Click for Table of Contents Stock prices tumbled 50 years ago this month, and the Roaring Twenties came to an abrupt end. Out of the Depres- sion that followed came the Social Security Act and other laws to increase the Federal role in managing the economy. THE CRASH

Confusion reigns on the Stock Market floor in 1929.

HILE IT’S NOT an occasion that anyone would want to celebrate, the 50th anniversary of the stock market crash occurs this month. Few SSA Wemployees were old enough (most of us weren’t even born!) to remember that fateful day in 1929; But most aged Americans now drawing social security benefits remember the Crash. They remember even more clearly the Great Depres- sion that followed. The Depression caused record high unemployment, tremendous hardships, and even hunger for many millions of people. But in one of history’s ironies, the Crash and the Depression were indirectly responsible for passage of the Social Security Act in 1935. Widespread economic and social insecurity brought about the program which provides security for nearly all families when workers retire, become disabled or die. No doubt the social security program would have come into existence eventu- ally in any case, but the terrible conditions of the Depression hastened its birth. Let’s look back at the period before the Crash-the 1920s, also called the

October 1979 29 Jazz Age, For many, it was a de- Model A was unveiled in December suddenly became famous and set up lightful decade, coming after the 1927, a million frenzied car-wor- COLIC Institutes all across the U.S. bloodshed and sacrifice of World shippers tried to jam into the com- His formula for self-improvement, War I and before the hard times of pany’s headquarters in New York “Day by day in every way, I am -- the 1930s. City to catch a glimpse of it. getting better and better,” was re- What wcrc the Roaring Twenties Throngs also flocked to Ford show- peated over and over by millions of like? They were a time of social re- rooms in Detroit and other cities. followers. This chant could be volt, of changing moral codes, of Mounted police were called out to called the theme of the decade. shifting crazes, and of avid hero maintain order. John Burnham, in an essay in worship. Controversial movies, books, and Change and Continuity in Twentieth In every generation, many par- new magazines such as True Con- Century America, The 1920’s, ents and grandparents think that the fessions helped to create, and then stated that “One of the striking youth are going to the dogs. This capitalize upon, the new morality. developments of the 1920s was the was particularly true in the twenties They were condemned by some re- culmination on a mass scale of pub- -a time of rapid social change. ligious leaders as works of the devil. lic interest in personal, introspective Young women became flappers by Crazes came and went. The old accounts of private experiences.” the droves. They discarded the long, Chinese game of mah jongg was Mass interest in mental improve- thick dresses of their mothers, and simplified, and it swept the country. ment, physical culture, psychology, put on thin ones with short sleeves Crossword puzzles came into vogue. popular psychoanalysis, letters to and hemlines up to the knee. Goldfish swallowing for college men the lovelorn, etc., was part of a “Some of the wilder young things was “in” for a while. Dances like general cult of the self. New social rolled their stockings below their the Charleston and the Black Bot- norms produced and justified self- knees, revealing to the shocked eyes tom became the rage. centered attitudes and self-indulgent of virtue a fleeting glance of shin- Another craze was started by a behavior. bones and kneecaps,” related Fred- Frenchman, Emil CouC, after he Radio was another mania in the erick Lewis Allen in his 193 1 book, came to this country in 1923. He twenties. Sales of radios increased Only Yesterday, An Informal His- 1400 percent from 1922 to 1929. tory of the 1920s. Young women The crooning of the old charmer, even went so far as to abandon their Rudy Vallee, captivated millions of corsets! Although Allen wrote right avid listeners. after the decade’s end, his witty, in- Radio’s wide audience helped formal book has held up remarkably spark a huge interest in sports and well. in their heroes. The great and flam- Bobbed hairstyles became very boyant home run king, Babe Ruth, popular. Sales of perfume soared, made baseball the national pastime. with 2,500 brands on the market. There was hardly a youngster in Cotton underwear gave way increas- America who didn’t keep track of ingly to silk and rayon, and petti- how many homers The Babe hit. coats vanished. Allen commented Sports super heroes also included that “no longer were silk stockings football’s Red Grange (the Gallop- the mark of the rich.” He quoted a ing Ghost), boxing’s Jack Dempsey workingman’s wife as saying, “No and Gene Tunney, and golf’s Bobby girl can wear cotton stockings to Jones. high school. Even in winter my But the biggest hero of the twen- children wear silk stockings. . . .” ties was not to be found in sports. Even “” girls were smoking He was a loner-the Lone Eagle. cigarettes and wearing rouge and When he made the first solo trans- lipstick-previously the mark of a Atlantic flight to Paris in May 1927, “fallen” woman. They began taking Charles Lindbergh became the unchaperoned rides in autos with world’s idol. America went wild their boyfriends. For many courting with relief and joy that he had couples, the auto took the sofa out landed safely. of the parlor, put it on wheels, and President Calvin Coolidge re- moved it onto secluded lanes. flected the national mood by send- Speaking of autos, America’s love ing a navy cruiser to bring Lindy affair with the car soared through and his “Spirit of St. Louis” back the twenties. Passenger cars in use home. No Caesar returning to Rome nearly quadrupled from 6 million in ever received such a triumphal wel- 1919 to 23 million in 1929. Flagpole sitting was just one of the many come. The public welcome with When Ford’s eagerly awaited fleeting crazes of the 1920s. ticker-tape parade in New York

