row of books on library shelfA Gold Classics Library Selection


Pompous Prognosticators
Optimism abounds as stock market crashes – 1928 to 1932

by Colin J. Seymour
May 2001 (Rev. August 29, 2001)

Chart of 1929 stock market crash with numbers corresponding to famous quotes

Chart locations are an approximate indication only. For relvance to 2001, scroll down to “Fast forward”

1. “We will not have any more crashes in our time.” – John Maynard Keynes in 1927 [NB: The authenticity of this one is a little suspect]

2. “I cannot help but raise a dissenting voice to statements that we are living in a fool’s paradise, and that prosperity in this country must necessarily diminish and recede in the near future.” – E. H. H. Simmons, President, New York Stock Exchange, January 12, 1928

“There will be no interruption of our permanent prosperity.” – Myron E. Forbes, President, Pierce Arrow Motor Car Co., January 12, 1928

3. “No Congress of the United States ever assembled, on surveying the state of the Union, has met with a more pleasing prospect than that which appears at the present time. In the domestic field there is tranquility and contentment…and the highest record of years of prosperity. In the foreign field there is peace, the goodwill which comes from mutual understanding.” – Calvin Coolidge December 4, 1928

4. “There may be a recession in stock prices, but not anything in the nature of a crash.” – Irving Fisher, leading U.S. economist, New York Times, Sept. 5, 1929

5. “Stock prices have reached what looks like a permanently high plateau. I do not feel there will be soon if ever a 50 or 60 point break from present levels, such as (bears) have predicted. I expect to see the stock market a good deal higher within a few months.” – Irving Fisher, Ph.D. in economics, Oct. 17, 1929

“This crash is not going to have much effect on business.” – Arthur Reynolds, Chairman of Continental Illinois Bank of Chicago, October 24, 1929

“There will be no repetition of the break of yesterday… I have no fear of another comparable decline.” – Arthur W. Loasby (President of the Equitable Trust Company), quoted in NYT, Friday, October 25, 1929

“We feel that fundamentally Wall Street is sound, and that for people who can afford to pay for them outright, good stocks are cheap at these prices.” – Goodbody and Company market-letter quoted in The New York Times, Friday, October 25, 1929

6. “This is the time to buy stocks. This is the time to recall the words of the late J. P. Morgan… that any man who is bearish on America will go broke. Within a few days there is likely to be a bear panic rather than a bull panic. Many of the low prices as a result of this hysterical selling are not likely to be reached again in many years.” – R. W. McNeel, market analyst, as quoted in the New York Herald Tribune, October 30, 1929

“Buying of sound, seasoned issues now will not be regretted” – E. A. Pearce market letter quoted in the New York Herald Tribune, October 30, 1929

“Some pretty intelligent people are now buying stocks… Unless we are to have a panic — which no one seriously believes, stocks have hit bottom.” – R. W. McNeal, financial analyst in October 1929

7. “The decline is in paper values, not in tangible goods and services…America is now in the eighth year of prosperity as commercially defined. The former great periods of prosperity in America averaged eleven years. On this basis we now have three more years to go before the tailspin.” – Stuart Chase (American economist and author), NY Herald Tribune, November 1, 1929

“Hysteria has now disappeared from Wall Street.” – The Times of London, November 2, 1929

“The Wall Street crash doesn’t mean that there will be any general or serious business depression… For six years American business has been diverting a substantial part of its attention, its energies and its resources on the speculative game… Now that irrelevant, alien and hazardous adventure is over. Business has come home again, back to its job, providentially unscathed, sound in wind and limb, financially stronger than ever before.” – Business Week, November 2, 1929

“…despite its severity, we believe that the slump in stock prices will prove an intermediate movement and not the precursor of a business depression such as would entail prolonged further liquidation…” – Harvard Economic Society (HES), November 2, 1929

8. “… a serious depression seems improbable; [we expect] recovery of business next spring, with further improvement in the fall.” – HES, November 10, 1929

“The end of the decline of the Stock Market will probably not be long, only a few more days at most.”
– Irving Fisher, Professor of Economics at Yale University, November 14, 1929

“In most of the cities and towns of this country, this Wall Street panic will have no effect.”
– Paul Block (President of the Block newspaper chain), editorial, November 15, 1929

“Financial storm definitely passed.” – Bernard Baruch, cablegram to Winston Churchill, November 15, 1929

