When Was the Great Depression?
Before we can explore the causes, we first need to define what we mean by the Great Depression. Economists and historians have struggled for almost 80 years to account
for the American Great Depression, se_710270.pdf (social studies.org)
The Great Depression was a global economic crisis, having been triggered by political decisions including war reparations post-World War I, protectionism such as the imposition of congressional tariffs on European goods or by speculation that caused the Stock Market Collapse of 1929. Worldwide, there was increased unemployment, decreased government revenue and a drop in international trade. At the height of the Great Depression in 1933, more than a quarter of the U.S. labor force was unemployed. Some countries saw a change in leadership as a result of the economic turmoil.
In the United States, the Great Depression is associated with Black Tuesday, the
stock market crash of October 29, 1929, although the country entered a recession months before the crash. Herbert Hoover was the President of the United States. The Depression continued until the onset of World War II, with Franklin D. Roosevelt followed Hoover as president.
Possible Cause: World War I
The United States entered World War I late, in 1917, and emerged as a major creditor and financier of post-War restoration. Germany was burdened with massive war reparations, a political decision on the part of the victors.
Britain and France needed to rebuild. U.S. banks were more than willing to loan money. However, once U.S. banks began failing the banks not only stopped making loans, but they also wanted their money back. This put pressure on European economies, which had not fully recovered from WWI, contributing to the global economic downturn.
Possible Cause: The Federal Reserve
The Federal Reserve System, which Congress established in 1913, is the nation’s central bank, authorized to issue the Federal Reserve notes that create our paper money supply. The “Fed” indirectly sets interest rates because it loans money, at a base rate, to commercial banks.
In 1928 and 1929, the Fed raised interest rates to try to curb Wall Street speculation, otherwise known as a “bubble.” Economist Brad DeLong believes the Fed “overdid it”
and brought on a recession.
Moreover, the Fed then sat on its hands: “The Federal Reserve did not use open market operations to keep the money supply from falling…. [a move] approved by the most eminent economists.” There was not yet a “too big to fail” mentality at the public policy level.
Possible Cause: Black Thursday (or Monday or Tuesday)
A five-year bull market peaked on September 3, 1929. On Thursday, October 24, a record 12.9 million shares were traded, reflecting panic selling. On Monday, October 28, 1929, panicked investors continued to try to sell stocks; the Dow saw a record loss of 13 percent. On Tuesday, October 29, 1929, 16.4 million shares were traded, shattering Thursday’s record; the Dow lost another 12 percent.
Total losses for the four days: $30 billion, 10 times the federal budget and more than the $32 billion the U.S. had spent in World War I. The crash wiped out 40 percent of the paper value of common stock. Although this was a cataclysmic blow, most scholars do not believe that the stock market crash, alone, was sufficient to have caused the Great Depression.
Possible Cause: Protectionism
The 1913 Underwood-Simmons Tariff was an experiment with lowered tariffs. In 1921, Congress ended that experiment with the Emergency Tariff Act. In 1922, the Fordney-McCumber Tariff Act raised tariffs above 1913 levels. It also authorized the president to adjust tariffs by 50% to balance foreign and domestic production costs, a move to help America’s farmers.
In 1928, Hoover ran on a platform of higher tariffs designed to protect farmers from European competition. Congress passed the Smoot-Hawley Tariff Act in 1930; Hoover signed the bill although economists protested. It is unlikely that tariffs alone caused the Great Depression, but they fostered global protectionism; world trade declined by 66% from 1929 to 1934.
Possible Cause: Bank Failures
In 1929, there were 25,568 banks in the United States; by 1933, there were only 14,771. Personal and corporate savings dropped from $15.3 billion in 1929 to $2.3 billion in 1933. Fewer banks, tighter credit, less money to pay employees, less money for employees to buy goods. This is the “too little consumption” theory sometimes used to explain the Great Depression but it, too, is discounted as being the sole cause.
Effect: Changes In Political Power
In the United States, the Republican Party was the dominant force from the Civil War
to the Great Depression. In 1932, Americans elected Democrat Franklin D. Roosevelt
(“New Deal“); the Democratic Party was the dominant party until the election of
Ronald Reagan in 1980.
Adolf Hilter and the Nazi party (National Socialist German Workers’ Party) came into power in Germany in 1930, becoming the second largest party in the country. In 1932, Hitler came in second in a race for president. In 1933, Hitler was named Chancellor of Germany.
