The 1929 Crisis -- Wall Street's Darkest Hour -- Wash, Rinse, Repeat

The crash of 1929 is remembered as an unnecessary disaster, a market event that need not have led to economic collapse. What is not recalled is that people then, too, were confident about many of the same things that seem so reassuring today.

"While bubbles that burst are scarcely benign, the consequences need not be catastrophic for the economy,'' said Alan Greenspan, the chairman of the Federal Reserve Board, in congressional testimony this summer. It was not the crash, but "ensuing failures of policy'' that led to the Great Depression, he said. He seemed confident that he could prevent similar errors if there were another crash, and recalled how the economy had not been devastated by the 1987 crash.

While considering such self-confidence, it may be useful to recall an editorial published in The New York Times in the midst of the 1929 crash, on Oct. 26. It heaped scorn on those who had participated in the "orgy of speculation'' that had sent prices so high amid talk of a new era and permanently high stock prices." We shall hear considerably less in the future of those newly invented conceptions of finance which revised the principles of political economy with a view solely to fitting the stock market's vagaries.''

But after blasting the speculators, The Times took a much more sanguine view of the economy's future. The Federal Reserve had "insured the soundness of the business situation when the speculative markets went on the rocks.''

Considering the dire straits the world finds itself in today, this was a grave error, which personally I find hard to conceive, or another clear lie and misdirection, wouldn't you say?