1929

“ That's how confidence — the lifeblood of our economy — disappears: gradually, and then suddenly.

“ That's how confidence — the lifeblood of our economy — disappears: gradually, and then suddenly. ” e.style.display='none');if(typeof getContentsSections==='function')setTimeout(getContentsSections,50)" /> The crash was not a bolt from the blue. Throughout 1929, the Federal Reserve tried and failed to cool speculation. In February, it issued warnings. In March, the market suffered its sharpest break in years — rescued only by a single banker's defiance. Economist Roger Babson warned of a 60-to-80-point collapse; Yale professor Irving Fisher declared stocks had reached "a permanently high plateau." Both men were household names. One was right. By October, the machinery broke. On Black Thursday, the stock ticker fell four hours behind — traders were gambling on prices from lunch while it was dinnertime. Over four trading days, the Dow lost nearly half its value, erasing $50 billion — roughly half the entire U.S. gross national product. The crash wasn't one moment. It was a slow boil that spilled over. TAKEAWAY 2

“ …the greatest product, the one that made all the others possible, was credit. ” e.style.display='none');if(typeof getContentsSections==='function')setTimeout(getContentsSections,50)" /> The 1920s invented the modern debt economy. In 1919, General Motors pioneered selling cars on installment plans — an assault on the American taboo against personal debt. Sears followed with payment plans for appliances. Wall Street went further: buy stock "on margin," putting up just 10% of the purchase price and borrowing the rest. By the late 1920s, margin loans had swollen from $1 billion to nearly $6 billion. The math was intoxicating. If a $100 stock doubled, a buyer who put down $10 earned $82 after interest — an 820% return. This only worked if everyone kept faith that the market would keep rising. When confidence cracked, the leverage that amplified gains became a machine for amplifying losses, triggering cascading margin calls that devoured portfolios in hours. TAKEAWAY 3

“ Optimism becomes a drug, or a religion, or some combination of both. ” e.style.display='none');if(typeof getContentsSections==='function')setTimeout(getContentsSections,50)" /> By summer 1929, speculation was a national pastime. Exchange superintendent William Crawford marveled that "the whole world for some reason wanted to be here." Tourists lined up for seats at brokerage customer rooms to watch quotation boards. A bootblack named Pat Bologna had $5,000 — his life savings — in National City Bank stock, based on a tip from its chairman. Groucho Marx bought $27,000 in Goldman Sachs shares on the advice of a fellow actor and Union Carbide stock on a tip from an elevator man at the Ritz. Astrologer Evangeline Adams dispensed stock picks based on zodiac signs to 100,000 newsletter subscribers. When virtually everyone from Yale professors to vaudeville performers…