A big thing is in OCT 1929 the big financial bust happened, but that data includes at least almost all of the 15+ year ride up to it, and the way that the huge bubble got blown -- at least a big part of it -- is that they created the FED (which they shouldn't have) but originally it was decentralized (until 1935, and that is correct if you are going have one it should be decentralized, but safeguards are needed) and then NY Fed immediately began user its open market power to blast up the NY based exchanges, which not only created a super bubble and mass growth in rich peoples incomes in NY, it also had the perverse -- and I would bet intended -- effect of sucking capital outta other states and into NY
Also, NY likely also got a far high share of federal spending outputs as well (probably not equal to its give but still) given how it was distributed and the sorts of various things that it went to
1) How is it not accurate that those are not stronng signs of a bubble?
2) the amount of federal spend outputs that went to things within the territory of the state of NY was a verifiably disproportionately large share relative to many other states. Like, dude, Infrastructure and defense expenditures alone would have got alot of the way there and theres other reasons as well
I do not read the NYT that much, (mainly just to criticism their climate reporting) but I do not sense "scornful anger" at the rest of the country. Recognizing that any amount is too much and worthy of reproval, the idea a coastal elite despises the rest of the country is largely a Fox "News" political claim to create and reinforce identity politics and distract from Republican anti-growth policies.
One problem with the data may be that returns are not only filed by individuals and households but also by businesses and corporations. You can see this from the ratio of exempted income (used mostly by individuals and households) to total taxes paid. The obvious tell is Delaware where that ratio is 2/1. Delaware is an historical tax haven for corporations. Compare that to the ratio of a rural state like Kansas where you mostly have household returns--the ratio is 48/1. Corporate locations are also concentrated in areas with major urban industrial agglomerations, so that same ratio can be construed as a measure of this as well.
Of course I'm not old enough to recall 1929, but I do feel that America is more homogeneous than back in the 1960s. We viewed a place like Georgia as a poor redneck state, now it's defined by the huge and booming Atlanta metro area.
Or government assistance has erased from people’s minds these distinctions, of capable of helping others/wouldn’t accept help/will always need help. The personal became political.
I’m sure there’s only one group that comes in for scorn, and it’s the last group that allows itself to be mocked: the rube, the redneck, understood or imagined to be, regardless of current location, Southern.
I once elicited from a Southerner - perhaps in passing reference to some comedian - his feelings about the fact that this group was made to bear the weight of the nation’s scorn, furnish its joke stock characters on TV/movies (I don’t see much of that sort of thing but I recall Chandler Tatum’s NASCAR heist movie - not bad - made plain use of the stereotype) free of charge - that is, without taking offense. Without cost to reputation, job, etc.
It was not exactly that he took offense, not really that at all. It was more that he understood the phenomenon as ceding the culture to this “white trash” motif it relied on so heavily. E.g. instead of the punching bag of the country, this would *become* the norm, because it was most of what was left standing, because that’s how culture works - or in this case, would be allowed to work. Its twin is obviously thug rap, but that is unassailable.
And this actually in his mind, was troubling because he didn’t really see that so-funny group as that which to emulate. It was not the group that the Southern gentry emulated. Accept, live with as best you can, sure.
It was like the whole country decided Eula Mae or whatever her name was, the girl with the chiffarobe, would be the cultural exemplar going forward.
And I don’t think there’s enough self-awareness society wide, for this to have been yet another intentional Yankee dressing down of the South.
I don’t mean to go into whose fault all this is, originally - the lion’s share of the blame is obvious. A whole class can fail, spectacularly and with a little help.
Thanks for that info. I should have mentioned that US GDP was about $100 billion, and federal spending was around 3% or 4% of GDP, to put the $1 billion figure into perspective.
I'm surprised that California tax payments were so high in 1929, even higher than Michigan where there was a lot of auto manufacturing. California was sixth in population at that time, just behind Texas and a bit ahead of Michigan. they did have a lot of agriculture but most of the manufacturing grew during the 1930s.
In addition to oil, the nascent aircraft industry, lots of general manufacturing and Hollywood in SoCal, you had timber barons on the North Coast, huge farming operations in the Sacramento and San Joaquin valleys, San Francisco finance and trade, specialty crops in the Salinas Valley and around Watsonville, more timber in the Sierra, big cattle and sheep spreads in Shasta, Siskiyou and Modoc counties, etc. Not suprising at all. Both sides of our family moved to California, "The Land of Opportunity", from Boston and NYC respectively, in the '10s and '20s.
