1929 Vs Now: Are We Headed For The Greatest Depression? Mike Maloney

in this video we're going to revisit the stock market crash of 1929 why should that be important to you and believe me it really should be it's because as Mark Twain is said to have said that there's actually no proof that he actually said it history never repeats but it often rhymes now I'm fond of saying history always repeats but with little twists and if you take a look into the past and you find something that had the same type of setup that society is at right now where the fundamentals are the same and then you look at what the outcome was and then you try and see what the differences are the little twists in the setup you might be able you have you've got a pretty good probability actually of predicting roughly what the outcome is going to be and so the book that we're going to this is cut these things that I'm going to read were cut from my first book guide to investing in gold and silver and the original draft was called understanding money and it was supposed to be a three volume set this section is from Volume one building your crystal ball and building your crystal ball was about trying your best to see what's coming in the future so that you can get prepared for it and the best way to do that is look as far back into the past as possible and find every example that you can identify where something was happening that was similar and then what the outcomes were and you add all of those things together and then you find out what those twists are like I said and you've got this good probability of predicting what's going to happen now this was just Volume one and it took me a long long time to write and I got I got about a quarter of the this Volume one done and I was at 800 pages and I realized that these you know these three books were going to be like 9,000 pages or something like that that only a few scholars would read for reference and nobody this wasn't a book that was going to sell to anybody so I scrapped this idea and I condensed all of this writing and research these 800 pages into the first 50 pages of guide to investing in gold and silver so I love this quote here predicting the future is never easy especially when you attempt to do it in advance and that's Bernard Baruch and he was a very famous trader from the first half of the 20th century and what I'm going to read for you here is from chapter 20 bumps dips bubbles and storms it comes after World War one the Weimar hyperinflation and the bumps are the other hyperinflations that happened around the world the dips are the big deflation z' that happened including the depression of 1921 in the United States and the Great Depression the bubbles there was obviously the stock market bubble of 27 8 & 9 however most people don't know that there was a nationwide real estate bubble in the United States that was at an extreme in Florida that's where the it was in a hyper bubble and then the storms are the things like the 1920 the depression of 1921 the Great Depression the economic storms but there was also a real storm there was a hurricane that popped the Florida real estate bubble and so I'm going to pick this up after there were a couple of pages where I'm describing all of the roaring 20s and the inflation that caused the roaring 20s that caused all of these bubbles and part of that was a very boring page on something called bankers acceptances which you don't really want to know about right now but it's one of the ways that currency got created and it was part of the great inflation of the 1920s and to write this one chapter bumps tips bubbles and storms I read Oh more than a dozen books I focused on three main books and probably 200 different websites or more and I wanted to have a broad knowledge of all a different economic understanding of what went on and so I picked a Keynesian Ben Bernanke's essays on the Great Depression his big thesis work that that made him famous and this is what was responsible for him becoming the head of the Federal Reserve for a couple of terms his essays on the Great Depression so that's a Keynesian perspective and what's interesting is because it's a Keynesian perspective he ignored the Great Inflation of the 1920s he ignored the roaring 20s and he started after the stock market crash and after the economy had really gone through its full deflation and that's the only way that a Keynesian could really justify his his conclusions of what caused the Great Depression and how to get out of it and then I read an Austrian school perspective by Murray Rothbard Murray Rothbard America's Great Depression what's interesting the title is America's Great Depression and Murray Rothbard being an Austrian economist focuses on the big inflation of the 20s so this whole book is really about the roaring 20s and the huge inflation and then the stock market crash and then the Federal Reserve and the government rushing in to save us and causing the Great Depression and then he's done with it he sort of wipes his hand out he says this is what caused the Great Depression that's the conclusion of his book and he doesn't tell you about the Great Depression very much at all because he's already proven his case it was the Federal Reserve and the US government that caused the Great Depression and then for my third book I selected something written by a monetarist the Dean of the Chicago School of Economics Milton Friedman with Anna Jacobson Schwartz and it was a monetary history of the United States 1867 to 1960 and this was a seminal work nobody to that date had ever taken on the task of writing such a thorough stir of an economy over a certain period of time and just absolutely brilliant work and Milton Friedman when he was professor of economics at Chicago University started what became known as the Chicago School of Economics and it's monetarism and so these three books I read you know I'm