Only Yesterday

20 April 2008

In June 1931, Frederick Lewis Allen, the respected editor of Harper's Magazine, completed his brief and impressionistic history of the United States from the end of the Great War (World War I) through to the stock market collapse of 1929, and on to the outset of the great depression. He titled the work "Only Yesterday."

This is a classic historical document, which has been archived by Project Gutenberg Australia. It is worthwhile and relatively easy reading.

Allow me to borrow from Mr. Allen's own words to describe his effort at contemporary history:

"This book is an attempt to tell, and in some measure to interpret, the story of what in the future may be considered a distinct era in American history: the eleven years between the end of the war with Germany (November 11, 1918) and the stock-market panic which culminated on November 13, 1929, hastening and dramatizing the destruction of what had been known as Coolidge (and Hoover) Prosperity.

"Obviously the writing of a history so soon after the event has involved breaking much new ground. Professor Preston William Slosson, in The Great Crusade and After, has carried his story almost to the end of this period, but the scheme of his book is quite different from that of mine; and although many other books have dealt with one aspect of the period or another, I have been somewhat surprised to find how many of the events of those years have never before been chronicled in full. For example, the story of the Harding scandals (in so far as it is now known) has never been written before except in fragments, and although the Big Bull Market has been analyzed and discussed a thousand times, it has never been fully presented in narrative form as the extraordinary economic and social phenomenon which it was.

"Further research will undoubtedly disclose errors and deficiencies in the book, and the passage of time will reveal the shortsightedness of many of my judgments and interpretations. A contemporary history is bound to be anything but definitive. Yet half the enjoyment of writing it has lain in the effort to reduce to some sort of logical and coherent order a mass of material untouched by any previous historian; and I have wondered whether some readers might not be interested and perhaps amused to find events and circumstances which they remember well--which seem to have happened only yesterday--woven into a pattern which at least masquerades as history. One advantage the book will have over most histories: hardly anyone old enough to read it can fail to remember the entire period with which it deals.

"As for my emphasis upon the changing state of the public mind and upon the sometimes trivial happenings with which it was preoccupied, this has been deliberate. It has seemed to me that one who writes at such close range, while recollection is still fresh, has a special opportunity to record the fads and fashions and follies of the time, the things which millions of people thought about and talked about and became excited about and which at once touched their daily lives: and that he may prudently leave to subsequent historians certain events and policies, particularly in the field of foreign affairs, the effect of which upon the life of the ordinary citizen was less immediate and may not be fully measurable for a long time. (I am indebted to Mr. Mark Sullivan for what he has done in the successive volumes of Our Own Times to develop this method of writing contemporary history.) Naturally I have attempted to bring together the innumerable threads of the story so as to reveal the fundamental trends in our national life and national thought during the nineteen-twenties."

An insightful episode in the work is Mr. Allen's recounting of the events of Tuesday, October 29, 1929 and their aftermath through November 13, 1929. I will quote the original work at length here:

"The big gong had hardly sounded in the great hall of the Exchange at ten o'clock Tuesday morning before the storm broke in full force. Huge blocks of stock were thrown upon the market for what they would bring. Five thousand shares, ten thousand shares appeared at a time on the laboring ticker at fearful recessions in price. Not only were innumerable small traders being sold out, but big ones, too, protagonists of the new economic era who a few weeks before had counted themselves millionaires. Again and again the specialist in a stock would find himself surrounded by brokers fighting to sell--and nobody at all even thinking of buying. To give one single example: during the bull market the common stock of the White Sewing Machine Company had gone as high as 48; on Monday, October 28th, it had closed at 11 ¹/₈. On that black Tuesday, somebody--a clever messenger boy for the Exchange, it was rumored--had the bright idea of putting in an order to buy at 1--and in the temporarily complete absence of other bids he actually got his stock for a dollar a share! The scene on the floor was chaotic. Despite the jamming of the communication system, orders to buy and sell--mostly to sell--came in faster than human beings could possibly handle them; it was on that day that an exhausted broker, at the close of the session, found a large waste-basket which he had stuffed with orders to be executed and had carefully set aside for safekeeping--and then had completely forgotten. Within half an hour of the opening the volume of trading had passed 3,000,000 shares, by twelve o'clock it had passed 8,000,000, by half-past one it had passed twelve 12,000,000, and when the closing gong brought the day's madness to an end the gigantic record of 16,410,030 shares had been set. Toward the close there was a rally, but by that time the average prices of fifty leading stocks, as compiled by the New York Times, had fallen nearly forty points. Meanwhile there was a near-panic in other markets--the foreign stock exchanges, the lesser American exchanges, the grain market.

