When does Black Friday end?

Generational talk

On October 24, 1929, New York's Wall Street stock prices began to slide.
Around noon, nervousness turned into panic, the Dow Jones sagged, trading collapsed several times.
The crash eventually turns into an economic crisis because everyone tries to save what can still be saved.

The Wall Street crash plunged the world into one of the worst and most momentous crises in history.

After the first bloody years of chaos in the Weimar Republic, after the war against the Ruhr and hyperinflation in 1923, the “Roaring Twenties ”.

It's boom years.
Cars, radios, refrigerators and vacuum cleaners are conquering the world and households; they are the stars of the long economic boom until 1929.

Even German corporations like IG colors, Siemens and AEG are there. Sales and profits of the high-tech companies of that time are skyrocketing, Year after year there is only one direction for stock prices on the stock exchanges. Upwards.

Everybody ought to be rich

Everyone should be rich, is the attitude towards life Roaring Twenties.
It almost looks as if the economic paradise on earth is finally attainable.

In the USA, the real winner of World War I and the heartland of this boom, is economic growth averaged 3.3 percent year after year.
There has been no inflation for years and the state budget is chasing from one record surplus to the next.

The stock market is also booming and many Americans are discovering speculation as a new pastime and lucrative sideline:

“… A fortune was made seemingly effortless in the stock market. In 'Early success: About money and love, youth and career, writing and drinking’Reports F. Scott Fitzgerald in amazement that his hairdresser retired after making half a million dollars with a single investment - almost four hundred times the average annual salary at the time. For many, speculating on the stock market has almost become an addiction. "

Bill Bryson, Summer 1927*

The willingness to take risks grows with optimism.
Shares in prosperous companies will be "on credit" Bought: For a deposit of just 10 dollars you can buy shares worth 100 dollars from brokers, The rest of the purchase amount can be conveniently paid later with the profits from the shares, which fortunately appear quickly and reliably.

Anyone who doesn't participate is actually an idiot.

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The Germans' attitude to life in the late 1920s, the turmoil of the Weimar Republic between left and right and a gripping crime thriller based on Volker Kutscher's Gereon Rath crime series * perfectly staged. A series worth seeing for everyone who is enthusiastic about the twenties - and for those who want to understand contemporary history not only through facts and figures, but also want to understand the people who lived back then.

Tom Tykwer's Babylon Berlin Season 1–3 *, 2020, FSK 12


Buy now, pay later

The longer the boom continues, the less it can be imagined that this happy new era could ever end.

Buy now, pay later, is not only becoming fashionable for stocks, but is also gaining acceptance as a concept for household use: You no longer save on your new radio, car or one of the many new and modern household appliances, but consume on credit.
Why wait when you can have it right away?

That works well as long as you keep your job and things are looking up economically.

It doesn't work when this cycle gets out of step.

The dance on the volcano - The Roaring Twenties are nothing more than the lively respite between two catastrophes.
Because there is one ticking time bombthat hardly anyone suspects anything: gold.

Because the USA has a problem: They are doing too well.
Too good compared to the Europeans, who have still not fully recovered from the aftermath of the First World War. Because due to the unchecked economic growth and the high income, gold is flowing unilaterally to America, the strongest economic power in the world.

This is thatinternationally applicableGold standard thanks, which stipulates that every state must have the equivalent of the amount of money in circulation in the form of gold in the vaults of their central banks.
Ten gold marks must - at least in theory - be exchangeable for gold worth ten marks; ten dollars for ten dollars worth of gold.

This is to be remedied. As early as 1927, four illustrious gentlemen from high finance met in complete secrecyto get the so-called “gold trap” under control.
(The then US President Calvin Coolidge - mainly known from the "Coolidge effect”When cheating - thinks a lot of a“ steady ”hand in politics, that is, of doing nothing. Accordingly, he is also busy elsewhere during the meeting.)

“… While President Coolidge was enjoying himself as a cowboy in the Black Hills, four international bankers on the other side of the country and beyond his current range of interests quietly and secretly laid the foundation for the collapse of the stock market and the ensuing global economic crisis. Of course, the latter was neither their intention nor their expectation.

The men in question were: Benjamin Strong, Governor of the Federal Reserve Bank of New York; Sir Montagu Norman, Governor of the Bank of England; Hjalmar Schacht, President of the German Reichsbank, and Charles Rist, Deputy Governor of the Banque de France. Judging by their enormous importance, the four men were a rather peculiar quartet: one of them was dying, one was completely cranky, one was a future Nazi, and one was relatively normal, but more or less under the present circumstances meaningless."

