Just out of curiosity, I like to check the charts on the Stock Market – Stock Market Milestones. When did it first hit 100? 200? And on and on. How long did it take to reach the next Milestone?, and things like that.
We look at today’s chart in today’s fashion. Fashions change. But the linear measurement is the same no matter how far back you go. Linear measurement is a constant. Each day measures the same amount of time; but some days are more important than others. Some you remember, and some you forget. That’s why it’s important to look at the chart. Put yourself back into that space of time and look at it from today’s perspective, THE RIGHT PERSPECTIVE; because you already know the outcome. Today you can look back and recall all the yesterdays that came before. When you look at the yesterdays, you are looking at the questions; today you know the answers.
The stock market, as measured by the Dow Jones Industrial Average, reached 100 on Friday, January 12th, 1906. Teddy Roosevelt was President. Bully, one of his favorite words. Let’s hear it for the stock market. The 100-level Milestone.
When Calvin Coolidge was President, that’s when things got moving. The market hit 200 on Monday, December 19th, 1927 and then it hit 300 the next year, one year later, also Monday, December 31st, 1928. What a way to end the year.
Now it was September 3, 1929 when the stock market was at 381.17. Proabably back then people were expecting it to get to 400. But that was September and the Crash occurred in October. Here’s the low point for 1929 – November 13th, 1929 at 198.69.
So here we go up with recovery. The stock market did not stay below 200, it climbed above 200. It recovered. It went so high as 294.07; so close and yet so far from the 300 threshold. But that was April of 1930. And it would not recover any more.
What Stopped the Recovery?
The passage by the Congress of the Smoot-Hawley Tariff; the signature by the President, that was President Hoover, marked the END of the recovery from the CRASH in the stock market. That was the END for a long long time.
From what I studied about the Smoot-Hawley Tariff, the idea originated as a PROMISE by Hoover in the 1928 Presidential Campaign. He had promised the farmers that he would help them. The farmers were suffering and Hoover thought if he could protect agricultural production, the income of the farmers would increase.
However, promises are not reality and politics is a different ballgame. The House of Representatives wanted to have tariffs on more than agricultural production, the Senate wanted their say, and the President wanted to stick by his promise. He wanted to stick by his promise so much that he was stubborn. So stubborn that even though about 1,000 economists wanted him to veto the Smoot-Hawley Tariff, he wouldn’t do it. He wouldn’t budge. Hoover was looking to protect the farmers; he thought he was protecting the farmers, but that is not how it worked out.
Protectionism caused United States imports from Europe to decline from $1,334 million in 1929 down to $390 million in 1932. And looking at American exports to Europe once again, a decline from $2,341 million also in 1929 to $784 million in 1932. World trade declined by 66% from 1929 to 1934. Well, we won’t do that again.
December 1930 it was not good; the stock market went as low as 163.34.
Recovery in the first quarter of 1931; February 192.23, but down by December to 73.79.
Today, we are into some recovery from the stock market downturn. Will it last? Will the recovery take us to higher ground and hold at higher levels? Will it turn lower? Will it go below its previous “bottom” as they like to phrase it?
We were promised CHANGE. This certainly does look like CHANGE. The automakers, the great titans of industry have collapsed. The saying used to be that as goes General Motors, so goes the economy. General Motors filed for bankruptcy. Chrysler which was saved many years ago is now gone. Taken over. I don’t hear the workers of the new company demanding the old benefits that the Chrysler workers had. The old pay scale; I hear nothing about that. Where will the cars be manufactured? Will just parts be manufactured and then assembled eventually in America? Will robots replace people? Has the technology gone that far? Don’t we need manufacturing with people doing the job? And what happens to the Dealers? Where do you go to buy the car? A lot of questions.
So to get back to the charts. Let’s see, 300 was hit on Monday, December 31, 1928. And 400 was hit on Wednesday, December 29, 1954 when Eisenhower was President. That’s 26 years. 26 years; isn’t that a whole new generation? Teddy Roosevelt, Calvin Coolidge, Dwight Eisenhower; all Republicans. Today’s Milestone that we measure is 14,000 on the Dow Jones Industrial Average. Times have come and gone; 14,000 was hit Thursday, July 19th, 2007 – George W. Bush was President. George W. did not get much publicity over that 14,000 level. The drive-by media drove right past that one – they were so busy bashing him they never looked at the Milestones, never paid attention to positives during his administration. Yep, they were all Republicans.