"So complete was the demoralization of the stock market and so exhausted were the brokers and their staffs and the Stock Exchange employees, that at noon that day, when the panic was at its worst, the Governing Committee met quietly to decide whether or not to close the Exchange. To quote from an address made some months later by Richard Whitney: 'In order not to give occasion for alarming rumors, this meeting was not held in the Governing Committee Room, but in the office of the president of the Stock Clearing Corporation directly beneath the Stock Exchange floor. . . . The forty governors came to the meeting in groups of two and three as unobtrusively as possible. The office they met in was never designed for large meetings of this sort, with the result that most of the governors were compelled to stand, or to sit on tables. As the meeting progressed, panic was raging overhead on the floor. . . . The feeling of those present was revealed by their habit of continually lighting cigarettes, taking a puff or two, putting them out and lighting new ones--a practice which soon made the narrow room blue with smoke. . . .' Two of the Morgan partners were invited to the meeting and, attempting to slip into the building unnoticed so as not to start a new flock of rumors, were refused admittance by one of the guards and had to remain outside until rescued by a member of the Governing Committee. After some deliberation, the governors finally decided not to close the Exchange.

"It was a critical day for the banks, that Tuesday the 29th. Many of the corporations which had so cheerfully loaned money to brokers through the banks in order to obtain interest at 8 or 9 per cent were now clamoring to have these loans called--and the banks were faced with a choice between taking over the loans themselves and running the risk of precipitating further ruin. It was no laughing matter to assume the responsibility of millions of dollars' worth of loans secured by collateral which by the end of the day might prove to have dropped to a fraction of its former value. That the call money rate never rose above 6 per cent that day, that a money panic was not added to the stock panic, and that several Wall Street institutions did not go down into immediate bankruptcy, was due largely to the nerve shown by a few bankers in stepping into the breach. The story is told of one banker who went grimly on authorizing the taking over of loan after loan until one of his subordinate officers came in with a white face and told him that the bank was insolvent. 'I dare say,' said the banker, and went ahead unmoved. He knew that if he did not, more than one concern would face insolvency.

"The next day--Wednesday, October 30th--the outlook suddenly and providentially brightened. The directors of the Steel Corporation had declared an extra dividend; the directors of the American Can Company had not only declared an extra dividend, but had raised the regular dividend. There was another flood of reassuring statements--though by this time a cheerful statement from a financier fell upon somewhat skeptical ears. Julius Klein, Mr. Hoover's Assistant Secretary of Commerce, composed a rhapsody on continued prosperity. John J. Raskob declared that stocks were at bargain prices and that he and his friends were buying. John D. Rockefeller poured Standard Oil upon the waters: 'Believing that fundamental conditions of the country are sound and that there is nothing in the business situation to warrant the destruction of values that has taken place on the exchanges during the past week, my son and I have for some days been purchasing sound common stocks.' Better still, prices rose--steadily and buoyantly. Now at last the time had come when the strain on the Exchange could be relieved without causing undue alarm. At 1:40 o'clock Vice-President Whitney announced from the rostrum that the Exchange would not open until noon the following day and would remain closed all day Friday and Saturday--and to his immense relief the announcement was greeted, not with renewed panic, but with a cheer.

