Skip to comments.A College Freshman History Text on the Stock Market Crash of 1987.
Posted on 08/22/2006 10:51:02 AM PDT by mcvey
A seeming epidemic of greed and self-absorbed materialism had spread through the country. Wall Street witnessed a rash of arrests and convictions . . . .
And more government officials, including Attorney General Edwin Meese, became entangled in the web of corruption. Commentators talked of a compulsive materialism energizing the . . . professionals dubbed Yuppies. Caught up in the race for money, goods, and status, these baby boomers in the fast lane captured the tone and mood of affluent life in the 1980s.
Then on October 19, 1987, the bill collector suddenly arrived at the nations doorstep.
The Dow Jones industrial average plummeted . . . an astounding 22.6 percent.
What caused such a goring of the bull market?
But most [analysts] agreed that the . . . problem was the nations spiraling indebtedness and chronically high trade deficits. Americans were consuming more than they were producing, importing the difference, and paying for with borrowed money . . . Foreign investors had lost confidence in Reaganomics and were no longer willing to finance Americas spending binge.
For the first time, [Reagan] indicated that he was willing to include increased taxes in such a package. Yet the eventual compromise plan was so modest that it did little to restore investor confidence. As one Republican senator lamented: There is a total lack of courage among those of us in the Congress to do what we all know has to be done.
George Brown Tindall and David Shi, American A Narrative History (New York: W. W. Norton & Company, 2004) Brief Sixth Ed., pp. 1188-1189.
"Finally, commentators who use any problem in free market-oriented, democratic countries to justify their basically cynical world view are just revealing their prejudices."
Trust me . . . they would be happy to admit that they are prejudiced (for the common good, of course.)
Paul Johnson is anything but a liberal academic.
His problem here is that he is not particularly an economic historian.
And he is very dependent on his researchers.
But he is the best overall, except for LS--whose textbook my department would NEVER buy.
Whoops!! I know that, but I didn't realize LS was referring to Paul Johnson with that comment. Slap me on the head and remind me not to rush through the thread so fast.....
Whatever happened to the book on American history by Thomas Bailey (of Stanford, iirc)? That was our US history textbook in high school.
Do you teach at a college or a high school or a middle school?
Absolutely. The theory was that part of his deal was secret testimony that nailed Milken.
It's my understanding, based on the "Predator's Ball," the inside story of the junk bond era, that Boesky did provide evidence that at least began the conviction of Milken. (What tipped it was that the feds had Milken's brother on some minor charge).
But I wasn't referring to a lib---I was talking about Paul Johnson, who has the money supply exploding in the 20s (prices fell, and it never kept up with mfg. growth), then simultaneously blaming the Fed for constricting credit. (He's right there).
Actually, at the high school level (not yet exposed at the college level) there is widespread plagiarism, as many of the same bots work on all the texts!
Thanks for the info - I didn't realize you were referring to Paul Johnson 'cause I was going too fast and didn't notice his initials in your post. Sorry......
I love Johnson, but his weaknesses as a conservative text were part of the reason we wrote PHUSA.
At a college. Where there are NO checks and balances except for students walking out.
Bailey is long, long, gone. I wonder if my colleagues even remember him.
If I wanted to survey the history of the stock market, I would want to look at the Dow and other indices on a semilog scale (aka a ratio scale) so that the Great Depression stands out much more in the 1920s-1930s than a similar drop in the absolute scale would look to us when the Dow is above 10,000.
On such a scale the 1987 event would definitely show up because of its magnitude, but its brevity in time - and the lack of corresponding drops in employment - mark it as a non-event in historical perspective. The fact that it is even mentioned in a history book (other than as an indicator of the uncertainties of life in general) is a red flag to me that said book is superficial and negative in much the same way as short-deadline journalism is.
In fact IMHO superficiality and negativity are besetting sins of liberalism precisely because the way to get praised by journalism as "liberal" or "moderate" or "progressive" is to hew to the arrogant, negative, superficial line which naturally gets projected by journalism. From my POV it is a disgrace for a historian to be caught up in the shortsightedness and negativity of journalism - but it is all too common. Journalism styles itself "the first draft of history," and the text you are quoting from definitely sounds like the second draft of journalism.
