- Jul 2, 2003
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....Published a century ago, F. Scott Fitzgerald’s “The Great Gatsby” captured the culture of an overheated economy on the brink of demise. Just as Jay Gatsby fell from the height of fortune to an ignominious death, the 1920s roared with financial overindulgence until the markets drowned in the Wall Street crash of 1929. The Great Depression followed, and the consequences for the global economy proved calamitous.
Today we find ourselves again dancing toward new highs in the stock market. Speculative money is once more pouring into risky investment schemes, with staggering sums of money being thrown at artificial intelligence and cryptocurrencies. But rather than heed a century of hard-won lessons, the Trump administration’s financial regulators are embracing dissolute policies to keep the punch flowing.
The financial excesses of 100 years ago teach us how high the costs of negligent oversight of our markets can be. When sentinels sleep, fraudsters flourish; their frenzied celebration of unreal profits pumps froth into the market; ultimately, with panic and pain, bubbles will burst. As stages of that cycle are recurring, we must decide whether to intervene now — or to mop up the mess later.
The parallels between the 1920s and the 2020s are numerous — and ominous. The 1920s economy boomed while America recovered from a deadly pandemic, the flu of 1918. Americans used installment plans — the precursor to today’s ubiquitous “buy now, pay later” plans at online checkouts — to spend liberally on consumer products, and they poured money into speculative new investments. Automobile and telephone stocks were the high-flying tech investments of their day; Tesla and Apple are two of ours.
The prevailing interest rate was around 5 percent, as it is today. And as with today, masses of Americans took advantage of easy credit and ubiquitous stock brokerages to speculate in finance. In 1929, a New York Times editor quoted a major newspaper’s financial expert who said that the “huge army that daily gambles in the stock market” had come to include, in the editor’s words, “the woman nonprofessional speculator,” whose share of market trading grew by one estimate from less than 2 percent to 35 percent. That influx of buying from 1919 to 1929 drove the stock market up more than sixfold over the decade — a growth rate our market has actually surpassed over the past three years.....
It is a good read, and he is not the only one believing Trump's decisions are leading the USA into a financial crisis.