9. “I see nothing in the present situation that is either menacing or warrants pessimism… I have every confidence that there will be a revival of activity in the spring, and that during this coming year the country will make steady progress.” – Andrew W. Mellon, U.S. Secretary of the Treasury December 31, 1929

“I am convinced that through these measures we have reestablished confidence.” – Herbert Hoover, December 1929

“[1930 will be] a splendid employment year.” – U.S. Dept. of Labor, New Year’s Forecast, December 1929

10. “For the immediate future, at least, the outlook (stocks) is bright.”
– Irving Fisher, Ph.D. in Economics, in early 1930

11. “…there are indications that the severest phase of the recession is over…” – Harvard Economic Society (HES) Jan 18, 1930

12. “There is nothing in the situation to be disturbed about.” – Secretary of the Treasury Andrew Mellon, Feb 1930

13. “The spring of 1930 marks the end of a period of grave concern…American business is steadily coming back to a normal level of prosperity.” – Julius Barnes, head of Hoover’s National Business Survey Conference, Mar 16, 1930

“… the outlook continues favorable…” – HES Mar 29, 1930

14. “… the outlook is favorable…” – HES Apr 19, 1930

15. “While the crash only took place six months ago, I am convinced we have now passed through the worst — and with continued unity of effort we shall rapidly recover. There has been no significant bank or industrial failure. That danger, too, is safely behind us.” – Herbert Hoover, President of the United States, May 1, 1930

“…by May or June the spring recovery forecast in our letters of last December and November should clearly be apparent…” – HES May 17, 1930

“Gentleman, you have come sixty days too late. The depression is over.” – Herbert Hoover, responding to a delegation requesting a public works program to help speed the recovery, June 1930

16. “… irregular and conflicting movements of business should soon give way to a sustained recovery…” – HES June 28, 1930

17. “… the present depression has about spent its force…” – HES, Aug 30, 1930

18. “We are now near the end of the declining phase of the depression.” – HES Nov 15, 1930

19. “Stabilization at [present] levels is clearly possible.” – HES Oct 31, 1931

20. “All safe deposit boxes in banks or financial institutions have been sealed… and may only be opened in the presence of an agent of the I.R.S.” – President F.D. Roosevelt, 1933

Fast forward… year 2001

Future of US economy “very bright”-Fed’s Broaddus

“Despite the current slowdown, however, intermediate and longer-term prospects for the U.S. economy are still very bright” – Federal Reserve Bank of Richmond President Alfred Broaddus, in a speech to the Virginia Housing Coalition, June 14, 2001.

Treasury Secretary Sees ‘Golden Age’- “[the country is] on the edge of a golden age of prosperity… I think we’re not doing badly for the kind of correction that we’re in right now… It’s easy to find gloom and doom, but consumers are hanging in there, their spending rates are still quite good… The contraction occurred … in the investment sector, where we had an overexpansion.” – Treasury Secretary Paul O’Neill, on ABC’s “This Week.”, Sunday June 24, 2001.

Economy Likely Up Over Next Year – Commerce Secretary Don Evans “Over maybe the next year, I certainly expect it (U.S. economic growth) to return to those kind of levels of (potential) growth” [between 3.0 percent to 3.5 percent] – US Commerce Secretary Don Evans to a Washington news conference, Wednesday August 29, 2001.

Aren’t these just a little disturbing after reading the prognostications from 1927-1933?

Colin Seymour – http://www.users.dircon.co.uk/~netking/
(Note: There is no relation between the netking in this URL and the USAGOLD forum participant who posts as Netking.)

References:

Many of the above quotations don’t have a reference to a source that you could look up in a library, such as a newspaper from the relevant era, or a learned journal, or a book complete with ISBN or Library of Congress numbers. We should therefore always be cautious in accepting the face value of such quotes. Nevertheless, I am sure most of these things were really said or something very close.

http://www.provide.net/~aelewis/gold/goldbear.htm
http://hv.greenspun.com/bboard/q-and-a-fetch-msg.tcl?msg_id=0016hr
http://sane.org.za/news_may99/money_matters.htm
http://www.srsr.org/toppage12.htm
http://www.sterling-asset.com/chrtmar99.htm
http://csf.colorado.edu/longwave/oct99/msg01538.html
“Only Yesterday” by Frederick Lewis Allen and “The Great Crash 1929” by John Kenneth Galbraith (mainly HES quotes) [thanks to Susan J. Barretta]