PPP effects were probably massive: you have a highly monetized (and far better policed in fiscal terms) urban economy and more self suficient and less controled rural economies.
In terms of welfare I would bet that American farmers had a better standard of life than the urban proletariat.
A big thing is in OCT 1929 the big financial bust happened, but that data includes at least almost all of the 15+ year ride up to it, and the way that the huge bubble got blown -- at least a big part of it -- is that they created the FED (which they shouldn't have) but originally it was decentralized (until 1935, and that is correct if you are going have one it should be decentralized, but safeguards are needed) and then NY Fed immediately began user its open market power to blast up the NY based exchanges, which not only created a super bubble and mass growth in rich peoples incomes in NY, it also had the perverse -- and I would bet intended -- effect of sucking capital outta other states and into NY
Also, NY likely also got a far high share of federal spending outputs as well (probably not equal to its give but still) given how it was distributed and the sorts of various things that it went to
Sorry, but this in inaccurate. There was no bubble in 1929. If you are interested in learning more, I'd encourage you to read my book The Midas Paradox.
Hey, I'm not ascertaining I'm correct here, but, respectfully and sorry: stock prices had reached unprecedented levels! the DOw had almost doubled between 1928 and Sep 1929, PEs for lots of companies were waaaay above historical averages. You mentioned how a billion dollar, in the denominations of the time, was a noticeable amount relative to the size of the economy: well brokers' loans had reached over eight billion!!!!!! The fall was real with stock prices between Oct 1929 and the end of 31 falling almost 90%. All those tings strongly suggest a huge bubble, and I could list other things, that was just off the top of my head
There's no good evidence that stocks were overpriced in 1929, and even if they were there is no evidence that Fed policy had anything to do with that overpricing. Stocks crashed because the economy went into the greatest depression in modern history. That's bad for the stock market!
It's true that P/E ratios were fairly high by 20th century standards, but those standards were (in retrospect) too low. P/E ratios were not especially high by recent standards, which are probably more rational.
ok but the NY Fed was actively using its open market operations in the late 1920s in various ways that blasted up the markets, they used ttheir open markets powers to continuously injecting liquidity into the banking system which then ended up in New York's financial markets there are many credible allegations that this was coordinated but even if it wasnt it still was because they didnt use their readily available regulatory powers to v=curb it. And before you mention its discount window raise to counter, it did that only barely and very late in the game, like DEc 28. And theres the international stuff, The NY Fed, under Strong, kept pushing lower rates for to stabilize the int gold standard, but the pursued policies to help Europe, were then structured in a way so as to allow europe money to be channeled into markets in New York. And it never did anything to tame lax margin requirements. I have to go but if you have a response, I'll respond later. If not, thanks for the interesting writing and your time.
I'm not sure where you get your information, but if it's from "Austrian" sources I'd urge caution.
"they used their open markets powers to continuously injecting liquidity into the banking system"
The monetary base ended the 1920s almost exactly where it began--about $7 billion. By the "liquidity" criterion the 1920s were among the most contractionary monetary policies in US history.
"And before you mention its discount window raise to counter, it did that only barely and very late in the game, like DEc 28. And theres the international stuff, The NY Fed, under Strong, kept pushing lower rates"
Again, this is wrong. The Fed began raising the discount rate in early 1928. In any case, at no time in the 1920s did the discount rate fall below 3%, and it averaged over 4%. This was in a decade where inflation averaged zero! That sort of real interest rate would today be viewed as quite high. (To be clear, I don't think interest rates or the base are a good indicator of the stance of monetary policy.)
And I see no reason why the Fed should regulate margin requirements.
Many people hold the sort of views you've expressed, but when I actually looked at the facts I found their view was very misleading. That's not to say there's no good Austrian critique of 1920s Fed policy---there is. I just think the criticism is often exaggerated and misleading. The big mistakes were made in 1929 and the 1930s--that's why we had a big depression.
Real academics and innovators spend their time trying to solve complicated real world problems: like new ways to make atomic swaps, new cryptographic algorithims, new drugs, stronger metals, etc.
