters. The broadest program for overcoming the crisis was developed and implemented by US President F.D. Roosevelt, called the "New Deal".
Since 1933, the world has not known crises like the Great Depression. In no small degree of stabilization of the economy contributed to the arms race during the preparation of the Second World War, and then during it. Subsequently, military orders loaded the production capacities of various countries of the world for almost half a century of the Cold War.
However, the invasion of the military-industrial complex into the economy did not stop speculative processes. Lead economist J. Keynes, whose theory formed the basis of the New Deal, warned of the threat of a new collapse already in the 30 – 40-ies, drawing attention to the strengthening of financial speculation. Keynes pointed out that speculative capital accounts for 10% of all funds in circulation.
After the end of the Cold War, financial speculation increased substantially in volume and accelerated. Describing the dynamics of world finances, the Russian economist Boris Klyuchnikov wrote in 2005: “The diabolical pump pumps 1500 – 1700 billions of dollars daily, 90% of which are speculative operations, which are transferred from country to country for an hour, a day, a week, and again running to a place where the profit rate is higher ... It has become much more profitable not to produce, but to speculate on the exchanges, not to build factories and supply useful services, not to invent and introduce, but to sneak into the executive chairs of banks, insurance companies and pension funds Speculate collectively and individually. "
In 2008, the bubble of speculative capital, inflated to the limit, burst. From autumn 2008 to the first months of 2009, the capitalization of the US stock market fell from 16,5 trillions of dollars to 5,9 trillions. All over the world, only for the first month of 2009, 25 trillions of dollars "burned down". Stock price fell by 45%.
The then Prime Minister of Japan, Taro Aso, said the world was facing a recurrence of the Great Depression. Pope Benedict XVI announced that the current financial system of the world is built on sand and it only remains to pray to God for salvation.
It seemed Pope’s prayers were heard. The crisis that began in 2008 did not lead to a crash, similar to what happened in 1929. At the same time, the problems that gave rise to the crisis were only postponed, but not overcome. Therefore, the crisis has become unusually protracted. Over the past 5 years, unemployment in the European Union has not fallen below 12%. In Spain and Greece, it exceeded 25%. Decline experienced the whole industry. The capital of the American automotive industry, Detroit has become a ghost town. Whole countries of the world were on the verge of bankruptcy, and Iceland, which went bankrupt, refused to return its debts.
In the summer of 2013, it was noted that the speculative bubble was again inflated to the limit. Reducing the effects of the 2008 crisis of the year was due to the fact that state and international financial institutions provided huge funds to banks and entire countries. As a result, their debt increased in astronomical proportions.
Now the US government debt is greater than the gross national product of this country. In May, the 2013 of US national debt exceeded the 16,7 trillion dollar ceiling set by the country's congress. The daily increase in government debt is 1,8 billion dollars. In addition, the termination of the payment of civil servants led to additional losses of billions of dollars. October 17 is the deadline for resolving the issue of increasing the US national debt ceiling. But while the solution of this issue, as well as the approval of the US budget, rests on the resistance of the republican opposition. If the decision is not made, the United States waits for default.
This year, like 84 years ago, October 24 will be on Thursday, which was “black” in 1929, and on Tuesday, October 29, as in 1929, will be. Then, until mid-October, bankers and many economists exuded confidence in the future. Now, some experts say: "It is unlikely that the United States will default." Others write: "Even if a default by the United States occurs, it will not bring down the global economy." Still others say: "Talking about the ceiling of public debt is a terrible tale."
However, alarming warnings also sound: “A default will plunge the planet into a crisis”, “A recession will begin in the USA even without a default”.
Of course, in 84, the world has changed a lot. In particular, powerful mechanisms have been created to assist financial institutions. However, as then, the economy is largely dependent on market forces, generating unrestrained speculation. Therefore, even some of those who believe that the United States will avoid default in October are not sure that it will never happen. Robert Kiyosaki, who accurately predicted the beginning of the 2008 crisis of the year, confidently writes in his book “Rich Dad, Poor Dad” that a default in the US will occur in 2016. If the default takes place this year or even through 3 of the year, it means that the lessons from the 1929 events of the year were only partially learned, and the American economy, the state of which affects the whole world, can, as in the 1929 year, cause a severe epidemic, which may suffer the whole planet.