Con-tango

1929

November 1929 headlines

I found this amazing piece, Reactions of the Wall Street Slump, published by The Economist on their November 23, 1929 edition.

I chose the following paragraph that was written days after the month long collapse of the stock market, because it’s truly eerie:

How far this will extend must at present be a matter of conjecture. A
great deal must in any case depend upon the situation of the banks. The
one influence that could throne back the full brunt of the speculative
collapse upon industry and produce a real depression throughout the
country would be banking trouble. Certain Wall Street banks made some
spasmodic efforts to check the slump, but were careful to dispose of
their holdings at the first opportunity, and there is no reason to
suppose that they have seriously handicapped themselves by efforts
which never went the length of attempting to stop the rot by holding
large blocks of stock off the market. There are, however, known to be
large quantities of securities not yet absorbed by the public which for
the time being have to be carried by banks and finance houses. Many
banks will, moreover, have made very large bad debts, while others will
have to finance customers for a long or short period. Some bank
failures, no doubt, are also to be expected. In the circumstances will
the banks have any margin left for financing commercial and industrial
enterprises or will they not? The position of the banks is without
doubt the key to the situation, and what this is going to be cannot be
properly assessed until the dust has cleared away. On the whole, the
experts are agreed that there mint be some setback, but there is not
yet sufficient evidence to prove that it will be long or that it need
go to the length of producing a general industrial depression.

The lack of liquidity, compounded with fear, and the underlying problems like CDS, CDOs, subprime MDS, over indebtness at all levels (from credit cards to companies and government) gives me a light stomach, like when I’m looking down from the edge of an abyss.