For Further Reading:

Black Thursday: October 24, 1929 [Newspaper headlines]

The 1929 crash [Newspaper headlines with charts]
Bang! went the doors of every bank in America
“… on March 6, 1933, Franklin Roosevelt, just sworn in for his first term as President, suddenly shut all 18,000 banks in America, aiming to overhaul them as fast as possible, and so reestablish people’s faith in government and America’s banking system…”

Depression, Radio and FDR
“Soon after his inaugural address, on March 12, 1933 Roosevelt held his first chat in an effort to quell the rising national panic over the banking crisis. By March 4th 5,000 banks had closed their doors and 36 States had suspended banking completely. Approximately $2.5 billion in individual savings were lost. Consequently, people were withdrawing their savings in droves, a situtation that only worsened the problem”

The Great Depression and the New Deal
“… when the banks reopened, the American public entrusted them with their money once more, which actually made the banks solvent. Merely by restoring public confidence in the banking system of America, Roosevelt saved it…”

Understanding How Glass-Steagall Act Impacts Investment Banking and the Role of Commercial Banks
“… by 1933 the U.S. was in one of the worst depressions of its history. A quarter of the formerly working population was unemployed. The nation’s banking system was chaotic. Over 11,000 banks had failed or had to merge, reducing the number by 40 per cent, from 25,000 to 14,000. The governors of several states had closed their states’ banks and in March President Roosevelt closed all the banks in the country…”

BANKING ACT OF 1935
“AN ACT To provide for the sound, effective, and uninterrupted operation of the banking system, and for other purposes”

Main Causes of the Great Depression [Gusmorino, Paul A., III., (May 13, 1996)]
The Great Depression 1920s-1941

Copyright © 2001 by Colin Seymour. All Rights Reserved. Reprinted by USAGOLD with permission of Mr. Seymour. No further reproduction without permission.

Reprinted with permission.


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Image of row of books at libraryA Gold Classics Library Selection


A Layman’s Guide to Golden Guidelines
for Wise Money Management
Gresham’s Law, Say’s Law, Rule of 72, Marginal Utility, Diminishing Returns, Regression to the Mean, Unintended Consequences, Murphy’s Law, Occam’s Razor, Law of Attraction, Law of Polarity, and more

by R.E. McMaster, former editor of The Reaper newsletter

Ed Stein cartoon graphic of bad money driving good into hiding

There is an old saying that not all that glitters is gold — as in the gold coins many of you have held in your hands. There is another kind of gold that inhabits the practical wisdom of the ages. In today’s “go-get-’em,” “read-it-and-forget-it” world of everyday web browsing, it can be a challenge to separate the run of the mill from the meaningful. It is with that thought in mind we offer this compendium of the rules and laws of finance and investment by long-time market analyst R.E. McMaster. Formerly the writer/editor of the widely-circulated The Reaper newsletter, McMaster is known for his occasional forays into the realm of economic philosophy and history. I think you will agree with me that these skillfully condensed descriptions are indeed meaningful — a wellspring of knowledge worth reading, re-reading and passing along to friends and family, especially the kids and grandkids.

(Illustrations by Ed Stein)

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[Gold Classics Library Index]

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Britain’s Gold Sales ‘a Reckless Act’
(Sir Peter Tapsell’s speech before the House of Commons, June 16, 1999, on the partial sale of United Kingdom’s gold reserves)

We do not update our Gold Classics Library often, but when we do we try to choose items that have a timeless quality.  This latest selection certainly meets that standard. It comes to us unexpectedly as a by-product of research for the recently published article, The Power of Gold Diversification, and with the kind permission of the United Kingdom Parliamentary Archives.

Photo of Sir Peter Tapsell addressing UK's parliamentMany associate Britain’s sale of nearly 60% of its gold reserves in 1999 with the beginnings of gold’s secular bull market. The government’s rationale for the sale, as explained by then Economic Secretary to the Treasury Patricia Hewitt, was to “achieve a better balance” in its reserves by going to foreign currencies.  Sir Peter Tapsell took the opposite tack.  “The Chancellor [of the Exchequer] may think that he has discovered a new Labour version of the alchemist’s stone,” he argued, “but his dollars, yen and euros will not always glitter in a storm and they will never be mistaken for gold.”