30 OASIS dwarfed any previous celebration. engendered by the widespread flout- Also awaiting him were 55,000 tele- ing of Prohibition. They marshaled Trams, one of which had 17,500 their own statistics and experts to names of well-wishers. prove their side was right. In the Not all was fun, games, and glory end, the wets won the political de- during the decade. There were more bate, and Prohibition was repealed serious events like the Sacco-Van- in 1933. zetti case. Sacco and Vanzetti, radi- The mass-produced auto made it cal immigrants from Italy, were tried easy for people to flock to vacation for murder in . They were lands like the year-round sun and convicted and their case became an sand of Florida. Land sales there international cause celebre. began to boom, and by 1925 the Although new evidence was un- boom was in full bloom. Developers covered after the trial which made christened Miami the “Wonder their guilt seem doubtful, proper City,” the “Fair White Goddess of Bostonian Judge Webster Thayer Cities,” and the “World’s Play- sentenced the two to death. They ground.” Ft. Lauderdale became were sent to the electric chair in the “Tropical Wonderland.” Some August 1927, amid wide protests. land fortunes were made in just a Prohibition became the law of few months. the land after the 18th amendment Inside lots sold for up to $20,000, was ratified in 1919. But the prob- and seashore lots-even those miles lem lay in how to enforce it. Mil- lions of Americans ignored the law and obtained liquor illegally. The supply came from two sources. Moonshiners made large amounts of illicit alcohol in stills from the Tennessee hills to New York apartments. And smugglers slipped boatloads of foreign booze across the 18,700 miles of coastlines and land borders of the U.S. Pro- hibition agents to prevent such il- legal activities were few and far between. Organized crime soon began to dominate the rum-running trade. Al Capone and gang warfare in Chi- cago and elsewhere made national headlines. Speakeasies were easy to find in any American city, and cor- ruption was rampant. Frederick Lewis Allen quotes a TOP: Charles Lindbergh with his “Spirit of St. Louis” column in the New York World that after his famous solo flight epitomized the confused attitude of across the Atlantic. ABOVE: many Americans toward Prohibi- The love affair with the tion. automobile filled the lives of millions during the ‘Roaring “Prohibition is an awful flop. 20s.’ LEFT: Flappers some- We like it. times concealed flasks in It can’t stop what it’s meant to stop. their garters to evade Pro- We like it. hibition. It’s left a trail of graft and slime, It’s filled our land with vice and crime, It don’t prohibit worth a dime, Nevertheless we’re for it” The “wets” and the “drys” de- bated Prohibition. Each side blamed the other for the disrespect for law 31 October 1979 and miles from Miami-skyrock- well and that the bull market would Nation that “we have now passed eted to as high as $75,000. Many soon resume. the worst and with continued unity unknowing investors bought lots But on Thursday, , of effort we shall rapidly recover.” sight unseen from shady promoters 1929, the Crash came with a ven- But there was no recovery, and the -and later found their land to be geance. As prices tumbled, there was downturn only grew worse. worthless, under 10 feet of water or a frantic stampede to get out from President Franklin Roosevelt, in a swamp. under. Wall Street was in chaos- after his inauguration in March The bubble began to burst in the no one knew just what was happen- 1933, took a number of dramatic summer of 1926 when the sharp ing. The stock ticker was late and steps to restore confidence. Under operators pulled out. People started unreliable. his Administration, the Congress to default on their payments. Then Many millionaires with highly passed many laws to increase the in September, a devastating hurri- margined stock holdings were wiped Federal role in managing the na- cane hit the Gold Coast of Florida. out in that 1 day. Some committed tional economy. Over 400 people died and 50,000 suicide. Billions of dollars in paper One of the most important of were left homeless. The storm dc- profits vanished without a trace. these was the Social Security Act stroyed what remained of the Flor- Millions