We don't waste our time worrying about whether the Gulf of Mexico is renamed to the Gulf of America, or whether Trump wants to buy Greenland.
For students reading this, I implore you to choose your major wisely, because this kind of rambling is unfortunately common in the social sciences.
Simply put, Greenland does not have a good relationship with Denmark.
Trump, to his credit, recognizes a good opportunity. And I suspect the people in Greenland would equally support the trade.
Such a trade would benefit team America. It has nothing to do with temperate climates.
I suppose you might add that productive people don't waste time writing long and tiresome rants in obscure blog comment sections in response to off hand remarks clearly intended as a light hearted joke.
"Indeed there wasn’t much of a sense that Middle America was more conservative."
Having just recently re-read Mencken's "Notes on Democracy", it does seem that Middle America (and especially the South) was more conservative than the Northeast in the 1920s.
There are some old films of people living in modest homes they built themselves in Florida and other places, pre-war. I suspect such dwellings were more common in warm-weather areas, but still show regional disparities.
There is little quibbling that living standards in the US are higher than the pre-war era.
I do wonder why the 1960s had, in many ways, higher living standards, in places like California and Detroit.
The per capita income charts do not show lower living standards. And there has been undeniable technological progress (smartphones, better medical devices, etc.)
But Social Security taxes are much higher now than in the 1960s, so seniors may have more income, while employers and employees take a whack.
Tyler Cowen has run charts showing that young men, after adjustment for inflation, make less per hour now than in the 1960s. Somehow 60 years of economic growth has passed by young male workers in the US, on average.
The automobiles of the 1960s show bravura styling, oozing confidence and on large scale too.
A mid-size car of the 1960s would be a luxury yacht today.
Kevin Erdmann's reviews of the nation's housing markets, and average rents and house prices, are always informative regarding actual living standards.
"At 32:08 to 32:18 this video (of Gary, Indiana) shows what used to be a soft drink bottling company named Superior Beverage. My father managed that company for the owner for 30 years. I began working there each summer starting at age 12 and and by the time I was 17 graduated to working summers in the steel mills (1960s) because my father could not match what the mills paid. I paid for my entire college education working for US Steel during summer vacation. I am now a retired Oral and Maxillofacial Surgeon looking back to where it all began and can only remember the loving and hard working people who once built Gary and made it a safe and successful place to live. It breaks my heart to see what has happened here. I could write a fifty page essay about how and why it occurred. I witnessed the whole process. Gary is the best example in the USA of the American dream turned into the American nightmare."
I like to see these videos made by ordinary people, which then generate comments from real people.
Is life better for young people today in the US?
To be sure, living standards are higher today than in the 1920s.
Perhaps, as measured, living standards higher than the 1950-60s, though I have my doubts due to chronic housing shortages and higher Social Security taxes, higher local sales taxes, and the demolition of the Rust Belt, and decline in civil behavior.
Loose housing markets and tight labor markets, and lower taxes on wages, are all good ideas.
“The past is another country. They do things differently there.”
Great post
It gives the impressions and insights that taking a deep dive into the intelligent contemporary reporting of a period brings.
I read this piece as an intellectual reenactment of intelleltual history.
Well done. R.G. Collingwood would approve
A big thing is in OCT 1929 the big financial bust happened, but that data includes at least almost all of the 15+ year ride up to it, and the way that the huge bubble got blown -- at least a big part of it -- is that they created the FED (which they shouldn't have) but originally it was decentralized (until 1935, and that is correct if you are going have one it should be decentralized, but safeguards are needed) and then NY Fed immediately began user its open market power to blast up the NY based exchanges, which not only created a super bubble and mass growth in rich peoples incomes in NY, it also had the perverse -- and I would bet intended -- effect of sucking capital outta other states and into NY
Also, NY likely also got a far high share of federal spending outputs as well (probably not equal to its give but still) given how it was distributed and the sorts of various things that it went to
Sorry, but this version of history is not accurate. If you'd like to learn why I'd encourage you to read my book entitled The Midas Paradox.
It's also not accurate that New York got a disproportionate share of federal spending.
1) How is it not accurate that those are not stronng signs of a bubble?
