best of all possible crashes
much longer can the stock market bubble last?" I asked. "Look
at this ... here's Ross Gittins in Saturday's Herald explaining what
makes a bubble and how it bursts. The end is surely near. When Ross
starts explaining that something's perfectly understandable, it's about
was sitting around in the Brushtail Café with Joadja and Old
Possum drinking and reading the papers. The afternoon had started as
a bit of a party to celebrate my big cheque from Kristina Moran's lawyers,
but somehow the morose weather got the better of us and we ended up
moping around reading the papers.
was raining in a desultory sort of way and big droplets of water clung
to the café window like crystal lenses. I peered through one
from up close. The world outside looked back, upside down and distorted.
A tiny black spider was struggled up the outside of the window, dodging
between the droplets.
there's no doubt about Ross, he's the Dr Pangloss of economics writers.
Everything's always for the best in the best of all possible worlds,
and if it isn't, it's at least explainable ... which somehow makes it
for the best", Joadja remarked.
he's noticed that Wall Street is suffering from a split personality",
said Old. He took another sip of cider before going on. "The Dow-Jones
index only rose 18 per cent in the last year but the Nasdaq is up 94
per cent. The thing is, Gittins makes it seem as if the market as a
whole is booming after all, 18 per cent isn't bad! but
that's not the real story. The real story is that the majority of Wall
Street stocks have been in the dumps for months. Their prices are way,
way down it's only a handful of blue chips that are pulling the
average up and making it look like there's a boom. What Gittins hasn't
said is that that's what characterised Wall Street in the months leading
up to the 1929 crash.
then there's Alan Greenspan's interest rate rises. The Fed tried the
same tactic in '29 and it made no difference then, the speculators just
shrugged it off and went on borrowing more money to plunge on the market.
What did they care? They all thought they were going to double their
money overnight and they rushed on to disaster.
the market rocketed up in '28 and '29, hundreds of thousands of suckers
entered it. This day-trading thing is nothing new. It's not something
brought on by the new internet technology, it's a social phenomena,
not a technological one, and it's a characteristic of the last months
of market bubbles. The equivalent in 1929 was the thousands of little
brokerage offices that opened across America to service the swelling
numbers of little punters who wanted to play at getting rich. They even
had them on the big ocean liners. These places were fitted out with
stock tickers, which printed the latest prices on a stream of paper
tape. Lots of people even had stock tickers in their homes."
parallels are everywhere", I said. "In '29 there was the same
hype about new technologies and the same relentless spin-doctoring.
Good old analog radio was the big thing then. Everybody was buying radios;
radio stations were starting everywhere. As they say about the internet:
it was going to change the entire way people lived, worked, and did
business. Capitalists were floating companies to make radios, market
radios, broadcast to radios, advertise on radios, insure radios, fit
radios in cars ... not one in a hundred survived the crash".
sudden flurry of rain gusted down Werrong Lane. The big drops of rain
hanging on the window quivered and collapsed, surging down the pane
in a thousand thousand tiny rivulets. I scanned the window for the tiny
spider, but he'd been swept away in the deluge.