1 Boring Old Man

Herbert Hoover [1929-1933]: Hoover got a bad rap as much of a force in causing the Depression. He was a do-gooder who straddled the fence between political parties. He’d organized relief programs for the great Mississippi flood, the Germans after WWI, and the Bolsheviks after the Russian Revolution. He entered office with a plan for reform of the nation’s regulatory system. Hoover saw the presidency as a vehicle for improving the conditions of all Americans by regulation and by encouraging volunteerism. Long before he entered politics he denounced laissez-faire thinking. As Commerce Secretary he had taken an active pro-regulation stance. As President, he helped push tariff and farm support bills through Congress. He was elected during a period of great prosperity, and seven months after his inauguration, the Stock Market went belly-up on Black Tuesday. By the next year, the severe drought known as "the Dust Bowl" added to the country’s woes. His part in the Depression was that he couldn’t stop it, though it was not for lack of trying. He lacked F.D.R.’s charisma, and he tried to stem the fall using "volunteerism" rather than direct governmental intervention. I guess people weren’t into volunteering during those years, so he ended up watching helplessly as things deteriorated in spite of his efforts. He left office and wrote books, like a classic about fly-fishing.

Calvin Coolidge [1923-1929]: To look at the Great Depression, one has to move back a step to the ‘roaring twenties‘ under Calvin Coolidge. What a period it must’ve been. Coolidge himself was a quiet man, unlike the era he officiated. He rose to national attention when, as governor of Massachusetts, he opposed the Union in a Boston Police Strike, and became seen as a hero against the spread of the Bolshevism. He was elected as Vice President to Warren Harding, becoming President two years later when Harding died. He was elected on his own in 1924, but the campaign period was marred by the death of his adolescent son, Calvin Jr., a great loss for him. The Prohibition began about the time he and Harding were elected, and spanned Coolidge’s years in the White House.

He cut taxes, and refused to sign a number of appropriation bills including farm aid, focusing instead on retiring some of the national debt. Businesses and agriculture should stand on their own [he said tersely]. He avoided visiting the Great Mississippi Flood, and only reluctantly signed the aid bill to that region. ‘Silent Cal’ officiated over the roaring twenties from afar, while the Charleston played in the speak-easies, the Mobs ran Liquor in the streets, the Stock Market soared and, wealth accumulated among the rich. He was the paradigm for the modern conservative creed – anti-communism, anti-socialism, anti-union, anti-intervention, pro-free market, pro-business, pro-fiscal responsibility with low taxes and low spending. After six years as President, he retired, supporting Hoover [who he didn’t much favor]. While Hoover couldn’t stop the downward spiralling Stock Market in his time in office, Calvin Coolidge didn’t even look at the boom during his tenure as anything but good business and good fortune.

The Roaring Twenties: What happened in the 1920’s that lead to such a boom in the economy and the Stock Market? And why was it so vulnerable and illusionary? Certainly Calvin Coolidge didn’t cause either the boom or the Depression that followed in the thirties, though his "hands off" attitude about government was definitely a factor. It was a time disconnected from history – thoroughly "modern." The Doughboys were home from World War I and America was full of itself. Europe was in shambles after "The Great War," and America was on the front of the world stage for the first time. Communism had consumed Russia and the Europeans were floundering in War debt and political confusion. We were the center of Free Market Capitalism, and business was booming. Henry Ford’s automobiles and the assembly lines that made them were just part of the flowering of big Industries. American businessmen were protected from competition by high tarrifs. Taxes were down thanks to Silent Cal. Prohibition, as we know, resulted the opposite of its intent – lawlessness, liquor, and libertines.  Women had been given the vote in 1920  with 19th Amendment. America was on fire, and the Stock Market reflected the mood of the country. Technology was on the move. Movies, radios, and phonographs spread the new jazz music everywhere. Un-noticed, the inequity of wealth was increasing – and the prosperity of the cities was not paralleled in rural America. No one seemed to notice that the incredible boom economy and the fluid ‘easy money’ portended of a coming crash. And that’s where the pundits point their fingers – at the ‘easy money.’ People were borrowing money like crazy, and investing it in the Market. The cost of borrowing was less than the yield from investing. So the fortunes being amassed on the Market weren’t just from the success of the companies, a lot of it was free money. The more they invested, the higher the Market, the further the Stocks moved from their connection to the companies. And the banks joined the fun, investing their assets in the cash cow of the booming Market.

The Crash: Looking back on it, the Roaring Twenties were a study in risky business. I’ve always been fascinated by the derivation of certain words. reckless is a favorite. Random House says: "Origin: bef. 900; ME rekles, OE reccelÄ“as careless (c. G ruchlos)" which is ridiculous in my opinion. What do they know? I’m sure that reckless comes from wreck-less – meaning "behaving as one who has never had a wreck." In the twenties, they hadn’t had a wreck yet, they didn’t know what could happen. Caution comes from experience, and they were running on exuberance with no experience – naive about what was coming down the road.

In the days leading up to Black Tuesday, the market was severely unstable. Periods of selling and high volumes of trading were interspersed with brief periods of rising prices and recovery. Economist and author Jude Wanniski later correlated these swings with the prospects for passage of the Smoot-Hawley Tariff Act, which was then being debated in Congress. After the crash, the Dow Jones Industrial Average recovered early in 1930, only to reverse and crash again, reaching a low point of the great bear market in 1932. The Dow did not return to pre-1929 levels until late 1954, and was lower at its July 8, 1932 level than it had been since the 1800s. Anyone who bought stocks in mid-1929 and held onto them saw most of his or her adult life pass by before getting back to even.

The crash of 1929 itself had no real cause – in retrospect, it was just an expectable waypoint in the natural history of what came before. But to its contemporaries, it was a cataclysmic event. Over the next three years, all attempts to "unhappen it" failed – maybe made things worse. The "dust bowl" that developed from the extreme drought in the West with failing farms and rampant unemployment just threw gasoline on a fire already burning out of control.