Bill Bryson, Summer 1927*


The gold trap

So they meet in the summer of 1927 Benjamin Strong, Sir Montagu Norman, Hjalmar chess and Charles Rist for joint consultations.
What nobody suspects: the bankers quartet accidentally works on the breathtaking crash of the world economy two years later.

Americans are suffocating in gold because of their economic strength, on the other hand, it will be tight for the Europeans. If you don't do anything about it, sooner or later this imbalance will stifle the entire world economy, so the fear.

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The USA on the way to becoming a superpower.
A funny and informative book about floods and politics, Charles Lindbergh, the cinema, the mafia, immigrants, President Coolidge and the cornerstone of the Great Depression in 1929. A thick book (640 pages), but one that is absolutely worthwhile and fun!

Bill Bryson: Summer 1927 *, Wilhelm Goldmann Verlag, Munich, paperback April 2016


In principle, the gold standard is not a bad ideabecause it makes inflation almost impossible.
It ensures stability in prices and exchange rates and is psychologically as a “hard currency” a guarantee for a functioning economy, because states cannot simply print money at will, as was done during the World War and especially in the years that followed, for example in Germany (and the Germans thus triggered hyperinflation in 1923).

The problem: the gold standard no longer fits into the new era.

“… In theory it may sound great to have all the gold reserves, but in practice that would mean that other countries would no longer be able to buy local products because they would no longer have the gold to pay for these products themselves. In the interests of trade and a healthy world economy, gold should circulate. "

Bill Bryson, Summer 1927*


Low interest rates with explosive effects

The four bankers set to work and parted ways on July 7, 1927 Highly satisfied and in good faith to have helped the global economy on its way before the “gold trap” caused damage and global trade cooled off.

You have decided to lower the discount rate of the American Federal Reserve Bank from four to three and a half percent and hope this will encourage more wealthy Americans to invest their capital in Europe.
It is believed that the American economy can handle a small rate cut can and hopes to be able to lure more American investors to Europe because they earn more money there through higher interest rates.

As a result, so the expectation of the four gentlemen, more gold would flow again towards Europe, the gold level on this side of the Atlantic could even out, and world trade would be boosted.

It is a capital miscalculation.

Because instead of going to Europe, the cheap money flows directly into domestic stocks.
The even cheaper interest rate for loans is grist to the mill of speculators in the USA and really heats up their buying mood.
The stock boom is experiencing a new record high - and leads to a huge speculative bubble.
Buying on credit is right now anyway en vogue.

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Lowering interest rates is the spark that implosed the shaky banking and economic system of the 1920s.

The already absurdly high share prices continue to skyrocket after the discount rate has been lowered. And since everyone buys on credit, investors in the US alone are a short time later with their brokers with a staggering four and a half billion dollars instead of one billion in the chalk.

Anyone can get rich, seems to be within reach for many.
In fact, the exact opposite of the original intention will occur.

From the stock market crash to the global economic crisis

Because the economy just can't keep up.
The first skid marks have existed since 1928, and company bankruptcies are increasingbecause markets are saturated and prices are pushed down by huge overproduction.

The stock exchanges had not initially bothered.
But the global upward trend in the stock markets has been around for a long time nothing more with productivity or profits to do, but only with the willingness of investors to invest more and more money - on credit.
There are billions of dollars in bad loans.

October 24, 1929, that “Black Thursday” happens what was inevitable: The gigantic speculative bubble bursts and the share prices on Wall Street plunge into the abyss.

When the news of the US stock market crash reached the European stock exchanges on Friday, October 25th, many initially believe in a correction phase in the American market.

Prices in Europe are even picking up slightly, because it is expected that after the cool down ’on the American stock exchanges, more investors would focus on European stocks.
But the downward trend in the USA continues, and on Tuesday of the following week the European market finally collapses.

Shares are being sold at bargain prices, banks are panicking and demand credit back immediately, a measure that even healthy companies bankrupt overnight.

Investors who bought stocks with credit, confident of an eternal boom, are suddenly deeply in debt.
But just because of the price falls, the stock market crash should not have turned into the global economic crisis that followed.

Once again, it is the “gold standard” that is finally dragging the tumbling economies into misery.