Dyslexic and I read these before I found out that in all Macintosh computers in the operating system there's a text-to-speech you just highlight text and you hit read to me and it reads to you you hit a button and it reads to you so it took me months and months and months of reading these books and I'd circle sentences and paragraphs I'd hand them to my assistant she'd typed them up and then I took all of the quotes out of these and I took a whole bunch of quotes from other books and websites and I wove them together into a timeline that gave me a really thorough outline that was very very well researched of what went on and Milton Friedman's book goes back to the Civil War so you're talking civil war in 1960 but more than half of that book was about the Great Depression and the cause of it and his determination also that it was the Federal Reserve's fault and the US government rushing in to save us those were the the causes that turned what he said should have been just a garden-variety to a severe recession that should have lasted one to two years at the most and the government and the Federal Reserve turned that into the Great Depression so he came to the same conclusion as Murray Rothbard came now when I took these and I wove them all into a timeline like this I then wrote over the top of them and then I left a quote here and there I've since cut out all of Ben Bernanke's quotes because he's just not quotable he is a bad author if you get a chance to read him don't because he's just going to give you a migraine headache that'll send you to bed for two days it's he was it was a pain in the ass to read this book yeah I guarantee it I'm going to revisit these books but I'm never going to read this one again he's an awful author so I'm picking this up after the bankers acceptances and I'm just going to get into it and I'm gonna hit you a sort of a barrage of quotes I'm sorry for that but it sort of gives you an idea of what was going on at the time and I'm going to pick it up from the roaring 20s and then through the stock market crash and then at the end of this I'm gonna give you some further analysis and bring it up to what's going on today so you're gonna really want to watch this through the end I know it's sort of a long video but I hope that it's entertaining for you the 20s were in the main a period of high prosperity and stable economic growth the bull market in stocks mirrored the soaring American optimism about the future Milton Friedman and Anna Jacobson Schwartz now I might just say Milton Friedman and in coming quotes but I'm referring to both of them here Anna Jacobson Schwartz probably did all of the hefty livet lifting and wrote most of the monetary history of the United States under the direction of Milton Friedman and I'll bet she was also one of the she was probably the main researcher on this thing so when I say Milton Friedman in the in the future here I mean Milton Friedman and Anna Jacobson Schwartz it's just that it's a mouthful it's sort of a tongue twister for me and every once in a while I mess it up and have to redo it again and again so President Coolidge and Secretary of Treasury Mount melon acted as the leading kappa doors of Wall Street now a cape a door is somebody in a bull fight that also had a cape besides the bullfighter the matador the kaepa door was another person with a cape that would distract the ball like especially during times when the the matador is switching over to the Soraa pulling out the sword the death of the bull the kaepa door was the distraction so the president Coolidge and the secretary of the Treasury Mel enacted the as the leading kappa doors of Wall Street distracting the public from what was really going on optimistic statements by melon and Coolidge's trumpeted the new era of permanent prosperity repeatedly injected tonics into the market Marie and rothbard one important aid to stock market inflation was the Federal Reserve policy of keeping call loan rates on bank loans to the stock market particularly low marie-anne rothbard now that's the same as margin accounts today so margin currency is currency that is created by the brokerage house to loan you to create to buy stocks on margin and so it is an expansion of the current it's it's a type of inflation so the high prosperity of the 20s and the spreading belief of a new era understandably led to an increasingly optimistic evaluation of the prospects of repayment and hence and increasing readiness to lend on a given project or collateral one result of these developments was that they apparently led to a reduction in the average quality of credit outstanding Milton Friedman and Anna Jacobson Schwartz now does that remind you of the real estate bubble that was happening in 2000 5 6 & 7 when they would lend to anybody that could breathe and we've had a reduction in credit quality outstanding recently before this coronavirus and market collapse there was reduced credit quality outstanding in fact the United States the US Treasury bonds have the United States suffered a downgrade of their credit rating so this is something that is happening today and so the outcomes are going to be somewhat similar but you know in this outcome you have to be ready for something really weird it's not going to be like just the crash of 29 this is what it's going to be like it first but then with the inflation that we're going to have with the world's central banks it's going to be the most I call it in deflation you'll see more about that later but it is going to be the weirdest most twisted thing that you've ever seen coming at you where it's just going to be hard to predict and so the better you are at the better your background is at knowing all these things the better your chances of having a good outcome through this so but the music played and the boom went on people dance the Charleston and the Lindy Hop live two radio performances by Louis Armstrong