Only Yesterday

"He used to be a big shot."
--Panama Smith (The Roaring Twenties)

Just completed Only Yesterday, a book by Frederick Lewis Allen that chronicled life during the 1920s. Allen was a journalist and magazine editor. When this book was published in 1931, he was writing for Harper's magazine.

The 1920-1930 period of US history interests me. Although I have read several books on this era already, Allen’s work promised to be an attractive read. As a mainstream journalist, Allen offers relaxed social perspective that differs from the rigorous analysis of academic economists that dominate literature about this period. Because the book was published soon after the decade ended, Allen's perceptions were still fresh in his mind and less subject to loss of accuracy from time decay. The quick turnaround also reduces the chance that the fidelity of his analysis was influenced by conclusion reached by future 'authorities' of the subject.

1922 $20 PCGS MS65+ CAC

The primary strength of this book is the analysis of social trends during the 1920s. The effect of WWI and Wilsonian regime on behavior (live for the day, less idealism, less tolerance for long, drawn out issues and news events). Women's fashion (skirts shorter, less frills, flat profiles, short hair, helmet hats). Youth rebellion and disillusionment (discarding customs and ethics, freedom facilitated by automobile, sex over love, alcohol consumption). Unfolding technologies (radio, car, airplanes). Fascination with 'ballyhoo' (Linbergh, murder cases, sports). Prohibition (going thru the rigorous process of passing a law by Constitutional amendment and then collectively ignoring and/or breaking it).

Several times I found myself tingling with a sense of deja vu. During Allen’s recount of the Red Scare in the early part of the 1920s, for instance, the rush to judgment and denial of rights toward those deemed communists or communist sympathizers seemed mirrors other targeted groups experience today.

1923-S $1 PCGS MS65 CAC

The most eye-brow raising 'never knew that before' data point? The theory that President Warren Harding didn't die from illness in 1923. Rather he either a) committed suicide upon learning of  Teapot Dome and other scandals committed by people in his administration, or b) was murdered (likely poisoned) by his wife when she learned of his extra-marital affairs which allegedly produced at least one child.

Allen focuses on the market bubbles toward the end of the book. Real estate comes first, primarily because the excitement came and went a bit earlier in the decade. The housing bubble in Florida and elsewhere was inflating by 1925 and had largely popped three years later.

1926 $20 PCGS MS65 CAC

Rather than dying there, the speculative juices of America then turned toward to stocks. Although equity markets had been rising steadily through much of the decade, it was not until 1928 that the real stock market action kicked in. Despite big time volatility that included at least four white knuckling pullbacks, stocks commenced an epic rise over the better part of the next two years.

Allen does well in capturing the accompanying sentiment. Stories of cab drivers and waitresses speculating in Steel (US Steel) and Radio (RCA). Bullish prognostications of Wall Street gurus and many academics.

1927-S $1 PCGS MS65 CAC

He also emphasizes the impact of margin loans. People everywhere were buying stock on margin. Even when the Fed announced in 1928 that it would not lend to entities supporting 'speculation,' margin loans continued to grow. Where did this credit come from if it was not facilitated by central bank credit? Perhaps it still did but in a roundabout way. Much capital for margin loans came from corporations that saw opportunity to make a tidy sum by lending cash to banks for the margin crowd at 10% or more.

As hoped, Allen zeros in on the panic during the fall of 1929. In late October he offers a day-by-day synopsis of what occurred around Black Tuesday. The most insightful aspect of his account: how far behind information systems were at generating data that today we take for granted--such as real time stock quotes. During the height of the panic, quotes were hopelessly behind--3-4 hours minimum. Imagine trying to decide whether to hold onto a margined position when you have no idea where prices are. Clerks settling trades burned the midnight oil for weeks to complete the accounting. Margin calls went out sometimes days late.

1928 $20 PCGS MS66+ CAC

What Allen doesn't address, and frankly I did'nt expect him to, was the role of monetary policy during the decade (and earlier) in facilitating the speculative fervor of the Roaring Twenties. People are always looking for a quick buck but they don't always have access to the means (read: easy credit) to satisfy their speculative urges. Where did those means come from during the 1920s? Allen is silent in that regard.

At the end Allen recounts the aftermath. In his view, the Hoover administration's efforts to get 'prosperity' back on track weren't working. Optimism was turning to pessimism. Business investment was falling. Unemployment was rising. Thoughts about the benefits of socialism that had waned with the Red Scare ten years earlier was gaining traction once again. Considering that the election of 1932 was still a year or so away, the picture that Allen paints in the year or so following the Crash suggests an interesting (and accurate) trajectory.

It turns out that Allen followed this work up with a chronicle of the 1930s, Since Yesterday. I've just opened it.

Reference

Allen, F.L. (1931). Only yesterday. New York: Harper & Row