When I was teaching General Motors workers about the history of the Automobile Industry, one of my favorite characters was William Durant. “Durant was the founder of General Motors and co-founder of Chevrolet. He created a system in which a company held multiple brands – each seemingly independent, with different automobile lines – bound under a unified corporate holding company. He also founded Frigidaire.” Durant was a polymath.
You wouldn’t think the guy that founded successful companies and was a millionaire several times over would show up in Andrew Ross Sorkin’s 1929 but here’s Durant’s fate: “Durant kept up appearances until 1936 when at the age of seventy-four, he declared bankruptcy. He put his net income that year at $5,438.” (p. 425)
How in the world did Durant–and thousands of rich people–go from wealthy to broke? That is just part of the story Sorkin tells in 1929.
Greed. Having millions of dollars and lavish mansions were not enough for some of the industrial and banking leaders of the U.S. back in 1929–and small investors, too. They thought the Stock Market was just going to go up, up, up (kind of like Today). The other Big Problem was that the rules back then allowed people to buy stocks “on margin.” For as little as 10% in cash, you could buy thousands of shares of stock. The problem–that few considered–was that if the price of the stocks fell, you had to come up with the balance…in cash.
And on October 29, 1929 (aka,”Black Tuesday“) 16.4 million shares of stock were traded. Around $14 billion of stock value was lost, wiping out thousands of investors. The panic selling reached its peak with some stocks having no buyers at any price. The Dow lost an additional 30.57 points, or 11.73%, for a total drop of 68.90 points, or 23.05% in two days. The Stock Market crashed and the Great Depression began.
Andrew Ross Sorkin tells the story of 1929 in a novelistic fashion with dozens of characters–who should have known better–betting on the Market in an orgy of speculation and greed. Sorkin hints the same inclinations are active in today’s Stock Market. Worth pondering… GRADE: A
Too many wheelers and dealers out there for my blood. Too much instant wealth with little or no actual value. Too many retirement funds heavily invested in a shaky stock market. Too great an ever-increasing income gap. Ptah!
Jerry, a lot of shady business is going on, especially in the Crypto World. A crash is going to come eventually…
I have this one on hold at the library; there are many others already ahead of me. Everything you and Jerry said. The combination of Crypto, the AI craze, the ongoing economic and political turmoil engineered by Trump and his shadowy enablers, and a nation of people living on credit in hopes their chits will never be called in — a disastrous combination. I would only hope to see DJT and his scurvy brood financially devastated and living in cardboard boxes on the street, but that will never happen.
Fred, I have believed Crypto is a scam from Day One. The fact that MAGA acolytes bought enough of Trump’s Crypto to make him a billionaire shows how corrupt the financial system is right now!
AI and Crypto and Trump and what Krugman calls the “Broligarchs” make a toxic combination.
Jeff, at some point, the financial chickens are going to come home to roost. People are going to realize Crypto is a Ponzi scheme. Artificial Intelligence will trigger massive Unemployment. And Trump is running up the National Debt. All signs that point to DOOM.