Wednesday, September 23, 2009

Select quotes from the Great Depression

... and why I don't believe a word Bernanke says.

According to Bernanke,
 "...from a technical perspective the recession is very likely over at this point"
 "... there is a reasonable prospect that the current recession will end in 2009 and that 2010 will be a year of recovery"

I've seen these quotes time and time again... from during the Great Depression. They were just as wrong then.

I planned on making this in flash and laying the quotes over the corresponding time on the chart, but due to limited flash abilities, I didn't. Does anybody want to make it for me?

Before looking at the quotes below, take a look at the stock market performance during the time frame in which the quotes were made.

With a chart like this, you'd expect the economists too be pessimistic. That's not the case.

These quotes are all over the Internet. I've found the original source for some, and for others, I've just posted the source where I found them. Collections of these types of quotes already exist, but I've chosen the ones that stood out the most to me. I've included the date and occupation of the person where I could.

Economist John Maynard Keynes in 1927
“We will not have any more crashes in our time.”

President Herbert Hoover on August 11, 1928
“Unemployment in the sense of distress is widely disappearing…We in America today are nearer to the final triumph over poverty than ever before in the history of any land. The poor-house is vanishing from among us. We have not reached the goal, but given a chance to go forward with the policies of the last eight years, and we shall soon with the help of God be in sight of the day when poverty will be banished from this nation. There is no guarantee against poverty equal to a job for every man. That is the primary purpose of the economic policies we advocate.”

President Calvin Coolidge on December 4, 1928
“No Congress of the United States ever assembled, on surveying the state of the Union, has met with a more pleasing prospect than that which appears at the present time. In the domestic field there is tranquility and contentment…and the highest record of years of prosperity. In the foreign field there is peace, the goodwill which comes from mutual understanding.”

Financier, Bernard Baruch, June 1929
“The economic condition of the world seems on the verge of a great forward movement.”

Economist Irving Fisher on September 5, 1929
“There may be a recession in stock prices, but not anything in the nature of a crash. Dividend returns on stocks are moving higher. This is not due to receding prices for stocks, and will not be hastened by any anticipated crash, the possibility of which I fail to see. A few years ago people were as much afraid of common stocks as they were of a red-hot poker. In the popular mind there was a tremendous risk in common stocks. Why? Mainly because the average investor could afford to invest in only one common stock. Today he obtains wide and well managed diversification of stock holding by purchasing shares in good investment trusts.”

Economist Irving Fisher on October 17, 1929
“Stock prices have reached what looks like a permanently high plateau. I do not feel there will be soon if ever a 50 or 60 point break from present levels, such as (bears) have predicted. I expect to see the stock market a good deal higher within a few months.”

Banker Arthur Reynolds, October 24, 1929
“This crash is not going to have much effect on business.”

Financier, J. L. Julian, October 26, 1929
“The worst is over. The selling yesterday was panicky brought on by hysteria. General conditions are good. Our inquiries assure us that throughout the country business is sound.”

Analyst R. W. McNeel, October 30, 1929
“This is the time to buy stocks. This is the time to recall the words of the late J. P. Morgan… that any man who is bearish on America will go broke. Within a few days there is likely to be a bear panic rather than a bull panic. Many of the low prices as a result of this hysterical selling are not likely to be reached again in many years.”

Businessman J.D. Rockefeller, Sr., October 30, 1929
“Believing that the 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. We are continuing and will continue our purchases in substantial amounts at levels which we believe represent sound investment values.”

Newspaper, The Times of London, November 2, 1929
“Hysteria has now disappeared from Wall Street.”.

Magazine, Business Week, November 2, 1929
“Now that irrelevant, alien and hazardous adventure is over. Business has come home again, back to its job, providentially unscathed, sound in wind and limb, financially stronger than ever before.”

School, Harvard Economic Society (HES), November 2, 1929
“…despite its severity, we believe that the slump in stock prices will prove an intermediate movement and not the precursor of a business depression such as would entail prolonged further liquidation…”

Economist, Irving Fisher, November 14, 1929
“The end of the decline of the Stock Market will probably not be long, only a few more days at most.”

President, Herbert Hoover, December 1929
“I am convinced that through these measures we have reestablished confidence.”

Government agency, U.S. Dept. of Labor, December 1929

“[1930 will be] a splendid employment year.”

Treasury Secretary, Andrew W. Mellon, December 31, 1929
“I see nothing in the present situation that is either menacing or warrants pessimism… I have every confidence that there will be a revival of activity in the spring, and that during this coming year the country will make steady progress.”

Treasury Secretary, Andrew W. Mellon, February, 1930
“There is nothing in the situation to be disturbed about.”

President, Herbert Hoover, May 1, 1930
“While the crash only took place six months ago, I am convinced we have now passed through the worst — and with continued unity of effort we shall rapidly recover. There has been no significant bank or industrial failure. That danger, too, is safely behind us.”

President, Herbert Hoover, June, 1930
“Gentleman, you have come sixty days too late. The depression is over.”

Economist Irving Fisher in September, 1932
“As this book goes to press recovery seems to be in sight. In the course of about two months, stocks have nearly doubled in price and commodities have risen 5½. European stock prices were the first to rise, and European buyers were among the first to make themselves felt in the American market.”


  1. The quotes tell a great story. Right now the unemployment rate is only part of the story. The other part is the cutting back of hours worked, elimination of overtime, and the demand for pay cuts, all in the private sector.

    The Post Office has a hiring freeze, most local and state governments are not hiring, and many states have instituted unpaid furlough days.

    The actual unemployment rate is probably 5-7 points higher than the government statistics show.

    If the price of the dollar continues to fall and the price of gas nears, or goes above 3.00 a gallon, look for a double dip recession or a depression.

  2. I agree. Although, unemployment is much higher than the official government figures. I trust John Williams' numbers more:

    In addition to unemployment, there's also underemployment and more part time workers. The "official" government numbers aren't helpful. Consider who produces them.

    Having a hiring freeze or furloughs is a nice first step, but it doesn't fix the problem. Expenses far exceed revenue. The government needs to drastically curtail spending or it will keep digging its grave. Ideally, taxes would be cut (even better, removed) at the same time.

    I don't think a falling dollar or gas prices (within reason) are going to cause a double dip recession. The falling dollar will increase exports and the increasing gas prices only play a small effect. I think a longer recession will happen regardless.

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