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A walk down Wall Street's past

By Richard Snow, Forbes
September 19, 2008 18:59 IST
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We've weathered worse.

This is at once a reckless thing to say--who truly knows the depth of the abyss that may be opening beneath Wall Street?--and a fairly safe one. The present is a bully. When it gets in a bad mood, it sits on you and threatens and makes awful faces, and, by comparison, everything that has gone before seems quaint and settled.

The 1890s, for instance. If we think of them at all, they're "The Gay Nineties," with nickel beers and straw boaters and the Rough Riders and Daisy on her bicycle built for two. In fact, many Americans felt cheerful about that decade going into it, and Chicago threw a treimendous gala to celebrate the 400th anniversary of Columbus' voyage (though the party got underway a year late, in 1893).

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This was a celebration of American industrial might and artistic achievement--the product of two decades of relatively untroubled growth and prosperity. The city built dozens of immense, sugar-white pavilions to hold its world's fair, and everyone was having a ball--until the economy disintegrated late that spring.

It all happened quickly. By the time the fierce Chicago winter began scouring the paint off them, all those pretty buildings had become the improvised home of last resort for hundreds of cold, hungry refugees who had lost everything. Soon enough, though, ugly days turned bright, and those horlat rors seemed all but forgotten.

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National memory hasn't forgotten 1929 and, indeed, there's been nothing like it since. Sure, there were other crashes--the first one came in 1792, before the Republic had celebrated its tenth birthday, followed by a few more, in 1837, 1857 and 1873. But the Great Depression--a term coined in the early 1930s to serve as a hopeful euphemism for "recession,"--was something else.

It took a decade and a world war to shake off its malevolence, triggered when the market capitalization of the New York Stock Exchange sunk from $80 billion to $50 billion dollars, vaporizing more than a third of its value in a matter of hours. By the time it hit bottom in 1933, the Dow stood where it had in 1900: a full generation of work and wealth wiped clean. By comparison, the index (at the time of this writing) has taken almost an entire year to shed 23 per centĀ from its all-time high last fall.

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One thing is certain to come out of the current convulsion, just as it has out of every other: excoriation. For as long as there has been a Wall Street, Americans have been wary of it. In his surprisingly absorbing 1912 novel The Financier--closely based on the career of the traction magnate Charles Tyson Yerkes--Theodore Dreiser describes how his character Frank Cowperwood reacts to the 1873 debacle:

"Now the crash had come. For days and days and weeks and months, normal confidence and courage would be gone. This was his hour. This was his great moment. Like a wolf prowling under glittering, bitter stars in the night, he was looking down into the humble folds of simple men and seeing what their ignorance and unsophistication would cost them. He hurried back to the exchange ... and ... began to sell everything in sight. ..."

Many Americans believed this sort of ability to prey on calamity was at the heart of Wall Street success. The cataclysm of 1929 intensified such suspicions, and left millions with a lifelong distrust of the Street and its mechanisms. To this day, a businessman rarely appears in a movie as a force for good.

Nothing--not even the stultifications of the dreary 1970s--has come close to the Great Depression in our economic history. The contagion that blew our way from Hong Kong in October of 1987 took 22 per centĀ out of our stock market (five times worse than Monday's battering) and was plenty scary at the time, but few today first think of this event when the year is mentioned.

Pestered once by a reporter to predict what the stock market would do, J.P. Morgan answered, with almost perfect contempt, "It will fluctuate." And so it always will, if not as predictably as we'd like. Back in 1990, Michael M. Thomas, once a partner in the now-wretched Lehman Brothers, wrote a scary novel called Hanover Place showing how the plague of corporate takeovers would wreck our economy. Nobody's much worried about that today, which suggests why the past is so often a frustratingly Delphic guide.

"History doesn't repeat itself," Mark Twain said, "but it rhymes."

Speaking of the stock market--and, really, of every other human enterprise--the historian John Lukacs likes to quote a useful proverb of his native Hungary: "Things are never as good or as bad as they seem."

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