Well, let’s see what happens. Let’s see how today’s economic policies work out. I wonder how long it will take to get back to 14,000.
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The stockmarket first went over 1000 when I started as a broker in 1973. It took until 1982 to get back there. I was one of the few that didnt tell people to buy for the long term. When I gave lectures on the subject all over the world I would start the lecture by asking people what a long term investment was. The answer something you were losing on and didnt want to take the loss.
Cheryl,
There is another chart you “may” want to look at. I say “may” because it is a chart for big girls only. Little girls who are not ready for the ugly side of life should avoid it. Free traders definitely rate this chart XXX and have been very conscientious at hiding it from the kids.
I refer to the chart showing history of US tariffs a copy of which is in the “Historical Statistics of the United States and Statistical Abstract of the United States 1991.” If you email me I will send you a copy I scanned. While I have seen the chart online from time to time it is a bit hard to find so I will describe it to you.
It seems that way back in 1828 one of the few things Andrew Jackson and Henry clay agreed on was that America needed protective tariffs. So they passed this thing called the “Tariff of Abomination” that was the highest tariffs we have ever had. Higher than the Smoot-Hawley tariffs a hundred years latter. These high tariffs upset the then Vice-President John C. Calhoun who set off a Constitutional crisis by urging nullification within South Carolina. They compromised and cut the tariff from 62 percent to about 40 percent.
As the chart shows tariffs went up and down but generally drifted lower in the following years ending at about 20 percent just before the Civil War. The tariff chart does not show it but, contrary to free traders, the economy was growing with higher wages, lower prices, and much innovation.
After the first few months of the Civil War Congress decided to protect industry from foreign competition in war time and passed the Morrill and War tariffs which jacked tariffs up to just under 50 percent. After the war tariffs oscillated but stayed high until the first decade of the twentieth century. Again the tariff chart does not show it but, contrary to free traders, the economy was growing with higher wages, lower prices, and much innovation. During this time we overtook free trade Great Britain.
In the first part of the twentieth century it was though that the way to respond to industrial monopolies was to expose them to foreign competition. Tariffs were lowered to below 20 percent. That cost jobs and was abandoned in favor of anti trust legislation. By the 1920s tariffs were back in the range of 40 percent where they were when Mr. Smoot and Mr. Hawley introduced their new tariffs that raised tariffs to just below 60 percent.
Smoot-Hawley tariffs went into effect in June 1931 but did not last long. In 1934 Roosevelt started lowering them. When the Great Depression got worse in 1937 tariffs were long back to pre Smoot-Hawley levels. Tariffs continued to decline to current low levels.
This chart shows that the notion that Smoot-Hawley was a major cause of the Great Depression is a misreading of history. The Great Depression protectionism was much less dramatic than claimed. The conventional story says that the economy collapsed because the US introduced the Smoot-Hawley tariffs in 1930. But this was more of the same protection we had always had and not a radical shift in policy. At the time America had been the most protectionist country in the world for more than a hundred years.
The history of US trade protection has been written by advocates of free trade and surprise, surprise protection comes out as a bad thing. That is wrong. Republicans were for free trade before they were against it. Every Republican presidential candidate from Abraham Lincoln to Herbert Hoover was a protectionist. During that long period of trade protection, contrary to the theory of free traders, the US had higher real wages, lower prices, and more innovation than the rest of the world. During that long period of protection the US ascended to the economic high from which it has descended during a short period of free trade.
Wow Cheryl, you’ve really outdone yourself with this one! This is a great essay that gives a historical perspective on how American presidents used protectionist tactics with the intent on helping American industry and workers, and wound up damaging economic growth. As always, welcome food for thought!
Very, very interesting. Cheryl sure has the knack to make you think, like NewsGuy said.
So there you go folks, not only will you find the truth, decent political discussions and proper History lessons at TRP, but also thought provoking Economics lessons.
Thank you, Cheryl!!