From the onslaught of savers into the abyss

The rumor that a bank had got into trouble due to share losses and insolvent debtors was often enough to provoke a mass onslaught of worried savers.
People are queuing and pushing to the countersto reclaim their deposits.

Many smaller, but also larger, banks do not survive such an onslaught and go bankrupt, many small savers lose the credit they believed to be safe, which they had saved with the bank of their trust for bad times or for expensive purchases.

So-called "Bank holidays“Are introduced to at least regulate the onslaught of the masses a little. In their distress, the banks try to stay liquid somehow.
Bit by bit banks give up one of their core tasks - lending - and only hoard money. But without credit, companies cannot invest and customers cannot buy.

DISPLAY

The dramatic interwar period in Europe from 1918 to 1939 perfectly staged with game scenes, previously unpublished original film material and based on diaries, letters and photos. No off-screen scientists - but people, their dreams and fates summarized in new and old pictures that are well worth seeing and that bring us closer to their time. Worth seeing!

War of Dreams 1918–1939 [3 DVDs] *, 2018, FSK 12


Hoarding money sets in motion a fatal downward spiral, because when money is withdrawn from circulation and becomes scarce, prices fall because buyers have fewer funds available.

Deflation - Goods and services have to become cheaper and cheaper in order to find buyers at all - the economy stalls and companies are ruined.
After the crash, the Crisis.

Hundreds of thousands - some of them profitable - companies collapse, Millions of people are losing their jobs.

In Germany the number of unemployed rises from 1.4 million (end of September 1929) to 5 million (end of 1930). In February 1932 6 million people were unemployed, the number of unreported cases is huge.

In addition to the economic depression, there is people's hopelessness.
Because the worst is: there is no end in sight. Worldwide.


Copyright: Agency for Bildbiographien, www .bild bio gra phien .de, 2013 (revised: 2019)

Read in the next post: The last free elections on November 6, 1932 sealed the fate of the Germans. But it is not the vote that rolls out the red carpet for Adolf Hitler, but the catastrophic actions of more or less democratic politicians who, with a mixture of ignorance, stupidity and selfishness, hit the first democracy on German soil against the wall.
1932 - The end of the republic. Brüning, the hunger chancellor

Book, listening and film recommendations:

The links marked with * are so-called affilate links that help to finance the blog intergenerational talk. If you like one of the recommendations given and you order the book (or another product) via this link, the blog will receive a small commission for it without incurring additional costs. For your click: Thank you very much in advance!

Berlin 1929: The first book in the Gereon Rath crime series by Volker Kutscher. The SPD police president Zörgiebel lets bobbies shoot at demonstrating communist workers on May 1st, while Soviet Stalinists, Trotskyists and anarchists are fighting bloodily in the city. An exciting thriller against the background of a chaotic time - template for Tom Tykwer's great TV series Tom Tykwer's Babylon Berlin Season 1–3 *
Very worth reading or also very worth listening to as a podcast!
Volker Kutscher, Der nasse Fisch *, Piper Taschenbuch; 2nd edition, 2020


The USA on the way to becoming a world power.
Bill Bryson as always exciting and informative about floods and politics, Charles Lindbergh, the cinema, the mafia, immigrants, President Coolidge and the cornerstone of the Great Depression in 1929. A thick book (640 pages), but also a very readable book.

Bill Bryson: Summer 1927 *, Wilhelm Goldmann Verlag, Munich, paperback April 2016


The beginning of the end.
A very readable historical thriller about the actors and the last catastrophic 10 weeks of the Weimar Republic. Written factually and excitingly - a history thriller and reading experience, if only it weren't so true ...

Rüdiger Barth, Hauke ​​Friedrichs, The Gravedigger: The Last Winter of the Weimar Republic *, S. FISCHER Verlag, 2018


The interwar period from 1918 to 1939.
Not explained by scientists and historians, but told by contemporary witnesses using diaries, letters and photographs. Game scenes alternate with old film recordings - a very interesting and authentic mixture of stories and history that brings us close to this time with its dreams and abysses.
War of Dreams 1918–1939 [3 DVDs] *, 2018, FSK 12


The Germans' attitude to life in the late 1920s, the turmoil of the Weimar Republic between left and right and a gripping crime thriller based on Volker Kutscher's Gereon Rath crime series * perfectly staged. A series worth seeing for everyone who is enthusiastic about the twenties - and for those who want to understand contemporary history not only through facts and figures, but also want to understand the people who lived back then.
Tom Tykwer's Babylon Berlin Season 1–3 *, 2020, FSK 12


The history of the Germans explained well, clearly and understandably. In addition to important data and facts, there is a lot of background information and anecdotes that make reading a pleasure and make it easier to understand historical developments. Great for looking up and reading sideways. Very recommendable!

