A Second JOLTS

What happens when we are stunned and dazed? We filter out the noise to focus on the bare basics by getting back to our instincts, acting reflexively based upon our deeply held beliefs and especially training. When faced with a crisis and there’s no time to really think, shorthand will have to suffice.

That’s what was so odd about 1930, as I wrote about last week. The stock market crash had happened during the prior October, but while that had meant panic on Wall Street generally speaking there wasn’t too much of it outside lower Manhattan. To begin with, these kinds of things happened before.

When the economy began to follow share prices into the toilet, there was no sense of massive urgency. Everyone knew that the prospects were grim, nothing good was going to come of the thing. For the most part, however, during 1930 there wasn’t a sense it would be anything different than those depressions of the past.

Even the worst ones were awful but temporary. In fact, New York’s Governor Franklin Roosevelt wrote to a constituent during that year telling the man to just hang in there, urging this local voter to “not to yield to the counsels of despair because depressions always come to an end and business also eventually adjusts.” Time was on everyone’s side.

As was the government. Contrary to modern biased views, Hoover’s administration was far from the do-nothing laziness FDR would describe in his political campaign of 1932 (which was then transcribed by the newspapers as fact). The Federal Reserve wasn’t idle, either, merely, like Hoover, grossly ineffective. No one knew that at the time, though.

One New York Times article written in March 1930 sounds way too familiar:

The action of open-market rates for credit, combined with the lowering of the British bank rate last week, had clearly pointed to such a move [in stocks]. The desire of the country’s banking authorities to do everything possible to stimulate business is conceded to be the motive behind the Federal Reserve’s aggressive easy-money policy.

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Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

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