2) the amount of federal spend outputs that went to things within the territory of the state of NY was a verifiably disproportionately large share relative to many other states. Like, dude, Infrastructure and defense expenditures alone would have got alot of the way there and theres other reasons as well
I do not read the NYT that much, (mainly just to criticism their climate reporting) but I do not sense "scornful anger" at the rest of the country. Recognizing that any amount is too much and worthy of reproval, the idea a coastal elite despises the rest of the country is largely a Fox "News" political claim to create and reinforce identity politics and distract from Republican anti-growth policies.
One problem with the data may be that returns are not only filed by individuals and households but also by businesses and corporations. You can see this from the ratio of exempted income (used mostly by individuals and households) to total taxes paid. The obvious tell is Delaware where that ratio is 2/1. Delaware is an historical tax haven for corporations. Compare that to the ratio of a rural state like Kansas where you mostly have household returns--the ratio is 48/1. Corporate locations are also concentrated in areas with major urban industrial agglomerations, so that same ratio can be construed as a measure of this as well.
Interesting. But Delaware is not an outlier when you look at 2022 income tax data.
As recently as the 80s, I went on a church mission trip - to the (American) city I currently live in.
I’ve not heard of one of these domestic mission trips in a long time. Lots of Mexico and Central America.
I suppose I should note it was a mission to Spanish speakers, however.
Of course I'm not old enough to recall 1929, but I do feel that America is more homogeneous than back in the 1960s. We viewed a place like Georgia as a poor redneck state, now it's defined by the huge and booming Atlanta metro area.
That or class dynamics have changed.
Or government assistance has erased from people’s minds these distinctions, of capable of helping others/wouldn’t accept help/will always need help. The personal became political.
I’m sure there’s only one group that comes in for scorn, and it’s the last group that allows itself to be mocked: the rube, the redneck, understood or imagined to be, regardless of current location, Southern.
I once elicited from a Southerner - perhaps in passing reference to some comedian - his feelings about the fact that this group was made to bear the weight of the nation’s scorn, furnish its joke stock characters on TV/movies (I don’t see much of that sort of thing but I recall Chandler Tatum’s NASCAR heist movie - not bad - made plain use of the stereotype) free of charge - that is, without taking offense. Without cost to reputation, job, etc.
It was not exactly that he took offense, not really that at all. It was more that he understood the phenomenon as ceding the culture to this “white trash” motif it relied on so heavily. E.g. instead of the punching bag of the country, this would *become* the norm, because it was most of what was left standing, because that’s how culture works - or in this case, would be allowed to work. Its twin is obviously thug rap, but that is unassailable.
And this actually in his mind, was troubling because he didn’t really see that so-funny group as that which to emulate. It was not the group that the Southern gentry emulated. Accept, live with as best you can, sure.
It was like the whole country decided Eula Mae or whatever her name was, the girl with the chiffarobe, would be the cultural exemplar going forward.
And I don’t think there’s enough self-awareness society wide, for this to have been yet another intentional Yankee dressing down of the South.
I don’t mean to go into whose fault all this is, originally - the lion’s share of the blame is obvious. A whole class can fail, spectacularly and with a little help.
It can happen again. It can be happening.
According to AI only the top 5 percent paid federal income taxes in 1929. So New York was on another level in terms of wealth.
Thanks for that info. I should have mentioned that US GDP was about $100 billion, and federal spending was around 3% or 4% of GDP, to put the $1 billion figure into perspective.
I'm surprised that California tax payments were so high in 1929, even higher than Michigan where there was a lot of auto manufacturing. California was sixth in population at that time, just behind Texas and a bit ahead of Michigan. they did have a lot of agriculture but most of the manufacturing grew during the 1930s.
I'm not sure. Hollywood? Real estate developers?
In 1926, California produced 29% of US oil production.
https://en.wikipedia.org/wiki/California_oil_and_gas_industry#Chronology_of_the_California_oil_industry
In addition to oil, the nascent aircraft industry, lots of general manufacturing and Hollywood in SoCal, you had timber barons on the North Coast, huge farming operations in the Sacramento and San Joaquin valleys, San Francisco finance and trade, specialty crops in the Salinas Valley and around Watsonville, more timber in the Sierra, big cattle and sheep spreads in Shasta, Siskiyou and Modoc counties, etc. Not suprising at all. Both sides of our family moved to California, "The Land of Opportunity", from Boston and NYC respectively, in the '10s and '20s.