History’s indisputable verdict is that Tapsell was correct and the British government wrong.  The ensuing nearly two decades featured a global financial crisis, low-to-zero-percent interest rates, scrambling central banks, and the consistent depreciation of global currencies against gold. Currencies did not glitter in the storm, and they could not have been mistaken for gold which rose relentlessly from $287 per ounce at the time of his speech to the current price of over $1500 (at one point reaching almost $1900 per ounce in 2011).  Though his speech before the House of Commons failed to stop the sales, it goes down as one of the most eloquent appeals ever made on the merits of gold ownership for nation states and individuals alike.

[LINK]

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Who owns and controls the Federal Reserve
by Dr. Edward Flaherty

“Is the Federal Reserve System secretly owned and covertly controlled by powerful foreign banking interests? If so, how? These claims, made chiefly by authors Eustace Mullins (1983) and Gary Kah (1991) and repeated by many others, are quite serious because the Fed is the United States central bank and controls U.S. monetary policy. By changing the supply of money in circulation, the Fed influences interest rates, affecting the mortgage payments of millions of families, causing the financial markets to boom or collapse, and prompting the economy to expand or to stumble into recession. Such awesome power presumably would be used to benefit the U.S. economy. Mullins and Kah both argued that the Federal Reserve Bank of New York is owned by foreigners. Although the New York Fed is just one of twelve Federal Reserve banks, controlling it, they claimed, is tantamount to control of the entire System. Foreigners use their command of the New York Fed to manipulate U.S. monetary policy for their own and, as Kah asserted, to further their global political goals, namely the establishment of the sinister New World Order.” – From the author’s preface.

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A Gold Classics Library Selection


Money and politics in the land of Oz
The extraordinary story behind the extraordinary story of
“The Wonderful Wizard of Oz”

by Professor Quentin Taylor, Rogers State University

Year in, year out, Money and politics in the land of Oz is among our most highly-visited Gold Classics Library selectionsHere is the extraordinary story behind the extraordinary story of ‘The Wonderful Wizard of Oz’.  Most have seen the movie version of this allegorical tale, but few are aware of what the various characters, places and things represented in the mind of Frank Baum, the tale’s author. Though ‘The Wonderful Wizard of Oz’ was written over 100 years ago, the themes will be recognizable to those with an interest in golden matters. While many today consider gold an instrument of financial and personal freedom, in Baum’s tale, it is painted as a villain — the tool of oppression. So, as you are about to see, we have come full circle, and gold has traveled a yellow brick road of its own.

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[Gold Classics Library Index]

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The Nightmare German Inflation

The surprise is not only the length of time Scientific Market Analysis’ The Nightmare German Inflation has ranked among our most-visited essays, but that it has remained popular even now, when inflation seems a more distant concern. Inflation, though, is never far removed from the minds of many Americans particularly those who remember the inflationary-stagflationary 1970s decade and the dangers it imposed on financial markets and individual investment portfolios. The survivors of the German hyperinflationary debacle of the 1920s did so, as you are about to read, by purchasing gold early in the process. This comprehensive report not only describes how and why the hyperinflation occurred but how various investments performed under those trying circumstances.  There is little doubt it will affect your thinking.

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Gold Seizure
Here’s how it can happen and what you can do about it.

Allow us to make a personal observation and then we will send you on your way to Mr. Ganz’ important and timely analysis. Too many gold owners labor under the false presumption that high-end, high-premium numismatic gold coins are the only way you can protect your holdings against a potential seizure. Many of our prospective clients are pleasantly surprised when they discover that there is a whole genre of pre-1933 gold coins that can be acquired at modest premiums over the gold content and still meet the criteria for exemption Mr. Ganz outlines. As he points out, “rare and unusual” does not necessarily equate to “pricey” or “expensive.” To understand why the words “rare and unusual” are important, we invite you to proceed to the link.

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Fiat Money Inflation in France
How It Came, What It Brought, and How It Ended

Andrew Dickson White ends his classic historical essay on hyperinflation, “Fiat Money Inflation in France,” with one of the more famous lines in economic literature: “There is a lesson in all this which it behooves every thinking man to ponder.” This lesson — that there is a connection between government over-issuance of paper money, inflation and the destruction of middle-class savings — has been so routinely ignored in the modern era that enlightened savers the world over wonder if public officials will ever learn it. In this essay Dickson White explores France’s hyperinflation at the end of the 18th century in exhaustive detail – its politics, its economics and the social consequences which led, in the end, to Napoleon’s rise as emperor.

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