October 24, 1929 was Black Thursday, 79th anniversary has eerie similarities

After an amazing five-year run when the world saw the Dow Jones Industrial Average (DJIA) increase in value fivefold, prices peaked at 381.17 on September 3, 1929.[19] The market then fell sharply for a month, losing 17% of its value on the initial leg down. Prices then recovered more than half of the losses over the next week, only to turn back down immediately afterwards. The decline then accelerated into the so-called "Black Thursday", October 24, 1929. A record number of 12.9 million shares were traded on that day.

At 1 p.m. on Friday, October 25, several leading Wall Street bankers met to find a solution to the panic and chaos on the trading floor. The meeting included Thomas W. Lamont, acting head of Morgan Bank; Albert Wiggin, head of the Chase National Bank; and Charles E. Mitchell, president of the National City Bank. They chose Richard Whitney, vice president of the Exchange, to act on their behalf. With the bankers' financial resourcebehind him, Whitney placed a bid to purchase a large block of shares in U.S. Steel at a price well above the current market. As amazed traders watched, Whitney then placed similar bids on other "blue chip" stocks. This tactic was similar to a tactic that ended the Panic of 1907, and succeeded in halting the slide that day. In this case, however, the respite was only temporary.

Over the weekend, the events were covered by the newspapers across the United States. On Monday, October 28, the first "Black Monday",[20] more investors decided to get out of the market, and the slide continued with a record loss in the Dow for the day of 13%. The next day, "Black Tuesday", October 29, 1929, about 16 million shares were traded.[21][22][23] The volume on stocks traded on October 29, 1929 was "...a record that was not broken for nearly 40 years, in 1968."[22] Author Richard M. Salsman wrote that on October 29—amid rumors that U.S. President Herbert Hoover would not veto the pending Hawley-Smoot Tariff bill—stock prices crashed even further."[18] William C. Durant joined with members of the Rockefeller family and other financial giants to buy large quantities of stocks in order to demonstrate to the public their confidence in the market, but their efforts failed to stop the slide. The DJIA lost another 12% that day. The ticker did not stop running until about 7:45 that evening. The market lost $14 billion in value that day, bringing the loss for the week to $30 billion, ten times more than the annual budget of the federal government, far more than the U.S. had spent in all of World War I.[24]

 

The Dow Jones industrial average was down about 300 points, or 3.5 per cent, and the Nasdaq composite index off about 40 points, or 2.5 per cent. Both were also down more severely earlier in the session.

Oversees markets were worse off. The Dow Jones Euro Stoxx 50 was down 4.6 per cent, as the other main European indicators were seeing losses in the four-to-six per cent range, though not as bad as earlier declines on Friday.

Asian markets closed with devastating losses. Japan's Nikkei index was down 9.6 per cent to 7,649.08, coming close to levels not seen since 1982. Hong Kong's Hang Seng index was off by 8.3 per cent to 12,618.38.

Kavcic said Asian markets are playing some "catch-up" to U.S. markets, which were affected earlier over the past year or so by the credit crisis, which is largely linked to a fallout of the American mortgage market.

Former Federal Reserve chairman Alan Greenspan said Thursday the United States is swept by a "once-in-a-century credit tsunami" that will hit consumer spending and jobs.

Greenspan, called to testify before a congressional panel examining the regulatory system's role in the worst financial crisis since the 1930s Great Depression, underscored the breadth of the crisis meltdown.

"Given the financial damage to date, I cannot see how we can avoid a significant rise in layoffs and unemployment," Greenspan told the House of Representatives Committee on Oversight and Government Reform.

"Fearful American households are attempting to adjust as best they can to a rapid contraction in credit availability, threats to retirement funds and increased job insecurity," he said.

Greenspan, whose views remain closely followed by the financial markets, was the US central bank governor for 18 years and stepped down in January 2006 before a years-long housing bubble burst.
 

He made his historic backflip before a Congressional hearing in Washington, the same kind of forum that for years acted as his personal free market cheer squad.

In doing so he effectively marked the end of the Age of Reagan, the 30 years beginning with the rise of former President Ronald Reagan in which business was given free rein to create wealth wherever and however it wanted, with the bare minimum of government intrusion.

But now, with the world's most advanced economies in the midst of the worst financial crisis since the Great Depression and hundreds of billions of taxpayers' dollars spent trying to prevent a full-scale global meltdown, Mr Greenspan said the free market ideology that had guided his life and dominated world capitalism for a generation did not work the way he thought it would.

Appearing before the House Committee on Oversight and Government Reform, the man once dubbed "The Maestro" said he had found a flaw in the "critical functioning structure that defines how the world works". "I don't know how significant or permanent it is but I have been very distressed by that fact," Mr Greenspan said.

"I made a mistake in presuming that the self-interests of organisations, specifically banks and others, were such that they were best capable of protecting their own shareholders and their equity in the firms."