Reddit reviews The Great Depression: A Diary

I remember it well. This is a great read on how it feels for those who haven't been through a crash yet:

https://www.amazon.com/Great-Depression-Diary-Benjamin-Roth/dp/1586489011/ref=sr_1_1?ie=UTF8&qid=1487105688&sr=8-1&keywords=great+depression+diary

During the Great Depression there were quite a few bank runs. It was not uncommon for people, working people who had managed to save, to lose all access to their savings.

Quite often a secondary market developed for pass book savings - paying $.10 on the dollar for a bank account that may or may not exist depending upon the banks solvency.

Read this book for a very good first person account of what was happening at that time.

http://www.amazon.com/The-Great-Depression-A-Diary/dp/1586489011

Bank runs were ultimately halted by the declaration of a bank holiday. No one was allowed to make any withdrawals. It gave the government time to restore faith in the banking system.

http://en.wikipedia.org/wiki/Emergency_Banking_Act

Out of that was legislation to create the FDIC who by the way has a very good overview/timeline here if you are interested in these things.
https://www.fdic.gov/about/history/timeline/1930s.html

Federal Deposit Insurance Company insures depositors monies - regardless of a banks solvency within certain limits.

So yes - if everyone asked for their deposits at the same time it would result in a bank run as there is not enough money to meet those requests given the nature of fractional reserve banking.

Given how we have a fiat money system it would not be hard for the Federal Reserve to simply "create" more money out thin air to fill the void. This is made possible since the US Dollar is not backed by silver or gold or anything other than "belief" that US Dollars are "worth" what the notes say they are.

Spend some time looking at Bretton Woods for a discussion of the gold standard which we abandoned in the 70's.

Spend some more time learning about the shadow banking system.


The financial crisis of 2007/2008 proved one thing - congress and the federal reserve will go to any lengths to protect the banks. It would be foolish to think it would be any different if a bank run were to occur. No Swedish Solution here - uh uh - instead we will privatize the profits and socialize the loses!

Indeed, still time for recovery for the monthly report, he said hopefully...!

You are right on the earnings point, I was curious about the stability of this, and recently went back and looked at the long-term history of my distributions. While there is some variation, it's really been driven by portfolio growth overall.

My only real concern with buy the dips is that it shades into market timing, which historically doesn't work out that great. Recently read a famous account of an investor in the Great Depression, by Benjamin Roth. He thought he was buying dips too.

How We Got Out of The Great Depression: New Deal


FDR swept (won by a huge margin) the elections of 1932 and took the office from Hoover; he also inherited (took on, hand-me-down from Hoover) an economy that was in ruins. Roosevelt announced a “bank holiday,” and on March 9, he and Congress (they make laws) passed the Emergency Banking Act, which provided fund to failing banks. The Glass-Steagall Act prohibited (stopped) banks from buying and selling stocks, and established the FDIC. Roosevelt took the country off the gold standard (money is backed by gold), thus making it possible to issue more money. However, the focal point of Roosevelt’s plan to stimulate (make better) the economy was the National Industrial Recovery Act. The act established (created) the National Recovery Administration (NRA), which worked with business leaders to create standards for output, prices and work conditions. Within his first few months in office, FDR changed America’s entire way of thinking from a system of total free market economy (government does not tell businesses what to do), to a system where the government is able to regulate business (government does tell business what to do). To gain support of labor unions, the new law recognized worker’s rights to organize unions, a departure (change) from open shop policies during Hoover’s administration. Unfortunately, the NRA failed to recover the economy, and it failed to keep peace between employers and workers.

To combat (fight) unemployment Roosevelt formed the Federal Emergency Relief Administration, which made grants (gave money) to local agencies in order to provide relief for those impoverished (made poor) by the Depression. He also established the Civilian Conservation Corps, which provided jobs to unemployed en working on projects such as forest preservation, floor control, and the improvement of national parks. Under the National Industrial Recovery Act the Public Works Administration was created, which built roads, schools, hospitals, and created more than 4 million jobs. Unfortunately, the PWA was dissolved (shut down) due to the costs being too much and complaints that the PWA was creating a dependency (people rely) on the government.