and Duke Ellington in speakeasies they sipped bootleg booze supplied by the likes of Al Capone or Joe Kennedy from tea cups in 1927 Charles Lindbergh flew the Atlantic and at the movies which came of age at the beginning of the decade silent films gave way to the talkies when Al Jolson sang in the jazz singer the Dow began the year at 152 points and finished the year at 202 a 33 percent gain does that sound familiar but it was mainly the rich who were getting richer the wealthiest 1% of the population controlled the majority of the nation's wealth the tax acts of 1921 twenty four and twenty to twenty six reduced taxes on the wealthiest individuals from over seventy five percent to less than 25 percent and inheritance tax was also cut this helped fuel a booming stock market now that should just give you chills that's exactly what has been going on over the past couple of decades here the whole country was intoxicated in 1928 newly elected President Herbert Hoover proclaimed we in America today are nearer the final triumph over poverty than ever before in the history of any land now there was a booming middle class who because of the availability of easy credit were able to afford cars homes and radios newspaper ads touted own your own home for just twenty five to eighty five dollars per month the Dow had begun the year at 202 and finished the year at 3 hundred a 50% gain many investors caught up in the race to make a killing invested their life savings mortgage their homes and cashed in safer investments such as Treasury bonds and bank accounts mark s Underwood the Securities and Exchange Commission did not yet control the stock market so it was constantly being manipulated by the Wall Street elite a bunch of very wealthy men who would pool their currency together start buying up a stock spread rumors that it was going to the moon and dump the stock on the unsuspecting public now this was written before I started differentiating before currency and money so this was early 2005 and I was not you know later on I established like this hard line of what money is and what currency is and I tried to make my I tried to always define the difference and take a stand on making sure I wasn't miss communicating or giving currency suggesting that currency had attributes that it does not and we don't use currency we use I mean we don't use money we use currency all over the world money is gold and silver everything else is current Fiat national currencies so on March 8th 1929 Michel Mian began one of the most successful pools on Wall Street from March 8th to March 17th Mian and the pool pushed up the price of RCA stock now RCA was like the Apple and or Amazon or Facebook stock of the day this was the the tech stock this was the leading stock RCA by almost 50% and that's in just a few days there on March 18th they sold and divided up their profits in today's currency they may had made one hundred million dollars for one week's work if the small investor suffered they'd soon be back for more PBS the American experience the crash of 29 it's our racket those stock market guys are crooked Al Capone on May 23rd 1929 the new Marx Brothers movie the coconuts would premiere in New York the subject was the gullibility of all the suckers that had bought property in the florida land boom just a few years earlier 800 wonderful residences will be built right here why they're as good as up better you can get any kind of home you want you can even get stucco oh how you can get stucco now is the time to buy while the new boom is on and remember the old saying a new boom sweeps clean Groucho Marx the coconuts Groucho put all of his earnings into the booming stock market on margin of course you know I've heard I think I saw an interview with Groucho years ago that he really lost everything in the stock market everything that he had made in all of those Marx Brothers films to that point and had to start over in August brokerage houses were installed on transatlantic luxury liners so that the wealthy investor wouldn't go through stock market withdrawals during the week-long crossing secretary Mellon trumpeted once again about our unbroken and unbreakable prosperity mirth Marie Ann Rothbart but something wasn't quite right in the economy retail sales had slowed and industrial production was falling on Monday September 3rd 1929 the Dow hit a peak of 386 points a gain of 22 percent in just eight months everybody thought it was a new beginning very few could imagine it might be the beginning of the end you know it's time to sell when the shoeshine boy gives you stock tips Joseph Kennedy senior there were prophets of doom but their warnings were drowned out by the wail of the saxophone and the ring of the cash register Stuart Ross clearly the greater the credit expansion and the longer it lasts the longer the boom will last evidently the longer the boom goes on the more wasteful the errors committed and the longer and more severe will be the necessary depression readjustment marie-anne rothbard by Tuesday October 22nd the Dow had slid to 326 points the next day Yale University economist Irving Fisher would proclaim the nation is marching along a permanently high plateau of prosperity little did he know that on that very same day investors would get spooked and over the next few days the slide would turn into an avalanche that would become the greatest stock market crash in history the New York Times read price of stocks crashed in heavy liquidation total drop of paper lost four billion dollars two million six hundred share so shares sold in the final hour in record decline many accounts wiped out the next day would become known as Black Thursday where stock market crash stemmed by the bank's 12 million 12 million eight hundred ninety four thousand shared a swamps markets leaders confer find conditions sound the dow had fallen eleven percent that morning from 306 to 272 but at 1:30 