Most histories of the 1920s stock market (and there are some excellent ones) focus on the Crash as the central theme of the book. This book is refreshing in that it treats the collapse as significant, but not the whole story.
Sobel begins with a description of the immature financial markets of the end of WWI. Wall Street was not yet a major topic of daily discussion in America. New York had not yet eclipsed London as the world's financial capital.
The author looks at a number of individual events that would contribute to the economic growth of the 1920s that fed a real growth in equities and those which added to the speculative frenzy that gave the market its froth. There were new technologies that were spurred by a new approach to consumer credit that generated, through a macroeconomic multiplier effect, more disposable income in society. The Washington Naval Conference of 1922 led to some disarmament and a relaxing of tensions following the First World War to further spur consumer confidence. There was also Winston Churchill's foolish decision to return the United Kingdom to the gold standard at the pre-1914 level. To help the British prop up the pound, the New York Federal Reserve lowered money market rates that fueled the call money market and buying stocks on margin. Finally, there was the growth of trusts and informal collusion among major firms, such as steel companies, that increased profits that justified higher stock prices.
What Sobel has done is to re-examine the economic conditions of the 1920s. He investigates how changes in American society contributed to the forces that created the great bull market. Although we have a tendency to see the Crash of 1929, in retrospect, as the inevitable result of those forces, Sobel argues hard against that viewpoint. The reader will find himself reviewing tables of stock prices and other data rather than hearing the famous old stories. The new insights are worth having.
This book is recommended.
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