FDR provided relief to many farmers with the creation of the Agricultural Adjustment Act, which set quotas (limits) on crops, and paid famers not to plant more than the quota. The result was a significant raise in farm incomes, but benefits only came to those farmers who owned their land. This resulted in the eviction (kicked out) of poor tenants (rent land) and sharecroppers (sharecropping system is difficult to explain, ask for clarification and I will), and a mass migration of farmers to cities, or farms on the West Coast.
Roosevelt believed the ownership of a home was more-or-less a right (something we all get, like air for breathing). The New Deal established the Home Owners Loan Corporation and the Federal Housing Administration, which insured long-term mortgages (money paid to bank when you’re buying something over time) issued by banks. As well, millions of low-income housing units were developed by the government. It soon became cheaper to buy a home than to rent one. Sadly, none of these things ended the Great Depression, and unemployment was still at 20% when 1934 came to an end. In 1935, the Supreme Court declared the NRA unconstitutional, and in 1936 the AAA was also declared unconstitutional.
In 1934, there were no less than 2,000 strikes (people refuse to work until demands met) across the nation. Working conditions were still poor, and the ability to organize was still hindered (made difficult by businesses). The strikes would often erupt in violence, with employers and government repressing (like holding a kids head under water, holding them down) the strikers. In 1935, John L. Lewis, head of the United Mine Workers, organized a walkout (walk out of work and refuse to work) which resulted in the creation of a new labor organization, the Congress of Industrial Organizations. The CIO’s main objective (goal) was to create unions. In 1936, the United Auto Workers, a CIO union, organized a sit-down, in which workers would halt production, but remain inside the building. This tactic (plan) was effective (it worked) against strikebreakers, since it allowed the workers to basically takeover the plants that they worked in. In 1937, U.S. Steel, a major opponent of unionization, finally agreed to recognize the Steel Workers Organizing Committee in fear that they’d be subjected to a sit-down strike. The CIO was effective in stabilizing (making normal) the labor situation, but also put forward many policy ideas that were pretty radical for the time. They advocated for public housing, universal healthcare, unemployment insurance, and social security. In 1937, the UAW and General Motors reached an agreement in which the pay was reflective of the cost of living. The CIO was extremely influential in what was to come.

FDR’s Second New Deal took the focus away from economic recovery, and put the focus on economic security, such as protection against unemployment and poverty. In 1935, the REA – one of the Second New Deal’s most successful programs – was formed with the goal of bringing electricity to homes that lacked it, which would also result in these homes purchasing household appliances. As well, the Second New Deal tried to promote soil preservation and family farming. The federal government also bought eroded farms (land destroyed) and converted them to grasslands and parks. It also encouraged more environmentally friendly methods of farming. However, the small farmers were once again left out, and the land-owning farmers were the ones to reap the benefits. These programs made way for the corporate farms that we see today.
The Works Progress Administration was formed, and each year it offered 3 million Americans jobs constructing public buildings and bridges, more than 500,000 miles of roads, 600 airports, stadiums, swimming pools, and sewage treatment plants. The WPA even hired artists to paint murals, and writers to produce guidebooks. The Federal Theater Project funded plays, the Federal Music Project established orchestras, and the Federal Dance Project sponsored ballets. The National Youth Administration provided relief to American teens and young adults. The focus was on creating a more enjoyable way of life for the people.
The Wagner Act – also known as “Labor’s Magna Carta” – was formed to bring democracy (everyone votes and has a say) into the workplace, allowing employees to vote on union representatives, and outlawing unfair labor practices, such as the firing of labor organizers. The idea was that unionization and higher wages would stimulate the economy due to the boost in purchasing power of the working class (the people who work).
The main piece of legislation in the Second New Deal was the Social Security Act of 1935. The Social Security Act created unemployment insurance, old age pensions, and aid to the disabled, the elderly poor, and families with dependent children. The Progressives were finally seeing their platform become a reality. The original bill also included universal healthcare, but it was dropped due to opposition from the American Medical Association.
The last few pieces of legislation were the United States Housing Act, which passed in 1937, and resulted in a national effort to build houses for the poor. As well, the Fair Labor Standards bill passed in 1938, which banned goods produced by child labor, set a minimum wage, and required overtime pay for hours exceeding 40 hours per week. This piece of legislation established a federal minimum wage, and federal regulations of working conditions.

The New Deal created many jobs for women in the government. However, it also supported the idea of the housewife, since it advocated (encouraged) for women to stay at home while the men worked. The housewife was left out of many of the New Deal programs, since paying taxes made a person eligible or the programs. As well, individual states were allowed to set eligibility standards for benefits, which allowed for discrimination.

Suggested Readings:

A People's History of the United States - This gives such an awesome view of history that you do not get in history textbooks: that of the people. Read this for an interesting take on labor unions during this time.

The Great Depression: A Diary - Really interesting. Gives a good history, but also a personal account of the hardships faced during the era. I recommend this to everyone.

The Great Depression and the New Deal: A Very Short Introduction - I love the Very Short Introduction series, and this is no exception. Covers a lot of ground and gives a good historical perspective of how we got into the mess, and how we got out. In fact, I used some of this in writing this reply.

https://www.amazon.com/Great-Depression-Diary-Benjamin-Roth/dp/1586489011/

I agree - the most interesting book I've read recently is a diary by a lawyer during the depression who followed the local Ohio business community closely but also Wall Street and international developments. After reading this book I got the impression a lot of the history of the depression about Roosevelt as a hero was at best overblown and largely made up. Things were worse at the end of his second term than when he came to office. He mostly scared the business community with his approach.
http://www.amazon.com/The-Great-Depression-A-Diary/dp/1586489011