WI:No Wall Street crash of 1929

It's October 1929 that's remembered, but people forget that the economic collapse didn't start immediately (1930 saw a mild recovery). The "second leg" of the crisis was a massive banking crisis in 1931.

Basically, the problem is that the western interwar economy was built on a house of cards. Regardless of when, exactly, the bubble pops, the tools to prevent the calamity could not be developed without actually going through the calamity in the first place.
 

Redbeard

Banned
It's October 1929 that's remembered, but people forget that the economic collapse didn't start immediately (1930 saw a mild recovery). The "second leg" of the crisis was a massive banking crisis in 1931.

Basically, the problem is that the western interwar economy was built on a house of cards. Regardless of when, exactly, the bubble pops, the tools to prevent the calamity could not be developed without actually going through the calamity in the first place.

The crisis probably was much deepened by the "medicine" used - ie. cutting public spending and thus general activity. That was realised afterwards by an economist like Keynes and developed ideas about how to regulate economy by adjusting public spending, interest etc. Used from 1929 and on that might have adverted the worst crisis - if not 20/20 hindsight was such a scarce commodity in the real world. I wonder however if some kind of international crisis leading to say a global naval rearmament could have worked like a "Keynesian boost"?

The problem is however, that without the full understanding of how things work together (I don't think we even have that today) you would probably just have a worse crisis later. Unless of course we have world war precede it, but avoiding that crisis really begin to become quite expensive now.
 
This, the stock market crash was more of a symptom than a cause of anything, other than severe panic.

It's October 1929 that's remembered, but people forget that the economic collapse didn't start immediately (1930 saw a mild recovery). The "second leg" of the crisis was a massive banking crisis in 1931.

Basically, the problem is that the western interwar economy was built on a house of cards. Regardless of when, exactly, the bubble pops, the tools to prevent the calamity could not be developed without actually going through the calamity in the first place.

The underlying causes were well in place long before 1929. There were of course the residual weaknesses created by the Great War & its aftermath. Global trade was badly disrupted by the war & post war changes retarded a advance back to where the economy of 1925 or 1928 would have been absent the war. ie: The creation of the Soviet Union made a giant economic hole in both Europe and the global economy. The breakup of the Austro-Hungarian Empire required considerable adjustment. The flow of capitol and labor in the new nations was clogged by fragmented political and social policies.

Yet another factor was a concentration of changing technologies in the 1920s. As existing technologies/industries matured their growth slowed and return on investment both stabilized and declined. To the aggressive investor they looked like less desireable investments. Other technologies approached obsolesence & their contribution to employing the labor force declined as well as declining investment returns. ie: Coal energy ceased the rapid expansion of the 19th Century as petroleum grew and replaced coal. Railroads were another example, with the US railways arguably overbuilt by the 1920s, a problem aggravated by automobiles and the explosive growth of highway construction. Perhaps the largest or most important industrial change was the mechanization of agriculture. The 1920s represented tipping point when the US shifted from the majority of the population living in rural counties and engaged in agriculture, to urban/industrial labor force.

All this created volatility in capitol and cash flow patterns and in labor. Skilled farm laborers became unskilled labor in the cities, ditto for transitioning labor from any mature or declining technology to something new. Investors were baffled by the plethoria of automobile manufactoring upstarts. Of the hundreds existing in 1920 it was difficult to see which were the best bets. All this is true for any era, but in the early 20th Century the pace of inovation and introduction of new technologies ramped up, and the replacement of old with new concentrated to a unusual degree. Thus a perfect storm of investment volitility occured in the 1920s.
 

hammo1j

Donor
The energy that went into Prohibition went into curbing the evils of Wall Street.

"Gambling will never be permitted in the temple of our Lord."
 
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