Black Monday (1987) – YouTube
Black Monday is the name commonly given to the global, sudden, severe, and largely unexpected stock market crash on October 19, 1987. In Australia and New Zealand, the day is also referred to as Black Tuesday because of the time zone difference from other English-speaking countries. All of the twenty-three major world markets experienced a sharp decline in October 1987. When measured in United States dollars, eight markets declined by 20 to 29%, three by 30 to 39%, and three by more than 40%.
The least affected was Austria while the most affected was Hong Kong with a drop of 45.8%. Out of twenty-three major industrial countries, 19 had a decline greater than 20%. Worldwide losses were estimated at US $1.71 trillion. The severity of the crash sparked fears of extended economic instability or even a reprise of the Great Depression.
Bottomline: What caused Black Monday in 1987.
3 Reasons Why Stocks Have Been Plummeting
By Eric Levitz
The first 21 months of the COVID-19 pandemic were tough for human beings.
But they were spectacular for stock markets. The S&P 500 ended 2020 worth 16 percent more than it had been at the year’s onset. In 2021, the index climbed another 27 percent.
Alas, this January has sent a chill down equity traders’ backs.
America’s major stock indexes have declined for three straight weeks. And on Monday morning, shares fell further still, with the S&P 500 shedding another 2.4 percent in value, bringing the benchmark index down to “correction” levels, a threshold defined as a 10 percent drop from a near-term high. Even after an afternoon rally erased the morning’s losses, the S&P 500 remains on pace for its worst month since March 2020’s COVID crash — and its worst start to a year in recorded history.
Many Wall Street analysts believe that stocks remain far from their bottom. Morgan Stanley’s Michael Wilson, deploying a years-stale Game of Thrones reference, declared Monday that “winter is here” for equities. Legendary asset manager Jeremy Grantham, meanwhile, insists that we’re witnessing the catastrophic pop of the fourth “super bubble” of the past century. Some traders are more bullish about the market’s medium-term fortunes. But virtually all see near-term turmoil and are putting their money where their mouths are.
So, what explains the sudden death of the pandemic rally?
Myriad factors have contributed to the markets’ woes,
but three developments have been especially critical:
1) The Federal Reserve is removing “the punch bowl.”
The S&P 500 forfeited its high on January 5, when Fed officials unveiled the minutes
of their December policy-making meeting. Those notes revealed that the central bank expected to raise interest rates three times in 2022, in light of the tightening labor market and persistent inflation. This was a faster pace of monetary tightening than many traders had anticipated, and they adjusted their portfolios accordingly.
By itself, the Fed’s notes didn’t trigger a stampede for the exits. But it durably shifted the mood among investors. And the new climate of bearishness was reinforced a week later, when new data revealed that December had witnessed the highest rate of inflation in
four decades, a development that seemed likely to reinforce the Fed’s inclination toward tightening.
Central bank policy always influences stock-market values. Equities compete with bonds for the world’s savings. When benchmark interest rates are low, stocks become a better value proposition, as the alternative to investing in risk assets is to accept little to no return on one’s capital. Savings therefore flood into stocks, propping up their value.
By the same token, when interest rates rise, the relative appeal of bonds does, too, and savings slosh out of equities and into Treasuries.
But the pandemic rally was even more sensitive to central-bank policy than most.
After all, the Fed arrested the March 2020 crash — and birthed the ensuing boom — by taking unprecedented measures to increase the appeal of risk assets. Since the pandemic’s onset, the central bank has not only kept short-term interest rates near zero but bought upwards of $80 billion in Treasuries every month. These purchases put further downward pressure on rates by ensuing healthy demand for the government’s bonds, no matter how low their return.
The stratospheric highs of the major stock indexes reflected this tilted playing field more than it did conventional measures of their companies’ likely future earnings.
Further, in part because the pandemic disrupted in-person service and retail firms more than digital giants, the COVID-era rally was powered by tech stocks. At the end of 2021, more than half of the S&P 500’s value derived from Apple, Microsoft, Amazon, the company formerly known as Facebook, Alphabet, Tesla, and the chipmaker Nvidia.
Alas, tech stocks, especially smaller ones, are even more vulnerable to rising interest rates than the typical equity. This is because most tech firms are valued for their long-term growth potential. When the return on safe assets is negligible, the cost of locking up one’s capital in a risk asset that won’t pay off for years isn’t very high. But the more risk-free interest a present-day dollar buys, the less appealing “growth” stocks have.
In 1955, then-Fed chairman William McChesney Martin argued that the central bank’s job during inflationary booms was to serve as the “chaperone” who “has ordered the punch bowl removed just when the party was really warming up.” One might say that, in the present context, the Fed is removing a punch bowl that it had previously spiked with MDMA, just as the partygoers’ serotonin levels were starting to fall.