From my POV history should refer to journalism mainly to point out the fallacies people got caught up in which the perspective of time reveals to be overwrought nonsense.The wisest and most cautious of us all frequently gives credit to stories which he himself is afterwards both ashamed and astonished that he could possibly think of believing . . .
It is acquired wisdom and experience only that teach incredulity, and they very seldom teach it enough. - Adam Smith
So how do these authors explain the "snap back" recovery to new highs within one year (for the S&P 500) and within 14 months for the Dow Jones Industrial Average? Not a bad recovery from a one-day 22% meltdown.
What do these "experts" tell you about the Carter years? I bet they blame the high interest rates and recession Reagan faced in 1981 on the Gipper himself, right?
It really galls me the way people try to re-write history.
A course around historical bias sounds like a wonderful idea.
Mother always said "You might be doing exactly right, if you're hated by the right people."
I just assume that posts like this with obvious inconsistencies are posted by the Left Lurkers to :
1) get a Leftist Statement posetd on FR, and
2) get fellow Leftists to support it.
The Left is working very hard on FR these days
... then you ought to be able to discard the text and dismiss the author as a biased Leftist unworthy of your students attention, without posting the Leftist nonsense on a public forum.
The second, logarithmic graphing of it clearly shows the drastic decline marking the Depression, even though the value of the Dow was far lower back then, such that it's fairly routine now to see market moves which are just as big on a linear scale as the 1929 "crash" but which now are taken in stride as noise.
If I study the logarithmic graph, I want to characterize the big picture by laying a straight edge through the 1945 value and the present value, and call that slope the secular trend of the Dow. Looking at it in a little more detail, I note two long term upward slopes (from 1945 - 1965 and from 1982 - 2000) and two plateaus (from 1965 - 1982 and from 2000 to present). Frankly what occurs to me is that 1945 marked the end of WWII and 1965 marked the beginning of heavy involvement in Vietnam. 1982 was when the Reagan-Kemp-Roth bill began to affect the economy. 2000 was the end of the tech bubble and the beginning of the Sarbanes-Oxley accounting era, but also the beginning of WW IV or whatever the "War on Terror" finally turns out to be.
What stands out for me as the biggest undertold story in that graph is the 1965-1982 stagnation era. The Dow was marching in place, and inflation was very high during that time. The bottom line is that the 1970s were a really bad time for the economy. The era was started under LBJ and climaxed under Jimmy Carter, but it encompasses the entire Nixon-Ford administration.
Given the fact that the DJIA is a limited window on the economy - industrial average has a faintly musty smell to it - there is need for more general indices to characterize what was actually going on. Inflation is one index, employment is another, and demographic trends is yet another.
At which college do you teach? If you don't mind me asking.
If this remark is directed toward me, you might wish to do a search on my screen name and note the hundreds of posts I have on FR.
I hardly think I am Left-anything.
I teach for a Catholic Diocesan college in CT, but live in MA. I don't give out the precise name since:
a.) Conservatives have a very bad time of it at my school (including students);
b.) and I would like to retain what influence I have there.
They don't explain the snapback at all.
Nor the non-existent recession.
So . . . it is all fantasy, not a profession.
I understand completely - I went to Stonehill - I wondered if that was where you taught.
I'm 36. I took a micro class last year at the local community college. I took the time during the spring semester to take a full-time schedule. It was a blast.
The teacher would toss out something that was leftist drivel, and I'd counter it. She would get angry about it and start to challenge me, and I'd just back it up with fact after fact after fact. Eventually, she'd say something, and then look at me and ask for the "reality" of the situation, because she knew the other students were listening to me, not her, and were aware that the drivel wouldn't sell anymore.
When I got done with the semester (finished with a 112 average, as she gave bonus points whenever a student could best her in a debate) I went to her office and had a talk with her. She said that she was going to reevaluate how she tought her students and from what I understand, she's now a regular reader here.