Best of the Week
Most Popular
1.Will UK Interest Rate Rises Crash House Prices? - Nadeem_Walayat
2.Full on Crash Alert for Major World Stock Markets... - Clive_Maund
3.Gold And Silver Market Bottoming? Big Rally Imminent? Reality Check Says NO - Michael_Noonan
4.The Coming Silver Price Rally Will Outperform All Previous Ones - Hubert_Moolman
5.The Trigger For The Upcoming Stock Crash - Harry_Dent
6.Imploding Department Store Results - James_Quinn
7.Dr. Copper is Speaking, are you Listening? ... - Rambus_Chartology
8.Pandemonium in the Stock Market, Dow falls 1,000 points in a week - EWI
9.Asia's Whirling Dervish of Devaluations Has Encircled China's Exports - Keith_Hilden
10.China Weakens the Yuan; Rattles Global Stock and Financial Markets - Gary_Dorsch
Last 5 days
Sturgeon Plays Politics with Syrian Refugee's, Solution Settle Migrants in Hungary and Poland - 5th Sept 15
Jeremy Corbyn’s “Quantitative Easing for People”: UK Labour Frontrunner’s Controversial Proposal - 4th Sept 15
Stock Market Third Wave - Elliott Waves Point to Market Probabilities - 4th Sept 15
Another Hysterically False BLS US Unemployment Report - 4th Sept 15
Bill Gross: Jobs Report Means ‘Fifty-Fifty’ Chance of Fed Sept Interest Rate Move - 4th Sept 15
Will The Government Confiscate Your Gold? - 4th Sept 15
Gold-Silver Ratio in Gear - 4th Sept 15
The Real Threat from China's Stock Market Crash - 4th Sept 15
The Stocks Bear Market Everyone Saw Coming - 4th Sept 15
Why September’s Stock Market Volatility Is a Huge Opportunity for Options Traders - 4th Sept 15
What IF Gold is Just in a Great Big Bull Consolidation Pattern ? - 4th Sept 15
This Stock Market VIX Chart Should Blow Your Mind - 3rd Sept 15
Eurodystopia: A Future Divided - 3rd Sept 15
Stock Market Prepares for the Next Decline - 3rd Sept 15
Europe Rethinks the Schengen Agreement - 3rd Sept 15
BP Oil Company Moves past Mistakes But Still Feeling Price Pinch - 3rd Sept 15
EU Migration Crisis and Population Density, Why Cameron is Right, England Really is Full - 3rd Sept 15
Stock Market Return to Crisis: Things Keep Getting Worse - 3rd Sept 15
Dow Theory Stock Market Sell Signal Examined - 3rd Sept 15
How OPEC’s Attempt to Save Face Affects the Crude Oil Market - 3rd Sept 15
Crude Oil Price Forecast 2015 and 2016 - Video - 3rd Sept 15
The Real Threat from China’s Stock Market Crash - 2nd Sept 15
How Our “Mixed Economy” Created These Mixed-Up Markets - 2nd Sept 15
'Gravity' Is Returning to Stocks and Bond Markets - 2nd Sept 15
OPEC Divorce And Self-Destruction Thanks To Saudi Crude Oil Strategy? - 1st Sept 15
The Beginning Of A New Financial / Stock Market Cycle - 1st Sept 15
Three Things Every Master Trader Knows About Trading Options - 1st Sept 15
Chinese Yuan Revolution? - 1st Sept 15
Take Advantage of Record-High Auto Sales… Before This Bubble Bursts - 1st Sept 15
Pondering Hitler's Legacy - 1st Sept 15
Mainstream Media Goes Berserk - 1st Sept 15
Your Decisive Stock Market Plan to Follow Whilst Most Investors Shiver With Fear - 1st Sept 15
Are There Stock and Financial Markets Investing Opportunities For The Remainder Of 2015 - 1st Sept 15
Crude Oil Price Forecast 2015 and 2016 - 1st Sept 15
REPO Window Hidden $Trillion QE Monthly Volume - 31st Aug 15
Silver and Warnings From Exponential Markets - 31st Aug 15
Stock Market Calls Fed’s Bluff - 31st Aug 15
Why Some ETFs Led the Stock Markets Down Last Week - 31st Aug 15
Stock Market Collapse - Take The Opportunity To Bail Before It’s Too Late! - 31st Aug 15
The Most Important Market Chart on The Planet - 31st Aug 15
Stock Market 50% Retracement - 31st Aug 15
Stock Market Crash Red Alert for 2nd Downwave... - 31st Aug 15
Independant Scotland 1 Year on, UK Civil War If the SNP Fanatics Had Succeeded - 30th Aug 15
Gold’s 7 Point Broadening Top - 30th Aug 15
The Day the Stock Market Shook the Earth: Takeaways From the Dow’s 1,000-Point Drop - 30th Aug 15
Gold Price Rally Marked by Short Covering - 30th Aug 15
Aging Stocks Bull Market - 29th Aug 15
Economic Destabilization, Financial Meltdown and the Rigging of the Shanghai Stock Market? - 29th Aug 15
The Stocks You Should Be Buying After the Market Drop - 29th Aug 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Global Stocks Slide