PPP effects were probably massive: you have a highly monetized (and far better policed in fiscal terms) urban economy and more self suficient and less controled rural economies.
In terms of welfare I would bet that American farmers had a better standard of life than the urban proletariat.
I think it depends very much on which farmers, and which period of time. The interwar period was not a good time for farmers.
A big thing is in OCT 1929 the big financial bust happened, but that data includes at least almost all of the 15+ year ride up to it, and the way that the huge bubble got blown -- at least a big part of it -- is that they created the FED (which they shouldn't have) but originally it was decentralized (until 1935, and that is correct if you are going have one it should be decentralized, but safeguards are needed) and then NY Fed immediately began user its open market power to blast up the NY based exchanges, which not only created a super bubble and mass growth in rich peoples incomes in NY, it also had the perverse -- and I would bet intended -- effect of sucking capital outta other states and into NY
Also, NY likely also got a far high share of federal spending outputs as well (probably not equal to its give but still) given how it was distributed and the sorts of various things that it went to
Sorry, but this in inaccurate. There was no bubble in 1929. If you are interested in learning more, I'd encourage you to read my book The Midas Paradox.
Hey, I'm not ascertaining I'm correct here, but, respectfully and sorry: stock prices had reached unprecedented levels! the DOw had almost doubled between 1928 and Sep 1929, PEs for lots of companies were waaaay above historical averages. You mentioned how a billion dollar, in the denominations of the time, was a noticeable amount relative to the size of the economy: well brokers' loans had reached over eight billion!!!!!! The fall was real with stock prices between Oct 1929 and the end of 31 falling almost 90%. All those tings strongly suggest a huge bubble, and I could list other things, that was just off the top of my head
There's no good evidence that stocks were overpriced in 1929, and even if they were there is no evidence that Fed policy had anything to do with that overpricing. Stocks crashed because the economy went into the greatest depression in modern history. That's bad for the stock market!
It's true that P/E ratios were fairly high by 20th century standards, but those standards were (in retrospect) too low. P/E ratios were not especially high by recent standards, which are probably more rational.
ok but the NY Fed was actively using its open market operations in the late 1920s in various ways that blasted up the markets, they used ttheir open markets powers to continuously injecting liquidity into the banking system which then ended up in New York's financial markets there are many credible allegations that this was coordinated but even if it wasnt it still was because they didnt use their readily available regulatory powers to v=curb it. And before you mention its discount window raise to counter, it did that only barely and very late in the game, like DEc 28. And theres the international stuff, The NY Fed, under Strong, kept pushing lower rates for to stabilize the int gold standard, but the pursued policies to help Europe, were then structured in a way so as to allow europe money to be channeled into markets in New York. And it never did anything to tame lax margin requirements. I have to go but if you have a response, I'll respond later. If not, thanks for the interesting writing and your time.
I'm not sure where you get your information, but if it's from "Austrian" sources I'd urge caution.
"they used their open markets powers to continuously injecting liquidity into the banking system"
The monetary base ended the 1920s almost exactly where it began--about $7 billion. By the "liquidity" criterion the 1920s were among the most contractionary monetary policies in US history.
"And before you mention its discount window raise to counter, it did that only barely and very late in the game, like DEc 28. And theres the international stuff, The NY Fed, under Strong, kept pushing lower rates"
Again, this is wrong. The Fed began raising the discount rate in early 1928. In any case, at no time in the 1920s did the discount rate fall below 3%, and it averaged over 4%. This was in a decade where inflation averaged zero! That sort of real interest rate would today be viewed as quite high. (To be clear, I don't think interest rates or the base are a good indicator of the stance of monetary policy.)
And I see no reason why the Fed should regulate margin requirements.
Many people hold the sort of views you've expressed, but when I actually looked at the facts I found their view was very misleading. That's not to say there's no good Austrian critique of 1920s Fed policy---there is. I just think the criticism is often exaggerated and misleading. The big mistakes were made in 1929 and the 1930s--that's why we had a big depression.
Real academics and innovators spend their time trying to solve complicated real world problems: like new ways to make atomic swaps, new cryptographic algorithims, new drugs, stronger metals, etc.
We don't waste our time worrying about whether the Gulf of Mexico is renamed to the Gulf of America, or whether Trump wants to buy Greenland.
For students reading this, I implore you to choose your major wisely, because this kind of rambling is unfortunately common in the social sciences.
