Depression diary: When the banks went dark

[D-Mack]

Depression diary: When the banks went dark



By Benjamin Roth
Sunday, November 1, 2009
Eighty years ago this week, the United States experienced the worst meltdown of the stock market in the nation's history. As the effects of the crash rippled through the broader economy, banks began closing their doors in record numbers.
Benjamin Roth, a lawyer in Youngstown, Ohio, recorded the effects as the banks closed in his town. His diary, excerpted on The Big Money, has just been published as a book -- "The Great Depression: A Diary" (Public Affairs).


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Oct. 8, 1931. Everybody is excited about President Hoover's plan to end the Depression, and stocks go up as high as 10 and 15 points. Under this plan, a huge national banking corporation is to be formed backed by government money, which will discount frozen mortgages and other illiquid assets of the banks in order to give them cash to pay depositors. It will be something like the Federal Reserve Bank, except that it can discount mortgages and other paper not now eligible. The plan also contemplates making the Federal Reserve more flexible so that in time of depression it can widen its discount basis.

* * *
Oct. 10, 1931. When I visited my safety box in the vault of the Dollar Bank today, Mr. Owen told me that "in the last two days -- since President Hoover announced his plan to help the banks -- [it] has been the quietest we have had for several months. Before that we had a number of new applicants for safety boxes every day but since then we have had none." He felt that Hoover's [announcement] had strengthened faith in the banks and had put a stop to hoarding.





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* * *
Oct. 15, 1931. Great excitement in Youngstown. It finally happened here. The Dollar Savings & Trust Co, the City Trust and the 1st National Banks all fail to open for business this morning. This leaves only the Mahoning Bank and the Commercial open for business. Both of them are besieged by depositors seeking to withdraw their deposits. I do not see how it can last. The town is panic-stricken, and the streets are crowded with people excitedly discussing the situation. I was aroused this morning at 4 a.m. by newsboys shouting "extra." It still seems like a bad dream.



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http://www.washingtonpost.com/wp-dyn...103004206.html

good old times and history rhymes

[Starving Steve]

Re: Depression diary: When the banks went dark

The Crash of 2008-9 was twice as steep and twice as deep as The Crash of 1929. So by comparison, looking back, the Great Depression was not so great. And I think we had far more suicides this time around than in 1929, a story which is hardly being told. Not only that, everyone was effected and took a huge hit by The Crash of 2008-9, even Social Security in the U.S. and even the Canada Pension Plan in Canada.

But the story is even worse now: The money is all but worthless now, so nothing can be hoarded without great risk. ( There is no easy escape plan in a safe deposit box at $1000 gold. )

Add to this, real estate is still outrageously priced, and the governments are bailing-out bankers who lent on real estate. So the problem ( the bubble ) does not self-correct.

Add to this, no-one can save their way out of this mess because interest rates are zero, and you damage your principal by saving money due to the fact that the outrageous cost of living still has to be met.

And U.S. stocks are all-but unregulated, returns are meager, and risks are great and unclear. Meanwhile, the bond market is confused, disasterously over-priced with zero interest rates, and the Federal Reserve Bank is rigging the bond markets by buying government debt back. This has led to money fleeing the U.S. which has led to an emerging dollar crisis.

Nations have already done the competitive de-valuation thing, and to no avail; so now trade barriers are going-up--- a return to failed Hoover-economics, at its worst.

Meanwhile, we have a President who has offered an economics plan based upon solar power and windmills, with nothing achieved so far except mis-placed hope and wishful thinking.

Looking back, 1931 was downright wonderful.

Yes, to-day banks still have their lights on, but bankers can not lend. There simply is no equity worth lending upon.... So, the government's bail-out money sits in banks, or the government's bail-out money is returned to the government to buy treasury bonds which pay zero.... That is how bad things have become now--- similar to, but even worse yet than the so-called, "Dirty-Thirties".