Eve Of Financial Collapse 2011, Like 1932?

Stock-Markets / Financial Crash Sep 23, 2011 - 06:50 AM GMT

By: DK_Matai

Stock-Markets

Best Financial Markets Analysis ArticleIs history about to repeat itself or rhyme? They will say, nobody saw it coming. Who could have predicted it...? It is worth noting that the 1932 stock market crash is deemed to be the worst in the 20th century and not the one in 1929. It occurred three years after the first crash. In September 2011, we are now approximately three years after the financial crash of 2008-09, which was triggered by the bankruptcy of Lehman Brothers on September 15th, 2008.


1930s Bread Lines

Three years after 1929, on July 8th, 1932, the Dow reached its lowest level of the 20th century and did not return to pre-1929 levels until 23rd November, 1954. The full impact was not felt until the next year. By 1933, the Great Depression was very real and it would take more than 22 years before the market would regain what had been lost. By mid-1930, the market was up 30% from the trough of the 1929 crash. However, by the summer of 1932, the Dow reached a low of just 11% of its high in 1929, or a loss of roughly 89%, trading more than 50% below the low it had reached on October 29th, 1929.

If one had invested $1000 on September 3rd 1929 in the US stock market, and spread it across the Dow Jones components evenly, it would have gone down to $108 by July 8th, 1932 -- end of the worst crash -- or an 89.2% loss. To recover from that loss, one would have to watch one's portfolio grow by 825%! This did not happen until a decade after the end of the Second World War in 1945.

All this happened despite assurances from prominent government and business leaders of-the-time that the worst was behind. Here is a news headline that may sound familiar:

. September 1929: �There is no cause to worry. The high tide of prosperity will continue.� - Andrew W Mellon, US Secretary of the Treasury

After the stock market crash in October 1929, the Dow Jones Industrial Average (DJIA) partially recovered in November-December 1929 and the early 1930s until 1932 happened.

Reassuring headlines such as the following became increasingly common:

. May 1, 1930: �I am convinced we have now passed the worst and with continued unity of effort we shall rapidly recover. There is one certainty of the future of a people of the resources, intelligence and character of the people of the United States � that is, prosperity!� � US President Hoover

. August 29, 1930: �American labour may now look to the future with confidence.� � James J Davis, US Secretary of Labour

. October 16, 1930: �Looking to the future I see in the further acceleration of science continuous jobs for our workers. Science will cure unemployment.� � Charles M Schwab

So severe was the impact of the 1929-1932 crash, that by spring of 1933, when President Roosevelt (FDR) took the oath of office, unemployment in the US had risen from 8 to 15 million -- roughly 1/3rd of the non-farm workforce -- and the GDP had decreased by more than 45% from $103.8 billion to $55.7 billion. Although the depression was worldwide, no other country except Germany reached so high a percentage of unemployment as the US. The poor were hit the hardest. By 1932, New York's Harlem district had an unemployment rate of 50% and property owned or managed by African Americans fell from 30% to 5% in 1935. Farmers in the Midwest were doubly hit by economic downturns and the Dust Bowl. Schools, with budgets shrinking, shortened both the school day and the school year. The breadth and depth of the crisis made it the Great Depression.