Simply put, Greenland does not have a good relationship with Denmark.
Trump, to his credit, recognizes a good opportunity. And I suspect the people in Greenland would equally support the trade.
Such a trade would benefit team America. It has nothing to do with temperate climates.
"We don't waste our time worrying"
I suppose you might add that productive people don't waste time writing long and tiresome rants in obscure blog comment sections in response to off hand remarks clearly intended as a light hearted joke.
But you do you.
I must have had better luck than you. I bought a used 1963 Ford Falcon that I kept for 20-odd years.
I then bought a used 1986 Isuzu Trooper (Japanese-built) and I confess I kept that one 26 years, and then I left the country.
Cars will last if maintained, and driven carefully.
I think the Toyotas are the most durable, although some say the Honda 4-cylinder autos are the best. The Ford pick-up trucks are highly regarded.
---30---
BTW, check out the average age of a car on the road in the US.
"The average age of cars and light trucks in the United States in 2024 is 12.6 years, a record high:
This is up two months from 2023. The average age of vehicles has been increasing due to
In 2000, the average age of a passenger car was 9.1 years, and in 2010 it was 10.8 years.
Projected future
The average age of light vehicles is projected to be:
13.4 in 2029
13.3 in 2028
13.1 in 2027
13.0 in 2026
12.8 in 2025"
---30---
Yes, cars last longer.
Still, the average age of a car on the road soon at 13 years.
Higher living standards...or not?
This is laughable. You might be able to fool a younger reader, but I lived through the era of those rusty hulks.
"Indeed there wasn’t much of a sense that Middle America was more conservative."
Having just recently re-read Mencken's "Notes on Democracy", it does seem that Middle America (and especially the South) was more conservative than the Northeast in the 1920s.
Culturally yes. But politically? It seems like the Northeast was the most Republican.
https://en.wikipedia.org/wiki/1932_United_States_presidential_election
Interesting post.
There are some old films of people living in modest homes they built themselves in Florida and other places, pre-war. I suspect such dwellings were more common in warm-weather areas, but still show regional disparities.
There is little quibbling that living standards in the US are higher than the pre-war era.
I do wonder why the 1960s had, in many ways, higher living standards, in places like California and Detroit.
The per capita income charts do not show lower living standards. And there has been undeniable technological progress (smartphones, better medical devices, etc.)
But Social Security taxes are much higher now than in the 1960s, so seniors may have more income, while employers and employees take a whack.
Tyler Cowen has run charts showing that young men, after adjustment for inflation, make less per hour now than in the 1960s. Somehow 60 years of economic growth has passed by young male workers in the US, on average.
The automobiles of the 1960s show bravura styling, oozing confidence and on large scale too.
A mid-size car of the 1960s would be a luxury yacht today.
Kevin Erdmann's reviews of the nation's housing markets, and average rents and house prices, are always informative regarding actual living standards.
"A mid-size car of the 1960s would be a luxury yacht today."
Umm, no.
I wish I could post pictures.
I've driven those cars, they were total crap.
"At 32:08 to 32:18 this video (of Gary, Indiana) shows what used to be a soft drink bottling company named Superior Beverage. My father managed that company for the owner for 30 years. I began working there each summer starting at age 12 and and by the time I was 17 graduated to working summers in the steel mills (1960s) because my father could not match what the mills paid. I paid for my entire college education working for US Steel during summer vacation. I am now a retired Oral and Maxillofacial Surgeon looking back to where it all began and can only remember the loving and hard working people who once built Gary and made it a safe and successful place to live. It breaks my heart to see what has happened here. I could write a fifty page essay about how and why it occurred. I witnessed the whole process. Gary is the best example in the USA of the American dream turned into the American nightmare."
https://www.youtube.com/watch?v=ISajeWJ3Cts&t=11s
---30---
I like to see these videos made by ordinary people, which then generate comments from real people.
Is life better for young people today in the US?
To be sure, living standards are higher today than in the 1920s.
Perhaps, as measured, living standards higher than the 1950-60s, though I have my doubts due to chronic housing shortages and higher Social Security taxes, higher local sales taxes, and the demolition of the Rust Belt, and decline in civil behavior.
Loose housing markets and tight labor markets, and lower taxes on wages, are all good ideas.
The reverse policies are bad ideas.