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dpdoor (< 20)

The banks compared to the Great Depression



December 21, 2008 – Comments (2) | RELATED TICKERS: BAC

BAC had a 82 percent drop from its high of $55 in 2006 to it’s low of $10 in Nov 2008. In the stock market crash of 1929 to 1932 the dow droped 88%. The dow more than doubled in 1933 almost a year before the economy showed strong signs of recovery (when unemployment dropped considerably and gnp increased considerably in 1934). The dow did not fully recover until the fed gave up on trying to balance the budget at the start of WWII.

Are the banks stocks going to double the year before the recovery is measurable?

2 Comments – Post Your Own

#1) On December 21, 2008 at 9:46 PM, abitare (30.25) wrote:

It was in April, 1933 and in his first "official" act in office; President Roosevelt declared a banking "holiday" and issued the order to confiscate gold:

Executive order: By virtue of the
authority vested in me by Section 5(B) of
The Act of Oct. 6,
1917, as amended by section 2 of
the Act of March 9, 1933, in which
Congress declared that
a serious emergency exists, I as
President, do declare that the national
emergency still exists;
That the continued private hoarding
of gold and silver by subjects of the United
States poses a
grave threat to the peace, equal
justice, and well-being of the United
States; and that appropriate
measures must be taken immediately
to protect the interests of our people.

"Therefore, pursuant to the above
authority, I herby proclaim that such gold
and silver holdings
are prohibited, and that all such
coin, bullion or other possessions of gold
and silver be tendered within fourteen days
to agents of the Government of the United
States for compensation at the
official price, in the legal tender of
the Government. All safe deposit boxes in
banks or financial
institutions have been sealed,
pending action in the due course of the
law. All sales or purchases
or movements of such gold and
silver within the borders of the United
States and its territories,
and all foreign exchange
transactions or movements of such metals
across the border are herby prohibited.

"Your possession of these
proscribed metals and/or your maintenance
of a safe-deposit box to
store them is known to the
Government from bank and insurance
records. Therefore, be advised
that your vault box must remain
sealed, and may only be opened in the
presence of an agent of
The Internal Revenue Service.

"By lawful Order given this day,
the President of the United States."

In this act of theft, the citizens of the United States of America were compensated at the "official" price of $20.67 an ounce. That was the "official" price of gold for 97 years. Following the confiscation, the dollar was devalued by 40% - and the price of gold was revalued upwards to $35 an ounce.

Under the authority of the Emergency Banking Relief Act, President Roosevelt issued Executive Order No. 6102 which allowed the Government to confiscate all privately owned gold in the United States. The owners would be repaid in paper dollars whether they like it or not.

Dentists, jewelers and coin collectors were exempt from this Executive Order, and were allowed to own gold. (In terms of coins, the actual terminology used was "gold coins having a recognized special value to collectors of rare and unusual coins.")

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#2) On December 21, 2008 at 10:59 PM, dpdoor (< 20) wrote:

I am comparing the percentage drop of the dow in the Great Depression to the percentage drop of Bank of America. But your information does show how desperate things were. The bank “holiday” or closer to withdraws was deemed as a good move to give the government time to prevent more runs on the banks. The stronger banks ended up with more deposits than withdraws.

Overall the government did not know how to handle the situation (raising taxes and  taking money form one area to give to another instead of opening the money flood gates).

The countries that did programs similar to what Obama is proposing did much better.

I feel the banks will recover (somewhat) very soon. But things won’t be 2006 more like 1998.


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