Whats so different from 1929 to 2008 crash
Discussion
As the thread title, we are all familiar with the great stock market crash of 1929/30, how the green and greedy bought stock at ever higher prices until it all went POP. Is it so different this time around, are we any smarter or dumber and will this really be the last time we have a huge financial crash?
wormburner said:
Wall Street Crash was largely borrowed money. People lost money they never had. Not just all their net worth, but many multiples of it.
So in essence, not very different, people over extended to buy houses they couldn't afford and banks happy to lend. The U.K. was also affected by the crash and yet Globalisation hadn't been the buzz word back then.crankedup said:
So in essence, not very different, people over extended to buy houses they couldn't afford and banks happy to lend. The U.K. was also affected by the crash and yet Globalisation hadn't been the buzz word back then.
Dont be daft. It had nothing to do with normal people. No one was greedy apart from the rich and the banksters.That must be true because The Guardian told me so. Regularly.
Yes, stock and property speculation was similar, but...
IIRC, 1929 was mostly a production bubble. Overcapacity that wasnt fixed until it was utilized in the war effort, or else destroyed/bombed.
2008, in Europe and the US, mainly a consumption bubble.
Thats why Balls-nomics remedies of 'stimulating consumption' will fail this time round. Already too much of our GDP (around 70%) is consumption spending.
IIRC, 1929 was mostly a production bubble. Overcapacity that wasnt fixed until it was utilized in the war effort, or else destroyed/bombed.
2008, in Europe and the US, mainly a consumption bubble.
Thats why Balls-nomics remedies of 'stimulating consumption' will fail this time round. Already too much of our GDP (around 70%) is consumption spending.
Nothing new. The greedy and the stupid get burned.
http://en.wikipedia.org/wiki/Tulip_mania
http://en.wikipedia.org/wiki/Tulip_mania
Article which could be written now said:
As the flowers grew in popularity, professional growers paid higher and higher prices for bulbs with the virus, and prices rose steadily. By 1634, in part as a result of demand from the French, speculators began to enter the market.[25] The contract price of rare bulbs continued to rise throughout 1636, but by November, the price of common, "unbroken" bulbs also began to increase, so that soon any tulip bulb could soon fetch hundreds of guilders. That year the Dutch created a type of formal futures markets where contracts to buy bulbs at the end of the season were bought and sold. Traders met in "colleges" at taverns and buyers were required to pay a 2.5% "wine money" fee, up to a maximum of three guilders per trade. Neither party paid an initial margin nor a mark-to-market margin, and all contracts were with the individual counter-parties rather than with the Exchange. The Dutch derogatorily described tulip contract trading as windhandel [literally "wind trade"], because no bulbs were actually changing hands.
Edited by Soovy on Wednesday 9th May 16:24
Interesting that Mervyn King cited his academic background and knowldege of economic history as key instruments in managing the crisis at the B of E. I think that the current crisis was brought about by an overheated property market, initially in the US, rather than over valued stocks. The common factors appear to be greed and a lack of proper, effective regulation.
Soovy said:
And why anyone would think that the laatest crash will be the last one is beyond me.crankedup said:
wormburner said:
Wall Street Crash was largely borrowed money. People lost money they never had. Not just all their net worth, but many multiples of it.
So in essence, not very different, people over extended to buy houses they couldn't afford and banks happy to lend. The U.K. was also affected by the crash and yet Globalisation hadn't been the buzz word back then.The main difference was that for the majority of people in this country the 1929 crash had started 10 years earlier. The post war period in this country was personified by recession. After the war the government had no real fiscal plan other than cutting back and cutting more. For the poor MoP in the street there was little difference between 1928 and 1929.
One problem was that in 1919 Britain had lots of debt. No attempt was made by the government at the time to expand the economy so by the time of the 1929 crash Britain had more debt than 10 years earlier.
The main difference would appear to be that in 1929 the crash occured because greedy people with money, like those in banks and other finance houses, speculated with their own and other people's money and the inevitable crash that everyone could forsee occurred.
The little bloke in the street, the vast majority of the population, had no real debts as such as no one leant them any money. So unlike this time it was the bankers who caused it all whereas this time, at least so I'm told, it was people with credit cards who did it.
My uncles, who had lived through the interwar years, said that in essence the 1929 crash was nothing to do with this country. It affected the Americans and greedy speculators in this country.
I remember being told a while ago that my credit rating was not 100% as not only had I no debt on my credit card, on the infrequent occasions when I did use it I paid the debt off within a month. (Being ignorant, I thought that made me a good risk, but what do I know?) So no pressure there for more debt.
One problem was that in 1919 Britain had lots of debt. No attempt was made by the government at the time to expand the economy so by the time of the 1929 crash Britain had more debt than 10 years earlier.
The main difference would appear to be that in 1929 the crash occured because greedy people with money, like those in banks and other finance houses, speculated with their own and other people's money and the inevitable crash that everyone could forsee occurred.
The little bloke in the street, the vast majority of the population, had no real debts as such as no one leant them any money. So unlike this time it was the bankers who caused it all whereas this time, at least so I'm told, it was people with credit cards who did it.
My uncles, who had lived through the interwar years, said that in essence the 1929 crash was nothing to do with this country. It affected the Americans and greedy speculators in this country.
I remember being told a while ago that my credit rating was not 100% as not only had I no debt on my credit card, on the infrequent occasions when I did use it I paid the debt off within a month. (Being ignorant, I thought that made me a good risk, but what do I know?) So no pressure there for more debt.
Derek Smith said:
I remember being told a while ago that my credit rating was not 100% as not only had I no debt on my credit card, on the infrequent occasions when I did use it I paid the debt off within a month. (Being ignorant, I thought that made me a good risk, but what do I know?) So no pressure there for more debt.
Good risk but poor earner for the credit card companies 
ewenm said:
Derek Smith said:
I remember being told a while ago that my credit rating was not 100% as not only had I no debt on my credit card, on the infrequent occasions when I did use it I paid the debt off within a month. (Being ignorant, I thought that made me a good risk, but what do I know?) So no pressure there for more debt.
Good risk but poor earner for the credit card companies Blue62 said:
Interesting that Mervyn King cited his academic background and knowldege of economic history as key instruments in managing the crisis at the B of E. I think that the current crisis was brought about by an overheated property market, initially in the US, rather than over valued stocks. The common factors appear to be greed and a lack of proper, effective regulation.
The property market was really the symptom, rather than the root cause. It was too much credit. Initially that went into housing, which peaked in the US 2005/6, here 2006/7.Once mortgages had reached about as insane levels as possible, credit started looking elsewhere than in property, so you got the Commodities and Oil bubble by 2007/8.
But yes, Merv, Greenspacker and the rest of them enabled the situation to develop. They sure as hell wont be the ones to fix it - they cant even shoulder their part of the blame for a start.
What we have now is the govt bond bubble. And that'll end just as badly, in time.
Well one difference is that the 1929 crash had less of an impact on the British economy.
Once we abandoned the straight jacket of the gold standard (which Britain had readopted too soon after the end of the first world war) the economy grew briskly and the 30s were a time of prosperity for Britain.
Once we abandoned the straight jacket of the gold standard (which Britain had readopted too soon after the end of the first world war) the economy grew briskly and the 30s were a time of prosperity for Britain.
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