1929

The ordinary human being does not live long enough to draw any substantial benefit from his own experience. And no one, it seems, can benefit by the experiences of others. Being both a father and teacher, I know we can teach our children nothing…Each must learn its lesson anew. —Albert Einstein, October 26, 1929

Ref. 7A95-A

Mitchell woke early the next morning after a sleepless night replaying the prior day’s events, still desperately searching for a solution. He did what he considered his mandatory daily fifteen minutes of calisthenics—a “setting up” drill, he called it—which usually had a soothing effect on him. “No amount of brilliance or personal charm will carry a man to the top and keep him there unless he can come up smiling day after day,” he liked to say about his exercise routine.

Ref. A8D2-B

Taking notice of this cultural shift, banks mechanized the process for smaller merchants. Wall Street went one step further and started offering stock on credit—“on margin,” it was called. By the thousands, middle-class Americans opened margin accounts, putting up 10 or 20 percent of a stock purchase and borrowing the rest. When the market went up, the returns felt like free money. Americans no longer had to save for the goods they wanted. Borrowing became a habit, born along with optimism. So long as faith in tomorrow was maintained, debts could be rolled over endlessly into the future.

Ref. 3498-C

Groucho ended up having to mortgage his home to pay the broker. “Aren’t you the fellow who said nothing could go wrong—that we were in a world market?” Groucho said to Mr. Green. “I guess I made a mistake,” said an embarrassed Green. “No, I’m the one who made a mistake,” said Groucho. “I listened to you.” We all love a good story, a concise explanation of how the world works. We all love an easy buck. Temptation has driven human folly for centuries, whether the serpent in the Garden of Eden or the market manias of cryptocurrency or artificial intelligence. Each wave seduces us into thinking that we’ve learned from history and, this time, we can’t be fooled. Then it happens again. This is how it happened in 1929.

Ref. 48B5-D

Tensions ran so high that Morgan locked the bankers in his library to prevent them from leaving without a deal while he played solitaire and smoked cigars in an adjacent room. It was clear that unless they found a solution, the American banking system could fail. “The situation must not get further out of hand,” Lamont later wrote about the crisis. “It had to be saved.” And it was. The bankers agreed to draw a line between the institutions they deemed viable and all the others and commit to funding those that fell on the right side of the line. By sheer force of will, one man had pulled the entire economy back from the abyss, a demonstration of personal power by an American financier that felt instantly anachronistic. Would such a gambit ever work again?

Ref. 9179-E