of American families in 1935. It established the national ida Land Boom. lost their life savings-in the Crash social security program that today New subdivisions became ghost or later as other investments and plays such a vital role in American towns, building stopped, and many savings also were wiped out. The life. banks failed. What transpired in Roaring Twenties had come to an Most economists believe that we south Florida in 1926 might have abrupt end, will never have another Great De- been a warning to the Nation that Within 2 1/2 years of the Crash, pression. Paul Samuelson, in his hard times were coming. over 90 percent of all stock market basic text, Economics, states that But in the rest of the country- values at their 1929 peak were gone. “economic science knows how to from to the Golden Tens of thousands of businesses use monetary and fiscal policy to Gate-the economic boom went on. failed and over 8,000 banks became keep any recession that breaks out The “bulls” were in the saddle on insolvent by 1935. from snowballing into a lasting Wall Street, with stock market prices What had caused the Crash? The chronic slump.” soaring to record heights. main reason was excessive specula- Federal regulatory agencies such Speculative fever was intense in tion. People were able to buy stocks as the Securities and Exchange the late 1920s. Whenever financial on as much as 90 percent margin Commission (SEC), the Federal confidence started to falter, Presi- (which meant that they only had to Trade Commission (FTC), and the dent Coolidge and Treasury Secre- pay 10 percent of the stock’s value). Federal Deposit Insurance Corpora- tary Mellon made reassuring re- The market was also subject to a tion (FDIC) have the authority to marks andbtocks spurted again. great deal of insider manipulation, combat excessive speculation and Few people listened to those ob- pyramid schemes, etc., which added unsound business and banking prac- servers who forecast an end to good to the instability of the market. tices. The FDIC also assures savers times. They were derided as proph- Another reason for the Crash was that they will get their money back ets of gloom and doom. Even ele- the psychology of the market. The if federally regulated financial insti- vator operators and newsstand bull market had prospered in wild tutions fail. vendors were getting and passing on dreams, while the bear market that Samuelson and other economists “inside” tips on hot stocks. The Big followed was consumed by its own cite certain built-in stabilizers in the Bull Market became a national nightmares. Selling led to more sell- economy as preventing any depres- mania. ing, and the process fed upon itself. sion. These stabilizers are Govern- An article in Ladies Home Jour- The causes of the Great Depres- ment payments that increase during na! entitled “Everybody Ought to be sion of the 1930s included the wipe- recessions when unemployment in- Rich” fitted the prevailing mood. out of individual savings and busi- creases. The gateway to fortune seemed open ness profits in the Crash, the rapid Social security, welfare payments, wide. People thought the boom drop in production that followed, and unemployment compensation would last forever. They looked for- and the banking crisis mentioned are the three main automatic sta- ward to the day when they could sell above. bilizers. Nonautomatic stabilizers- some stocks at huge profit, buy a Until 1933, the Federal Govern- that is, those requiring legislative mansion and a fleet of cars, and loll ment seemed unable to do anything action-such as lowered taxes and on the beach. effective to prevent or alleviate the public works projects could also be Alas, this dream was never to be. Depression. Presidential pronounce- used to prevent a recession from The stock market peaked in Sep- ments-so effective in the heady turning into a depression. tember 1929. Stock prices began to Coolidge area-didn’t work any- We may have economic crises in waver and then fall in October. Wall more. the future, but another Great De- Street spokesmen soothingly assured For example, in May 1930 Presi- pression is as unlikely as another anxious investors that all would be dent Herbert Hoover reassured the era like the Roaring Twenties. ci

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