p.m. richard whitney vice president of the new york stock exchange and floor trader for JPMorgan started buying fury evaporated and the markets made a u-turn the Dow rebounded and closed just a whisker under three hundred points but that was only a preview of the horrors yet to come black monday stock prices slumped fourteen billion dollars in nationwide stampede to unload 16 leading issues down two billion eight hundred ninety three million dollars telephone and telegraph and steel among heaviest losers premier issues hit hard unexpected torrent of liquidation again rocks markets on black monday panic selling saw the dow plummet to two hundred and sixty points but unlike black thursday no savior stepped in to stop the carnage 500 miles from Wall Street in the Atlantic the luxury liner the Berengaria was heading home from Michael Mann's brokerage office word spread throughout the ship the bottoms falling out of the market men came running out of there Turkish baths Intel's card games ended abruptly everyone tried to jam into the tiny office yelling sell at market they had left England wealthy men they docked in New York without a penny the crash of 1929 the American experience PBS but it wasn't over yet there is a reckoning that occurs every so often in world history it is a time when debts are paid when wars are fought when disease ravages and passes through a land when the corn does not grow like it used to or when the forces of nature itself delivers a brief catastrophic blow on black Tuesday the reckoning of several years of boom which was based in large part on credit came do our Richard Savile boy I wish I could write like him the doubt would fall to 2012 before recovering too close at 230 points the New York Times would read stocks collapse in a 16 million 410,000 shared a two hundred and forty issues lose 15 billion 894 million in a in month two hundred and forty stocks lost almost sixteen billion dollars in one month it doesn't sound like a lot today but let me put that into perspective for you according to Milton Friedman and Anna Jacobson Schwartz the US currency supply in 1929 was about 48 billion dollars the losses for just these 240 stocks amounted to one third of the currency supply of the United States most of the panic took place in the morning hours the ticker tape machine fell behind by an hour and a half leaving investors madly scrambling to sell their investments without even knowing her the current prices panic set in people gathered outside the exchanges and brokerage houses police were dispatched to ensure the peace rumors were flying by 12:30 p.m. the Chicago and Buffalo exchanges were closed down eleven well-known speculators had already killed themselves and the New York Stock Exchange closed the visitors gallery on the wild scenes below Dustin Woodward now I don't know if there were really any suicides but I do know that after a two-day rally the markets continued their slide in an act unprecedented in its history the Federal Reserve moved in during the week of the crash the final week of October and in that brief period added almost 300 million dollars to the reserves of the nation's bank instead of going through a healthy and rapid liquidation of unsound positions the economy was fated to be continually bolstered by governmental measures that could only prolong its diseased state as a result the weekly reporting member banks expanded their deposits during the fateful last week of October by 1.8 billion dollars a monetary expansion of nearly 10 percent in one week the Federal Reserve also promptly and sharply lowered its rediscount rate that would be like the Fed Funds rate today marie-anne Rothbard on November 13 1929 the Dow balanced at 198 98 points and the markets began to recover President Hoover would exclaim any lack of confidence in the economic future or the basic strength of business in the United States is foolish investors rushed in to scoop up the bargains and the markets continued to rise by April of the following year the Dow had risen 50 percent and was a breath away from 300 points then on April 17th with the Dow at 294 points the markets began to falter all of the currency that the Fed had manufactured had created a false bottom almost everyone believed that speculation could now be resumed in earnest a common feature of all of these earlier travel troubles was that having happened they were over the worst was reasonably recognized as such the singular feature of the great crash of 1929 was that the worst continued to worsen what one day looked like the end proved the next day to have only been the beginning nothing could have been more ingeniously designed to maximize the suffering and also to ensure that as few as possible escaped the common misfortune the man with the smart money who was safely out of the stock market when the first crash came naturally went back in to pick up bargains the bargains then suffered a ruinous fall John Kenneth Galbraith the Great Crash I've heard it said that more currency was sucked into the markets during this rally by investors scrambling to pick up a deal than was lost during the crash of 29 but the carnage would continue for two more years when the Dow would finally find a real bottom on July 8th 1932 at just 40.5 six points a loss of 89% it would take another quarter century for the Dow to exceed its 1929 peak the terrible depression that followed was the direct result of bungling by the Federal Reserve System we're still America's Great Depression was to become worldwide Milton Friedman now this is a chart of the crash so all of this was about this crash and then a little bit of it was about this recovery and then just that last paragraph was about the rest of this slide into nineteen third mid nineteen thirty two now these that when I wrote that it took a quarter century for the Dow to exceed its 1929 peak since then this was 2005 when all of this was