Then, As Now

The Great Crash 1929 by John Kenneth Galbraith was poetically published in 1954, the first year that stocks would eclipse their 1929 highs. One of the most enjoyable aspects of reading about events that shaped history is getting a better sense of what actually happened. Ninety years later, the stories tend to morph into something a few steps farther than reality. One of those stories is that everybody was getting rich in the market. Here is Galbraith busting that myth.

The cliché that by 1929 everyone ‘was in the market’ is far from the literal truth. Then, as now, to the great majority of workers, farmers, white-collar workers, indeed to the great majority of all Americans, the stock markets was a remote and vaguely ominous thins. Then, as now, not many knew how one went about buying a security; the purchase of stocks on margin was in every respect as remote from life as the casino in Monte Carlo.

In later years, a Senate committee investigating the securities market undertook to ascertain the number of people who were involved in securities speculation in 1929. The member firms of twenty-nine exchanges in that year reported themselves as having accounts with a total of 1,548,707 customers. (Of these, 1,371,920 were customers of member firms of the New York Stock Exchange.) Thus only one and a half million people, out of a population of approximately 120 million and of between 29 and 30 million families, had an active association of any sort with the stock market. And not all of these were speculators. Brokerage firms estimated for the Senate committee that only about 600,000 of the accounts just mentioned were for margin trading, as compared with roughly 950,000 in which trading was for cash……

Between the end of 1928 and the end of July of 1929, a period when the popular folklore has Americans rushing like lemmings to participate in the market, the number of margin accounts on all of the exchanges of the county increased by only slightly more than fifty thousand. The striking thing about the stock market speculation of 1929 was not the massiveness of the participation. Rather it was the way it became central to the culture.

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The Great Crash 1929