How does the 2008 crash compare to the 1929 stock market crash?
Some so called experts are telling us the 2008 stock market crash is nothing like the 1929 crash, but the number of similarities are startling. If you have been following the stock market closely for the past several months, you will recall that the market had taken a big hit in early January and then in fits and starts climbed back toward where it had been over the course of the ensuing 9 months. Then there was a huge drop in the DOW, then a slight reprieve, then another big drop, then a big climb and then weeks of unsteady declines. Warren Buffett stepped in and made a big show of making a sizable investment to demonstrate his confidence in the markets. Back in 1929, on March 25th and 26th the market dropped by over 10%. Charles Mitchel of the National City Bank stepped in and made $25 million in credit available and effectively stopped the panic. Things calmed for several months, then in early September days after the stock market hit its all time high, the market dropped like a stone. Investors everywhere panicked. The markets went up and down; then there was a big rally on September 25th. On Thursday, October 24th the market tumbled, black Thursday. Thomas W. Lamont, an 1929 equivalent of Warren Buffett stepped in and made a big show of investing millions in order to calm the markets. The markets stabilized through the next two days Friday & Monday, then the market crashed hard, October 29th, Black Tuesday; and it stayed crashed for decades.
Why did the market crash in 1929? Corruption, unrealistic margins, falling real-estate prices and vastly overvalued stocks. Why did the crash of 2008 occur? Corruption, un-backed credit default swaps, plummeting real-estate prices and vastly overvalued stocks. Almost a one for one corollary despite the controls and safeguards that were in place to keep 1929 from happening again. In 1929 William Durant, the founder of General Motors, along with the Rockefeller family and others kept pumping his own fortune into the market in an attempt to put an end to the market meltdown. It didn’t work, he lost it all. His actions were the closest analog to the $700 billion bailout of 2008.
Back before October 1929 those that had learned to game the stock market lived in extraordinary luxury. In 2008 corporate CEOs awash in stocks and stock options were collectively pulling down hundreds of billions if not trillions of dollars a year and lived lives every bit as lavish of their predecessors of 1920s. These guys were sucking so much out of their corporations it was no surprise when so many imploded just as soon as the stock market showed any sign of weakness. The men that played the market in 1929 didn’t care about the company behind the stock, it was all numbers and rapid-fire profit taking. In large part, the big players buying stocks one day and selling stocks the next exacerbated the 2008 collapse created by the bottom falling out of the real-estate market. The market crash itself started because of crooked bankers and pseudo-insurers knowingly dealing in un-backed credit default swaps; essentially insurance contracts that had no money behind them to pay off claims. Credit default swaps were not regulated, and the lack of regulation back in 1929 was precisely why the market crashed then.
The crash led to the great depression. It’s called a depression because the prevailing mental state of the man on the street was distrust and depression. How can we trust anyone today. Many of our government leaders came from Wall Street and they profited handsomely and are now protecting their friends still sitting in their lavish offices. We handed our money over to these supposedly sound financial institutions and they siphoned of their outrageous salaries and pay packages and did nothing to protect our investments, they didn’t care, they got their payola and that’s all that mattered to them. Even now, even after they have collapsed the economy, they are sucking even more billions out of the dead carcases of their companies, sucking the government transfusion out as it is still being administered. 