Christian v. Ditfurth: German history for dummies *, Wiley-VCH Verlag GmbH & Co. KGaA, Weinheim, 2019


The tremendous turbulence in European history from 1914 to 1949
masterful, Well-founded and compelling explained and narrated by the British historian Ian Kershaw.
Very worth reading!

Ian Kershaw, Fall from Hell: Europe 1914 to 1949 *
Pantheon Verlag, 2017


Further contributions:

Economy in the "Third Reich": Economically, the Third Reich was never on a safe footing. The economy under National Socialism was built on deception and expansion - war - from the start. Over highways, labor battles, MeFo-Bills of exchange, lies and deceptions - without which Hitler's path to war would never have worked.
Autobahn and Mefo change: Adolf Hitlerm the German economy and the road to World War II

Pandemic: A novel flu virus is spreading at a U.S. military camp in Kansas, but since the infected soldiers have nothing more than one severe cold with a high fever, no precautionary measures are taken. And so the new virus can travel undisturbed in troop transports to the theaters of war in Europe and begin its death march.
The great death: The Spanish flu 1918/19

Hyperinflation 1923: Chancellor Wilhelm Cuno and his "government of the economy" try to drive the French out of the Ruhr area and have money printed for it. A lot of money. With catastrophic consequences for the battered Weimar Republic. It just seems like a matter of time before it collapses. Whether to the right or left collapse is not yet entirely clear
From the Ruhr struggle to the German October

Seizure of power in 1933: The last free elections on November 6, 1932 sealed the fate of the Germans. But it is not the vote that rolls out the red carpet for Adolf Hitler, but the catastrophic actions of more or less democratic politicians who, with a mixture of ignorance, stupidity and selfishness, hit the first democracy on German soil against the wall. About the pioneers of the “seizure of power” in 1933.
1932 - The end of the republic. Brüning, the hunger chancellor

Between Hitler and Stalin: In the summer of 1936 the world meets twice: at the Olympics in Berlin and on the battlefields of the civil war in Spain. A year that begins full of promise and with the hope of finally stopping the Hitler madness in unity, ends in a frenzy of blood and terror.
1936: the year of failure

The Munich Agreement: Were all Sudeten Germans ardent admirers of Hitler and their leader Konrad Henlein a nasty National Socialist arsonist? A background report from the crisis region of the time:
Biedermann or arsonist: Konrad Henlein

The Generational talk Over a century of dictatorships, world wars, millions of war dead, injured, refugees and displaced people that is still in our bones today.
The 20th century

Further links:

In the winter of 1929/30 Germany got caught up in the world economic crisis that developed from the collapse of the New York Stock Exchange in October 1929.
The flow of capital to Germany dried up when the foreign loans so urgently needed for the German economy were withdrawn. The effects of the global economic crisis on Germany, summarized at LeMO - Living Museum Online
https: // www .dhm .de / l e m o / h t m l / w e i m a r / i n d u s t r i e / w i r t s c h a f t s k r i se /

Photo credits:


In the fight for your savings! Mass rush of savers in front of the municipal savings bank in Berlin. From Bundesarchiv, Bild 102–12023 / Georg Pahl / CC-BY-SA 3.0

Berlin, tea dance in the “Esplanade” ADN-Zentralbild / Archiv Berlin 1926 In the garden of the Berlin hotel “Esplanada” a jazz band plays for 5 o'clock tea. From Bundesarchiv, Bild 183-K0623-0502–001 / CC-BY-SA 3.0

Agency for pictorial biographies

A crowd gathers on Wall Street after the stock market crash of 1929. Public domain, https: // com mons .wiki me dia .org / w / i n d e x . P h p? C u r i d = 3 7 4 410

The need of our time! Unemployed dock workers on call at the road employment agency at Baumall, Hamburg, 1931. From Federal Archives, picture 102–11008 / CC-BY-SA 3.0


4520cookie-check “Black Friday”: From the stock market crash to the global economic crisisyes
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