"Throughout Thursday's short session the recovery continued. Prices gyrated wildly--for who could arrive at a reasonable idea of what a given stock was worth, now that all settled standards of value had been upset?--but the worst of the storm seemed to have blown over. The financial community breathed more easily; now they could have a chance to set their houses in order. "It was true that the worst of the panic was past. But not the worst prices. There was too much forced liquidation still to come as brokers' accounts were gradually straightened out, as banks called for more collateral, and terror was renewed. The next week, in a series of short sessions, the tide of prices receded once more--until at last on November 13th the bottom prices for the year 1929 were reached. Beside the figures hung up in the sunny days of September they made a tragic showing:

Company	High price Sept. 3, 1929	Low price Nov. 13, 1929
American Can	181 7/8	86
American Telephone & Telegraph	304	197 1/4
Anaconda Copper	131 1/2	70
Electric Bond & Share	186 3/4	50 1/4
General Electric	396 l/4	168 1/8
General Motors	72 3/4	36
Montgomery Ward	137 7/8	49 1/4
New York Central	256 3/8	160
Radio	101	28
Union Carbide & Carbon	137 7/8	59
United States Steel	261 3/4	150
Westinghouse E. & M.	289 7/8	102 5/8
Woolworth	100 3/8	52 1/4

"The New York Times averages for fifty leading stocks had been almost cut in half, falling from a high of 311.90 in September to a low of 164.43 on November 13th; and the Times averages for twenty-five leading industrials had fared still worse, diving from 469.49 to 220.95.

"The Big Bull Market was dead. Billions of dollars' worth of profits--and paper profits--had disappeared. The grocer, the window-cleaner, and the seamstress had lost their capital. In every town there were families which had suddenly dropped from showy affluence into debt. Investors who had dreamed of retiring to live on their fortunes now found themselves back once more at the very beginning of the long road to riches. Day by day the newspapers printed the grim reports of suicides.

"Coolidge-Hoover Prosperity was not yet dead, but it was dying. Under the impact of the shock of panic, a multitude of ills which hitherto had passed unnoticed or had been offset by stock-market optimism began to beset the body economic, as poisons seep through the human system when a vital organ has ceased to function normally. Although the liquidation of nearly three billion dollars of brokers' loans contracted credit, and the Reserve Banks lowered the rediscount rate, and the way in which the larger banks and corporations of the country had survived the emergency without a single failure of large proportions offered real encouragement, nevertheless the poisons were there: overproduction of capital; overambitious expansion of business concerns; overproduction of commodities under the stimulus of installment buying and buying with stock-market profits; the maintenance of an artificial price level for many commodities; the depressed condition of European trade. No matter how many soothsayers of high finance proclaimed that all was well, no matter how earnestly the President set to work to repair the damage with soft words and White House conferences, a major depression was inevitably under way.

"Nor was that all. Prosperity is more than an economic condition; it is a state of mind. The Big Bull Market had been more than the climax of a business cycle; it had been the climax of a cycle in American mass thinking and mass emotion. There was hardly a man or woman in the country whose attitude toward life had not been affected by it in some degree and was not now affected by the sudden and brutal shattering of hope. With the Big Bull Market gone and prosperity going, Americans were soon to find themselves living in an altered world which called for new adjustments, new ideas, new habits of thought, and a new order of values. The psychological climate was changing; the ever-shifting currents of American life were turning into new channels.

"The Post-war Decade had come to its close. An era had ended."

There is much more in Mr. Allen's original text. Don't miss his chapter on the styles, fashions and conceits of the 1920s. You don't need my insights to instruct you in the parallels to our era. Further, the chapter on the Florida real estate bubble - yes, the 1920s Florida real estate bubble - is not to be overlooked!

I attribute the classic aphorism, that those who cannot remember the past are condemned to repeat it, to Santayana. This lesson is applicable to broad swaths of Mr. Allen's text.

You may read the original work - online - here.