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The Gathering Storm

“The year 1929 reached almost the end of its third quarter under the promise and appearance of increased prosperity, particularly in the United States. Extraordinary optimism sustained an orgy of speculation. Books were written to prove that economic crisis was a phase which expanding business organization and science had at last mastered. “We are apparently finished and done with economic cycles as we have known them,” said the President of the New York Stock Exchange in September. But in October a sudden and violent tempest swept over Wall Street. The intervention of the most powerful agencies failed to stem the tide of panic sales. A group of leading banks constituted a milliard-dollar pool to maintain and stabilize the market. All was vain.

“The whole wealth so swiftly gathered in the paper values of previous years vanished. The prosperity of millions of American homes had grown upon a gigantic structure of inflated credit, now suddenly proved phantom. Apart from the nationwide speculation in shares which even the most famous banks had encouraged by easy loans, a vast system of purchase by installment of houses, furniture, cars, and numberless kinds of household conveniences and indulgences had gown up. All now fell together. The mighty production plants were thrown into confusion and paralysis. But yesterday there had been the urgent question of parking the motor-cars in which thousands of artisans and craftsmen were beginning to travel to their daily work. To-day the grievous pangs of falling wages and rising unemployment afflicted the whole community, engaged till this moment in the most active creation of all kinds of desirable articles for the enjoyment of millions. The American banking system was far less concentrated and solidly based than the British. Twenty thousand local banks suspended payment. The means of exchange of goods and services between man and man was smitten to the ground, and the crash on Wall Street reverberated in modest and rich households alike.

“It should not however be supposed that the fair vision of far greater wealth and comfort ever more widely shared which had entranced the people of the United States had nothing behind it but delusion and market frenzy. Never before had such immense quantities of goods of all kinds been produced, shared, and exchanged in any society. There is in fact no limit to the benefits which human beings may bestow upon one another by the highest exertion of their diligence and skill. This splendid manifestation had been shattered and cast down by vain imaginative processes and greed of gain which far outstripped the great achievements itself. In the wake of the collapse of the stock market came during the years 1929 and 1932 an unrelenting fall in prices and consequent cuts in production causing widespread unemployment. ” Winston Churchill, The Gathering Storm, pp. 31-32, Houghton Mifflin, 1945.

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Submitted by Ed Firmage, Samuel D. Thurman Professor of Law, emeritus, University of Utah College of Law.

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