written and it took months and months and months of research to be able to write these few chapters here and but since then I've made many many charts of an inflation-adjusted dojos Industrial Average as a proxy for the stock market and this is the latest one and it's inflation adjusted and it's indexed when you index it it's a logarithmic chart first of all so it shows you the percentage change over time not the change in points the change in points is pretty meaningless if something is at 100 and it goes to 200 a gain of 100 points that is a 100 percent gain if it's at 1,000 and it gains 100 points that is a 10 percent gain if it's at 10,000 and it gains 100 points that's all that 100 point they're all 100 point gains but that 100 point gain is only 1% so measuring instead of a linear graph which would show you the change in points linearly this is a logarithmic graph that shows you the percentage change and then we've done something called indexing here we're at at the peak in 1929 we indexed that to a value of 100 and then this is the percentage change up and down above 100 a thousand is 10 times 100 and 10 is one-tenth of 100 so it's a constant percentage change on this graph but what's interesting to me is that say you were 20 years old in 1929 and you had inherited a bunch of currency you know sale your somebody died you inherited a fortune and you plowed it all into the stock market at its peak in 1929 you had to wait for 63 years and now you're 83 years old an entire lifetime wasted waiting to get up to the same purchasing power and this is adjusted by the CPI which I like to call the CP lie because ever since the 1980s ever since the Reagan administration and this is not a Republican thing or a democratic thing both parties do this they're equally guilty here this is just a political thing in general but since the Reagan years we have been fiddling with the CPI and doing things like hedonic and adjustment hedonic adjustment is where they say well you're $50,000 car that you just bought has airbags and anti-lock brakes and all of these other improvements and the smog devices and and all of these safety improvements crash worthiness and so on so it actually costs you less than the five thousand dollar car that you bought back in 1970 this the the price of cars have been going down but that's that's hedonic adjustment and this is true this is what they say and then another thing is replacement they've been doing replacement somewhere in here during the Greenspan years Alan Greenspan they decided that roast beef or the cut of top sirloin beef that they had been tracking since the 1950s the change in price for a pound of tops or you know either choice or prime top sirloin beef I think was choice top sirloin beef that it had been tracking since the 1950s they decided well beef is getting too expensive so people are gonna are going to eat chicken instead they substituted it with chicken breast now there are reasons that they do this and then there's somebody that recreates the original CPI this john williams of shadow government statistics or shadow stats comm and you can go there and see the original CPI and how in high inflation of those original goods and services that they've been tracking for more than you know for 75 years now or something like that you can see the real price change of those things without hedonic adjustment and replacement but the truth actually lies somewhere in the middle but even if you did if if you picked the middle figure and tried to make the CP lie into the CP truth the Consumer Price truth you would probably see that this the crash of 2008 took us back to below where the stock market the value of the stock market was actually below what it was in 1929 now we're going to do further analysis of analysis of this in future videos I've got to end this video because it's getting really long but there's we're going into this period that I call in deflation every dollar created has to go somewhere and we have these huge deflationary forces that I have been predicting for years now everybody is predicting inflation and so everybody has jumped on board just recently within the past couple of months here everybody has changed their mind no not inflation deflation first that I and that's what I've been saying since I wrote this back in 2005 and I've stuck to my guns deflation before a big inflation or hyperinflation that we go through this roller coaster crash inflation reinflates the crash of 2000 and then a deflationary dip a deflation inflation followed by a deflationary dip followed by a reflation of the markets and stuff followed by a real deflation in a real crash and that's what we're in now however the response that the world central banks are going to do are they're going to make this the hardest thing for you to navigate possible every dollar has to go somewhere and there is an opportunity somewhere and it's your job to try and find it the best way you can find it is by paying attention to monetary history so what we've got to do is sort of paste the crash of 29 and the Great Depression to something like the Weimar hyperinflation you paste these you paste these two things together and you might get an inkling of what we're going to go through with this deflationary crash and then a hyperinflationary depression it's gonna be difficult to navigate navigate so we've all got to buckle up and try our best I want to thank you for watching this video we'll see you next time

Channel: GoldSilver (w/ Mike Maloney)

Views: 202,037

Rating: 4.9393468 out of 5

Keywords: gold, silver, gold and silver, mike maloney, buy silver, buy gold, silver bullion, invest, money, bullion, precious metal, precious metals, hidden secrets, Hidden secrets Of Money, 500oz, gold price, silver price, mining stock, rate hike, fed, how to buy gold, how to buy silver

Id: ZCjWdAEh-EU

Length: 35min 31sec (2131 seconds)

Published: Thu May 28 2020