By Harold Bierman Jr.
ISBN-10: 031330629X
ISBN-13: 9780313306297
Attempting to bare the genuine factors of the 1929 inventory marketplace crash, Bierman refutes the preferred trust that wild hypothesis had excessively pushed up inventory industry costs and led to the crash. even if he recognizes a few costs of shares similar to utilities and banks have been overprices, average causes exist for the extent and elevate of all different securities inventory costs. certainly, if shares have been overpriced in 1929, then they extra much more overpriced within the present period of awesome progress in inventory costs and funding in securities. The explanations of the 1929 crash, Bierman argues, lie in an negative choice by way of the Massachusetts division of Public Utilities coupled with the preferred perform often called debt leverage within the Nineteen Twenties company and funding arena.
This e-book extends Bierman's argument in an previous booklet, The nice Myths of 1929 and the teachings to Be Learned (Greenwood, 1991), during which he mentioned and refuted seven myths approximately 1929 yet couldn't clarify the crash. He now believes he has an affordable rationalization. He additionally examines the activities of Charles E. Mitchell and Sam Insull and their next unjust felony prosecution after the crash of the 1929 inventory market.
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Additional resources for The Causes of the 1929 Stock Market Crash: A Speculative Orgy or a New Era?
Sample text
On September 21, dealings in Hatry’s stocks were suspended. 70 we obtain an external unsecured capital exposure of $64,600,000 which is very close to the New York Times estimate of $67,500,000. The biggest portion of the exposure was debt ($59 million), and this debt was mostly owed to banks and other financial institutions, not to individuals. The New York Times concluded (December 23, p. ’’ This reinforces the conclusion that the Hatry affair was not a major factor in the stock price collapses of October 24 and 29.
2). Senator Glass ‘‘proved’’ the speculative aspect: ‘‘It was selling at 108 in January. It was selling in the market yesterday at 69. , p. 80). National City Bank seemed to recommend a recession to solve the speculation problem: ‘‘A temporary slackening of the business pace, which would have as its effect a sobering influence on speculative sentiment, should be the very thing to keep business on a sound and enduring basis’’ (National City Bank of New York Newsletter, October 1929, p. 197). ’’ Albert Henry Wiggin responded, ‘‘Investments that turn out wrong are speculations’’ (Committee on Banking and Currency, Stock Exchange Practices, 1933, pp.
The fact that stock price volatility did not increase until after the crash is a surprise, but does not prove there was a bubble. Actual volatility is merely eliminated as an explanation of the premium (expected volatility is still a contender). The increase in margin requirements is consistent with excessive speculation and with stock prices being too high, but other explanations are also possible. The increase in the premium on the call loans is also consistent with the explanation offered by Liu, Santoni, and Stone (1995) that the Fed was exerting pressure.
The Causes of the 1929 Stock Market Crash: A Speculative Orgy or a New Era? by Harold Bierman Jr.
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