And traders fear that Jerome Powell & Co. will become even bigger party-killers after
their meeting this week, in part because of another adverse development:
2) The odds of inflation dissipating in 2022 have declined in recent weeks.
When consumer prices first began spiking last year, both the Federal Reserve and investors were unperturbed. In their view, inflation would prove “transitory.”
As the economy reopened, demand was bound to temporarily run ahead of supply, especially in sectors that were hard-hit by the pandemic.
In time, however, markets would recalibrate. After all, an outsize portion of price increases were concentrated in a small number of goods. Once automakers revved up production, falling car prices alone would take a large bite out of inflation. A heavily caveated version of this analysis remains plausible. Although inflation has proven more persistent than the Fed had hoped, it remains relatively narrowly distributed.
More than half of December’s 7 percent CPI increase derived from spikes in the prices
of energy, new vehicles, and used vehicles. As Leslie Lipschitz and Josh Felman note in Barron’s, if you assume that the prices of those products will stay flat through 2022, while others continue to rise at their present rate, then inflation will fall by 4 percentage points this year.
Yet markets can no longer have much confidence in an imminent stabilization of prices.
If the pandemic subsides come springtime, that could ease some supply-side woes in the automotive sector. However, it might simultaneously drive a demand-induced surge in the prices of restaurant meals, airline tickets, and hotel fares.
More critically, the consumer-price index does not currently reflect the soaring cost of housing in the United States. The rate on a new lease is between 15 and 20 percent higher today than it was one year ago. The CPI’s measure of shelter costs remains dampened because a lot of tenants are still paying rental rates that were set nearly a year ago. As leases turn over, however, that measure will soar. And since housing accounts for such a large share of the typical American consumer’s spending, a 15 percent increase in rents would translate to a four-point increase in overall inflation.
Meanwhile, private demand is likely to remain robust through 2022, as newly hired workers find themselves with more disposable income and middle-class Americans
still have plenty of excess savings left to burn through.
Beyond these structural forces, there’s a growing risk of a contingent inflationary shock. Russia is the world’s No. 2 oil producer, and Ukraine is one of the world’s leading energy hubs. Should the former invade the latter, analysts say that the price of oil could shoot up past $100 a barrel.
Meanwhile, China’s “zero-COVID” policy is all but certain to fail when pitted against the exceptionally transmissible Omicron variant. Given the relatively low levels of natural immunity against COVID among the Chinese population, Omicron has the potential to cause severe outbreaks in the world’s largest exporter, further exacerbating supply-chain difficulties.
If inflation were to once again exceed the Fed’s expectations, it could raise interest rates
by even more than its December minutes projected. Such an occurrence would not only reduce the relative appeal of stocks to bonds, but also threaten to derail the broader economic recovery, depressing profits in the process.
3) Corporate earnings have been a mixed bag.
Finally, corporate earnings have not been robust enough to ease investors’ anxieties. Which isn’t to say that it’s been an especially bad earnings season. About one-fifth of the companies in the S&P 500 have filed their fourth-quarter results, and 82 percent of these firms beat analysts’ expectations.
But stock valuations are forward-looking. And companies’ guidance to investors — which is to say, their official expectations for earnings in the months to come — has been lower than anticipated, with only a single S&P 500 corporation, Micron Technology, beating earnings estimates and raising its expectations for future profits.
None of this means that the present correction is bound to turn into a full-blown crash.
It remains possible, in the coming months, supply-side bottlenecks will ease, tensions between Russia and Ukraine will blow over, Omicron will leave Chinese exporters unscathed, and falling goods prices will mitigate the influence of rising rents. In such a scenario, inflation will cool off, the Fed will leave out a little punch, and stocks could very well recover their lost highs.
Virginia’s new Republican governor, who banned critical race theory in schools, is launching a tip line for parents to report their kids’ teachers (msn.com)
Is the market crashing? No. Here’s what’s happening to stocks, bonds as the Fed aims to end the days of easy money, analysts say (msn.com)
Is Omicron the ‘endgame’ for the pandemic? The World Health Organization’s top health experts offer conflicting outlooks (msn.com)
Worried About the Future of America? (oc-oxfordcommunique.com)
Fall outdoor getaways that won’t break the bank, per Hopper
The National Park Service has released its annual visitation report for 2020.
As you might expect, COVID-19 closures resulted in a significant drop, falling
28% from 327.5 million visitors to national parks in 2019 to 237 million in 2020.
(First Reduction in Attendance in American History.)
