October 5, 2009

Favorites of the week Sept. 29-Oct. 4, 1930

No Journal was published Sunday, Oct. 5, 1930. Once again, a collection of my favorite items of the week. These aren't a representative selection but just the ones that made me smile or take notice.

Oct. 4:

[Note: Strangely familiar dept.] Salmon O. Levinson urges temporary suspension of “organized short selling” on NYSE as means to end business pessimism.

Oct. 3:

[Note: I find this speech fascinating. It clearly contradicts the image of Hoover as oblivious or do-nothing - he's not in denial about the severity and human consequences of the crisis, and he sounds strangely like a modern economist in his explanation of what caused the crisis and in defending the necessity to take action. The second paragraph in particular sounds uncannily familiar, especially the part quoted about the periods of stability becoming longer and recessions milder – could this be a feature of the period when a debt bubble is ballooning to its final humongousity before bursting? ]
Pres. Hoover's address to American Bankers' Assoc.:

Past year has been a severe shock to economic system, disorganizing it and slowing consumption to 85%-90% of normal. This has caused “a great human problem ... unemployment, privation, and fear”; however, it's not a new experience but typical of recurrent crises in the past.

Main cause of most of these crises is an inflationary boom leading to destructive results, in this case in our stock markets and in worldwide overproduction of many commodities. Some fatalists believe these crises are inevitable, but the same was once said about typhoid or cholera. Govt., economic and business leaders have already accomplished much in past decade; as a result, “the period of stable prosperity between storms is longer, the period of the storm is shorter, and the relief work far more effective.”

Unprecedented cooperative measures so far by business, bankers, labor, and govt. have been effective at maintaining demand to some extent, but we should also think of prevention. The banking system can play an important role due to its large influence in directing credit, both by restraining unwise expansion and speculation during booms and by instilling confidence and making credit accessible during recovery. Rails and utilities could also act as “balance wheel” through public works and construction.

While depression is worldwide, US doesn't need to wait upon recovery in rest of the world but can lead the way as it did in 1922. Our resources, people, and scientific discovery are unimpaired. Depression is “but a temporary halt in the prosperity of a great people.”

[Note: Strangely familiar in the receipts; strangely unfamiliar in the expenditures.] Income tax receipts for fiscal Q1 (July 1 - Sept. 30) were $554.4M vs. $609.4M in 1930, total ordinary receipts were $868.9M vs. $1.015B, and total ordinary expenditures were $715.6M vs. $722.7M. Gross public debt on Sept. 30 was $16.081B vs. $16.720B in 1929.

[Note: Ay Chihuahua! dept.] British Imperial Conference hopes to solve problems of empire free trade, India, and Palestine, knitting empire into an “economic and imperial whole.”

[Note: Sheer Genius dept.] NY City Community Council recommends construction of world's largest airport on artificial island just south of Governors Island in New York Bay, and construction of subway from Manhattan to Staten Island and on to Brooklyn, with stations on Governors Island and the airport.

Oct. 2:

[Note: Interesting data point on what's depression-proof.] Amer. Beauty Congress told women spend almost $750M/year on cosmetics with no decline this year; 30% spend over $150/year.

[Note: I made this joke last week, about a laptop.] “The owner of a cheap watch brought it in to the jeweler's shop to see what could be done with it. 'The mistake I made, of course,' he admitted, 'was in dropping it.' 'Well, I don't suppose you could help that,' the jeweler remarked. 'The mistake you made was picking it up.'”

Oct. 1:

[Note: Strangely familiar dept.] National City Bank monthly business review: Thus far business in Sept. has shown some improvement, but not strongly enough to convince that the uptrend is here to stay. However, without minimizing the depression, which is caused by serious and fundamental maladjustments, we also shouldn't “magnify the difficulties out of all due proportion.” While it's true no two depressions are identical, they have been studied for many years and general characteristics are fairly well understood; business activity indexes in July and Aug. touched lows of 1921, “warranting the assumption that the decline must have nearly, if not entirely, run its course.”

[Note: Always keep your eye on the freight loadings dept.] Rail freight loadings for week ended Sept. 20 were 952,512 cars, down 13,201 from previous week, down 18.4% from 1929, and down 16.7% from 1928.

Sept. 30:

[Note: Strangely unfamiliar dept.] Editorial: “New economics” statements that consumers are now buying too little and saving too much have just enough truth to be “dangerous pabulum for the popular mind.” Consider the savings people have in banks and life insurance. “Is it conceivable that it can be for the general good ... that these savings should not be made and that the money should be spent in consumption? Will the country be better off as a whole if the mortgage on the home is allowed to remain and instead a second car placed in the garage? The question answers itself. ... Thrift and extravagance succeed each other as do the tides, and the wheel invariably comes full turn. ... A little patience is all that is necessary ...”

[Note: Strangely unfamiliar dept.] US Steel policy of keeping as many workers as possible and distributing available work among them has been favorably commented on in many quarters; “the recommendation is made in the financial district that the adoption of such a policy by other large employers ... would do much to alleviate unemployment this winter.”

[Note: Ay Chihuahua! dept.] Baar, Cohen, & Co. contrast current stock market with debacle last fall. Back then, business had been declining since June but the market kept rallying; now business has hit bottom and should improve, but the market “ignores this condition just as it ignored the business decline ... A year ago the public was in the market up to its neck - in fact, in some cases, above its head. Today the public is afraid to own stocks. We know of no better indication that a turn for the better is near.”

Sept. 29:

[Note: Planning for brutal world domination is one thing, but when you mess with perfectly good securities you have officially Gone Too Far.] Editorial: Market reaction to Hitler's tirade in court was a crying shame: “It is a wonder, as well as a pity, that good securities must be made a football of a bombastic radical who since [1919] has succeeded in making an ass of himself.” Germany has had a hard time since the war; Hitler has taken advantage for his own selfish purpose. He formed his present party in 1921 with no platform but opposition: to Parliament, to capitalism, to rights of the Jews, and now to the Young plan. Four months later he tried to march on Berlin to “save” Germany, which showed no interest. They are even less likely to adopt his program now that much progress has been made toward reconstruction. Hitler's testimony showed his true colors. “The almost certain reaction will be a wave of disgust that will line up the people against any further progress of his party ... it is likely that his career will prove like a glass of soda water now frothing but quickly simmering down to nothing.”

[Note: Strangely familiar dept.] Dr. B. Anderson of Chase Nat'l. Bank criticizes Fed. Reserve use of open market operations; allows they may have been necessary to arrange war financing at low rates, but use has increased greatly since, mainly to lower rates; doing this “can generate almost incredible abnormalities in the monetary picture.”

[Note: Doctor: You could live so much longer if you gave up drinking, smoking, and gambling. Patient: You call that living??] W. Graham, Pres. Great Britain Bd. of Trade, notes British spend $325M/year on drinking, smoking, and betting; suggests unemployment would be much improved if they used the money to buy commodities instead.

[Note: Passengers then had to wait 45 minutes in the friggin' taxi line] Air travel record set at Newark Airport when 114 passengers landed or departed within 2 hours.

[Note: Correct priorities dept. ] Knute Rockne, Notre Dame head coach, to join R. H. Gibson & Co. as special partner; will devote his time to brokerage business except during football season.

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