FDR, after assuming the presidency, promoted a wide variety of federally funded programs aimed at restoring the American economy, helping relieve the suffering of the unemployed, and reforming the system so that such a severe crisis could never happen again. After the crash in 1932:

1. The Securities and Exchange Commission (SEC) was established;

2. The US Congress passed the Glass-Steagall Act mandating a separation between commercial banks, which take deposits and extend loans, and investment banks, which underwrite, issue, and distribute stocks, bonds and other securities;

3. The Federal Deposit Insurance Corporation (FDIC) was established to insure individual bank accounts for up to $100,000; and

4. Works Projects Administration (WPA), the largest New Deal agency, was set up employing millions to carry out public works projects.

However, while FDR's New Deal did help restore the GDP to its 1929 level and did introduce basic banking and welfare reforms, FDR refused to run up the government deficits that ending the depression required. Only when the federal government imposed rationing, recruited 6 million defence workers (including women and African Americans), drafted 6 million soldiers, and ran massive deficits to fight World War II did the Great Depression finally end.

The extent of the economic devastation of the 1930s went far beyond the imagination of anyone in the financial markets or governments across the world.

Conclusion

Are we about to see a repeat of 1932 in 2011? With every passing day it feels like we are in the middle of a financial and economic global conflict. This troubling development points not only to an even more painful recession than anticipated, but also to the urgent need for international co-ordination to avoid something worse: all-out financial and economic confrontation between leading powers. We are now likely to see substantially more defaults and credit panics in the Eurozone and not just in smaller countries and emerging markets. Added to this are worrying signs that the credibility of Eurozone and American authorities is on the decline. The banking situation looks increasingly fraught and the system appears to be overwhelmed and unable to cope because of inadequate circuit breakers. Most of the time, financial conflict of this kind is painful and costly. It may lead to decades of lower international capital flows and could also have other far-reaching effects on politics and global peace. Unless the leading powers of the world take concerted action, there is a very real danger that we may all suffer from this rising uncertainty and extreme loss of confidence.

What are your thoughts, observations and views? We are hosting an Expert roundtable on this issue at ATCA 24/7 on Yammer.

By DK Matai

www.mi2g.net

Asymmetric Threats Contingency Alliance (ATCA) & The Philanthropia

We welcome your participation in this Socratic dialogue. Please access by clicking here.

ATCA: The Asymmetric Threats Contingency Alliance is a philanthropic expert initiative founded in 2001 to resolve complex global challenges through collective Socratic dialogue and joint executive action to build a wisdom based global economy. Adhering to the doctrine of non-violence, ATCA addresses asymmetric threats and social opportunities arising from climate chaos and the environment; radical poverty and microfinance; geo-politics and energy; organised crime & extremism; advanced technologies -- bio, info, nano, robo & AI; demographic skews and resource shortages; pandemics; financial systems and systemic risk; as well as transhumanism and ethics. Present membership of ATCA is by invitation only and has over 5,000 distinguished members from over 120 countries: including 1,000 Parliamentarians; 1,500 Chairmen and CEOs of corporations; 1,000 Heads of NGOs; 750 Directors at Academic Centres of Excellence; 500 Inventors and Original thinkers; as well as 250 Editors-in-Chief of major media.

The Philanthropia, founded in 2005, brings together over 1,000 leading individual and private philanthropists, family offices, foundations, private banks, non-governmental organisations and specialist advisors to address complex global challenges such as countering climate chaos, reducing radical poverty and developing global leadership for the younger generation through the appliance of science and technology, leveraging acumen and finance, as well as encouraging collaboration with a strong commitment to ethics. Philanthropia emphasises multi-faith spiritual values: introspection, healthy living and ecology. Philanthropia Targets: Countering climate chaos and carbon neutrality; Eliminating radical poverty -- through micro-credit schemes, empowerment of women and more responsible capitalism; Leadership for the Younger Generation; and Corporate and social responsibility.

© 2011 Copyright DK Matai - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2015 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Biggest Debt Bomb in History