As regular readers know,
I’m a fan of the blog News from
1930, which provides a daily news summary based upon the author’s reading
of the Wall Street Journal from the corresponding day in 1930. Today’s
entry is especially good:
Monday,
July 21, 1930: Dow 236.65 -3.92 (1.6%)
Governor R.A. Young of Fed. Reserve Bd.
warns banks to be careful about the increasing amount of loans against
securities. About the crash last fall, says: “there is food for serious thought
in the fact that, under our excellent banking system … we nevertheless came
to the brink of a collapse, had to resort to heroic action to prevent a panic,
and were not able to avoid … severe liquidation and what appears to be a
business depression. Is this unavoidable? Is it necessary for this country to
go through periods of reckless exuberance, accompanied by enormous credit
expansion and fantastic levels of money rates that profoundly disturb the
financial structure not only here but all over the world?” The cost of these
episodes is paid in unemployment and worldwide depression. Reminds banks that
security loans are safe only if a liquid market exists for the security; large
scale sales can cause a drop in value, “and there is no telling when such a
drop may terminate and what catastrophe may follow …” Calls on banks not to
assume Fed will always be able to help them, since its resources are “not
inexhaustible.” (emphasis mine)
And a rhyme (who knew?):
“Sitting in the broker's office,
Wondering what in heck to do;
Watching, waiting, hoping, fearing,
Praying all my dreams come true. …
NPT is still a dairy; old VA has just
gone by;
BMT is slowly mending; Radio is flying
high.
Will I? Won't I? Hurry, Hurry; Down she
wavers; up she goes.
‘Buy,’ I shout with great decision;
Comes the answer – ‘Market closed.’”