Scroll through to see the top 10 most-visited national parks for 2020.
Starting with The Ten Most Visited “National Parks” in 2020. Out of the 423 parks in the National Park System in 2020, there were 62 with the naming designation “national park” when these visitor statistics were collected. Please note, the total of park units and units with the naming designation “national park” may have changed in this current year.
Park Recreational Visits
1 Great Smoky Mountains National Park 12.1 million
2 Yellowstone National Park 3.8 million
3 Zion National Park 3.6 million
4 Rocky Mountain National Park 3.3 million
5 Grand Teton National Park 3.3 million
6 Grand Canyon National Park 2.9 million
7 Cuyahoga Valley National Park 2.8 million
8 Acadia National Park 2.7 million
9 Olympic National Park 2.5 million
10 Joshua Tree National Park 2.4 million
Visitation Numbers (U.S. National Park Service) (nps.gov)
What you need to know before going to Yosemite and other national parks in 2022 (msn.com)
Yosemite’s “Firefall” Is Back—Here’s How to See the Natural Phenomenon (msn.com)
What Arizona voters think of Sen. Kyrsten Sinema after filibuster vote, censure
The non-profit Voto Latino has launched its “Adios Sinema” campaign after the Arizona Senator Kyrsten Sinema was censured by her state’s Democratic party over her filibuster vote. NBC News’ Leigh Ann Caldwell breaks down how Arizona voters are reacting to Sen. Sinema’s vote and how it could impact her re-election campaign.
Blinken: Russian invasion could open Pandora’s box beyond Europe (cnn.com)
Secretary of State Antony Blinken tells CNN’s Dana Bash that other countries around
the world may decide to act in similar ways if Russia invades Ukraine “with impunity.”
Market drops 1,700 points, while inflation cancels out wage increases
The price hikes we’re seeing have effectively erased many of the wage increases workers have negotiated during the pandemic.
A long-time bear who called the 2000 and 2007 crashes slammed the Fed and said stocks are headed for a 70% drop. Here are the 7 best quotes. (msn.com)
The next Covid variant will be more contagious than omicron, but the question is whether it will be more deadly, WHO says (msn.com)
Biden says no one knows what Putin will do after White House called Russian invasion of Ukraine ‘imminent’ (msn.com)
The West fears Russia is about to attack Ukraine. But that’s not the way Russians are seeing it on TV (msn.com)
Let the wild rumpus start: is the US facing a stock market ‘super-bubble’? | Stock markets | The Guardian
Russia Has Been Warning About Ukraine for Decades. The West Should Have Listened.
The Sneaky Reason You Might Lose a Chunk of Your Social Security Income (msn.com)
Biden warns he would personally sanction Putin if Russia invades Ukraine (msn.com)
Why Biden should be worried about the stock market (msn.com)
But for the moment, investors aren’t betting on it.
Thomas Paine’s common sense – Bing video
Presented here is the full text of Common Sense from the third edition (published a month after the initial pamphlet), plus the edition Appendix — now considered an integral part of the pamphlet’s impact. PERHAPS the sentiments contained in the following pages, are not yet sufficiently fashionable to procure them general favor; a long habit of not thinking a thing wrong, gives it a superficial appearance of being right, and raises at first a formidable you (americainclass.org)
Thomas Paine’s common sense pdf – Bing video
Whatever Happened to Common Sense.
The Brightest States of America, From Most to Least Educated.
Federal Reserve expected to signal March interest rate hike — with more to come (msn.com)
US stocks continue to slide as investors await Fed meeting and cascade of earnings results (msn.com)Federal Reserve expected to signal March interest rate hike — with more to come (msn.com)
Biden approval rating: 8 terrible numbers from the new Pew poll (msn.com)
The stock market sell-off won’t find its bottom until these 5 things happen, according to Stifel (msn.com)
Hot mic: Biden swears at Fox News reporter for inflation question (msn.com)
Megyn Kelly on The Truth About Fauci and Collins Trying to Suppress the COVID Lab Leak Theory
Magnus Carlsen stunned by 17-year-old super talent Abdusattorov Nodirbek | World Rapid 2021
Woke and Weak: Biden Punishes Americans, Emboldens Adversaries | Opinion (msn.com)
U.S. considering controlling exports to Russia if there is an invasion of Ukraine (msn.com)
Is Putin bluffing on Ukraine? Allies in the U.S. and Europe are divided. (msn.com)
Hot mic: Biden swears at Fox News reporter for inflation question (msn.com)
U.S. stocks slide as market volatility continues (msn.com)