A question. The Great Depression is often dated from the October '29 market crash:

[Jackpine Radical]

The 1929 Stock Market Crash
Harold Bierman, Jr., Cornell University
Overview

The 1929 stock market crash is conventionally said to have occurred on Thursday the 24th and Tuesday the 29th of October. These two dates have been dubbed "Black Thursday" and "Black Tuesday," respectively. On September 3, 1929, the Dow Jones Industrial Average reached a record high of 381.2. At the end of the market day on Thursday, October 24, the market was at 299.5 — a 21 percent decline from the high. On this day the market fell 33 points — a drop of 9 percent — on trading that was approximately three times the normal daily volume for the first nine months of the year. By all accounts, there was a selling panic. By November 13, 1929, the market had fallen to 199. By the time the crash was completed in 1932, following an unprecedentedly large economic depression, stocks had lost nearly 90 percent of their value.

My question is this: Have we as yet crossed the point that future historians will, in retrospect, cite as the beginning marker of the global mess we are now entering? What is, was, or will be that point?

[Taverner]

1. Things were incredibly different back then

Back then, money moved very slowly, so when something like this happens, the shock wave is deep and powerful

Today money moves so quick, that we have had several moments like these...

Where we share similarities to 29 is in consumer confidence - both were low and showed no signs of getting better. It took a huge public works program and a world war to build that confidence back last time.

[Jackpine Radical]

5. Yes, surely you're right, times are now a lot different. But then as now,

only in retrospect was the beginning point selected, and that process was in some ways arbitrary. For one thing, commoners were much less invested in the market back then than now, so 1929 didn't hit them in the same way. It was 3-1/2 years between the crash and the New Deal.

[Taverner]

8. Yes this is true

People didn't have their retirements tied up in the stock market

They had their retirement money in a bank - and those crashed

I just think we won't be able to isolate one point where it all began, based on the speed of the markets.

But we will definitely know when we are in it

[Idealism]

2. The day Lehman was allowed to go under

is the day you are referring to.

[Statistical]

6. Agreed. Likely historians will consider that the "Black Thursday" of this debacle

The problems existed under the surface just like in 29 but that day was the what sent shockwaves out and toppled the house of cards.

[Idealism]

10. Precisely

Just like when Bank runs happened and the Fed didn't extend loans to those who were in need and ultimately led to 3,000 closing in the 1930s

[bobd0]

3. I don't think we've had one singular occurrence we can point to yet.

I'm not sure there will be one at all. This time around we seem to be stumbling drunkenly into what is almost guaranteed to be a very long and brutal hangover.

[Taverner]

9. A bunch of little ones

Fall of Lehman definitely

Also there is the credit bubble popping

Hell, I would even tie in the tech and real estate bubbles bursting as part of it

[bulloney]

16. How about December 2000, when the courts validated Bush's 'election' to the WH?

[truedelphi]

4. Last year, maybe Sept? certain financial advisers were

Saying that should we go below the 8000 Mark, then we'd be at a depression. Well that is where we stand now.

I am sure some people have decided that we have to go lower to truly be in A Great Depression, but the thinking I've heard is that with it going to 8000, then the economy is sytemically altered and almost impossible to rally so that although technically we might not yet be in a depression, there is no way to remedy the situation to get us out and avoid a "truer" depression.

[Common Sense Party]

11. The level of the Dow Jones Industrial Average does not tell us

whether we are or are not in a depression. The stock market (especially an index of only 30 companies) is not the same as the economy.

[truedelphi]

14. I have never even looked at it as an index or not, but am relying on what experts say

What I look to are things like the number of states in trouble with their budgets - 28 states are currently in trouble with their budgets. Food banks low on foods, church assistance running on empty, growing numbers of unemployment etc. All of of those things indicate that we are in a world of hurt.

Our governor in Calif is saying we will run out of money by March. This means no more food stamps, state disabilty, checks for state workers, monies to counties etc. It will affect some thirty two million people - and California is not doing so great now. I am not eager to see what will happen this spring.

[Warpy]

7. Oh, the ones with any brains at all will date it to late 2000

and the collapse of the dotcom bubble followed by a fiscally reckless government that lied about the numbers, viciously depressed wages, and did everything exactly wrong. The ones with fewer brains will date it variously to the mortgage scam collapse in August 2007, the stock market dump in October 2008, and the probable consumer market disaster by March of next year.

However, the seeds were sown during the Reagan years when the progressive tax was abolished, the social safety net shredded, and the march toward financial deregulation set into motion.

