I have a long research paper on my old computer, something that was commissioned after the 1987 Crash. Some agency was worried that we could have another Depression and paid for a study. I used to hear the author interviewed on the radio a few years back, when we had a good financial station here in LA, and I downloaded his paper off the net. It is a very detailed study, with a lot of original research. One of his surprising discoveries was that margin terms, and the use of margin, was little different than present practice. That was not necessarily a cause for relief, since if margin was the culprit then, it could be again today. As I recall there was actually a smaller percentage of margin in play in 1929 than we commonly use now. And the famed 10% margin applied to a very tiny quantity of stocks.
Friedman and Schwartz and Joseph Schumpeter credit the failure of the American banking system with having turned a common, although nasty, "Panic" into the Great Depression. Now, I realize that three economists from two different schools of thought pale in comparison to the Joe and His Dog School of economic history, but hey, I look for all the backup I can get. |
