A lesson learned from 1929, by Andrew Sorkin

 A stock market that seems too good to be true, eventually proves to be so.

    I have long known that the American stock market and its fortunes often has only the loosest connection to the lives of ordinary people, but I don't think I have ever felt as disconnected from it as I have over the past few years. According to the stock market, the American economy is invincible and the future has never been brighter--its overall value has gone up somewhere in the area of 400% over the past 15 years or so. That assessment might come as news to a vast majority of Americans, most of whom are decidedly pessimistic about the future of the economy; NO ONE I talk to amongst my friend base feels like they're doing spectacularly well and they have no concerns about anything, and most of the people in  my circle would definitely not count as "poor" in the technical sense of the word. That made reading Andrew Sorkin's new study of 1929 and the start of the Great Depression to be quite refreshing and eye-opening, as the stock market picture he paints of the 1920's feels frighteningly familiar; an unstoppable force until the bottom suddenly fell out, and the main costs of its failure were borne by millions of ordinary Americans rather than the industrial titans who then ran Wall Street.

    The famous "Roaring 20's" decade as remembered as a time of unprecedented American prosperity, and by many standards it was; American cities boomed in this decade as people flocked into them from around the country, and a vibrant new urban culture took over the country. The financial leaders of Wall Street welcomed this new era by encouraging ordinary Americans--even those with very little disposable income--to play around in the stock market, as it was sold that no one could fail and untold riches awaited anyone who bought stocks. However, the booming times for the wealthy financial elites masked a more small-town rural America that was starting to unravel; some of this was an inevitable result of America's urbanization, but the collapse of American agriculture put a serious strain on the economy, and many ordinary Americans were starting to invest in gambles like the stock market out of pure desperation. One of the stories Sorkin tells in his book would sound all-too familiar to audiences today; financial titans of the era assured ordinary Americans not to worry about their daily struggles, because the fantastical new technologies were going to fix everything! After all, cars, radios, and refrigerators were miracles that would create infinite economic wealth for everyone, and all people had to do to keep the American economy chugging along was to continue to invest in these new technologies.

    Of course, what was actually happening was Wall Street was increasingly propped up by a dangerous bubble; Sorkin notes that more than a few economists of the era sensed a disaster was imminent, but they were dismissed as hysterical doomsdayers who could not understand the era of American prosperity was never going to end. As a result, the inevitable disintegration of the stock market in 1929 (which Sorkin lays out in grim and exciting detail) triggered a series of panics in the larger American economy, which over the course of a few years sent the country into its grimmest period of economic struggle in its history. Sorkin ends the book noting that the only thing in the 1930's that restored the country's confidence was new government regulation on Wall Street such as the Glass-Steagall Act--regulations that largely no longer exist, due to America over the past five decades once again assuming that the path to unlimited prosperity was in allowing Wall Street to run wild. In another familiar tale, Sorkin notes that the government did make an effort to prosecute the bankers responsible for the wild speculation of the 1920's, but most of those trials came to nothing and many of the bankers eventually reacquired their wealth and then some.

    Sorkin doesn't spell out all of the similarities to the modern world of today--where we've promised that with all our economic struggles, the wonderful new technology of AI is going to fix everything!--but he doesn't have to. Depending on how the global economy shakes out over the next decade, 1929 might very well be read as a cautionary tale of our era, where in so many ways we feel like we have a modern economy that is built on sand--but hey, Wall Street assures us that if we just keep betting on them and their new technologies, everything will work out all right in the end. Count me a skeptic...