The net result was a huge tax increase on working people who formed the base of the consumer market and a huge tax giveaway to hoarders, creating the conditions for one bubble market after another while the consumer market sputtered and died. Financial deregulation completed the perfect storm of conservative mismanagement by encouraging people to assume ridiculously high debt burdens in order to compensate for poor wages.

This will happen every time conservatives gain control of this country because the core of conservative economic dogma is the fallacy that the economy always functions from the top down.

[madrchsod]

12. the first depression in the 1900`s was the 1920-21 depression

http://www.nber.org/papers/w11778

http://eh.net/encyclopedia/article/Smiley.1920s.final

todays problems can be traced back to clinton signing the repeal of the last 1930`s banking laws.

[TygrBright]

13. That point wasn't actually established based solely on the market crash

The market crash was followed by a credit drought, which was followed by a long, slow period of deflation that destroyed the value of remaining tangible assets like real estate, and threw millions of people out of work. Recovery was further delayed by a series of catastrophic natural events including the Dust Bowl, which destroyed the ability of key sectors of the economy to function at all.

If that sounds eerily familiar and scarily ominous, remember that much was very different back then in respect to the economy. Currency was still pegged, rather than floating; there was no FDIC, no SEC, not even the feeble shell of regulatory structure and oversight that we have now. There was no centralized policy making for key sectors of the economy such as agriculture and housing, there was little organized labor, the military budget was beyond teeny-tiny, and there was no mechanism for pumping money into the private sector via big government-sponsored infrastructure development projects.

Furthermore, our understanding of even the most basic factors influencing economic shifts, forecasting, etc., was primitive at best. The economy had been operating on a boom-and-bust cycle for fifty years, with "Panics" followed by short periods of recovery based on emerging technologies or business sectors.

So our ability to comprehend the sources and magnitude of the problems, and devise solutions to stave off the worst and reconfigure for recovery is vastly superior to what it was in the 1930s. We are in for hard times, and for smaller-scale repetitions of much of what was experienced then --including foreclosures, bread lines, etc.-- but it will likely affect a much smaller percentage of the population at that level. The rest will experience hardship, but in much less catastrophic terms.

However, we have a couple of ugly critters hiding in the weeds waiting to pounce. Everyone knows they are there, but so far they are being ignored in the scramble to stave off the near-term disasters. If we don't pay attention and start dealing with them now, though, we might be in for a much longer downturn and some very icky bits ahead.

One is the shift of retirement assets out of defined benefit plans (conventional pensions) and into defined contribution plans like 401(k) plans. The average 401(k) investor has never been able to match the overall long-term performance of carefully regulated and professionally-managed pension funds. (The much-publicized "failures" of pension funds can almost all be traced to waivers and/or regulation changes that allowed companies to use pension funds as collateral and otherwise play games with them--NOT to failures of the funds themselves.) So a huge wave of people in their 50s and 60s who should be thinking about leaving the work force will NOT be leaving the work force because they can't afford to-- Social Security and income from their 401(k)s won't meet their basic needs for housing, heating, medicine, etc.

Another problem waiting out back of the woodpile is the extent to which our financial structure is entangled with other large economies that operate on a very different basis from ours. By the time we are in recovery, troubles in places like China, India, and Russia will be peaking and can be expected to have serious impact on us.

And then of course, there is the problem of having a HUGE sector of our economy operating at an appallingly bad level of efficiency and productivity-- that is, health care. If the health care sector were (for example) in charge of turning out computers, the average desktop would cost more than five thousand dollars. It would be constantly crashing and you'd have to take it to a tech support center miles from your office and wait days and days to get it repaired. But when it DID work, it would be lightning-fast and able to do all kinds of fancy things. And the stockholders and executives in charge of turning out the machines would be obscenely wealthy. We have far too much of our GDP tied up in a sector focused more on making insurance, pharmaceutical, and medtech stockholders and executives rich than on turning out healthy citizens.

Putting it all together, I'm predicting a longish time in the initial trough, which will not be as deep as the 1930s', but will be painful all the same, with a recovery that comes in fits and starts as various strategies come on line. And plenty of speed bumps along the way as those lurking varmints rear their heads.

prognosticatorially,
Bright

[truedelphi]

15. We do not really have an FDIC now.

Should the number of bank failures continue to sprial, the pledge of $ 250,000 of FDIC insurance per account will not have any meaning what so ever.

And with our BailOut policies escalating past the 8.8 trillion dollar mark currently, it could be that even if you get
that $ 250,000 you are promised, it will get you a loaf
of bread or less.

[Odin2005]

17. When Lehman Bros. was allowed to fail. n/t