Crash of 1929 - It was FOMO plus debt. It’s almost always FOMO plus debt
What the 1929 Crash Tells Us About Today’s Stock Market
Sorkin, one of America’s highest-profile financial journalists — with twin seats at CNBC and the New York Times — does not seek to explain why the stock market fever rose and broke.
It was FOMO plus debt. It’s almost always FOMO plus debt.
Sorkin’s greatest accomplishment is allowing us to relive precedent by re-creating how the market felt in 1929, week by week, sometimes day by day, to those experiencing it as its own thing before they knew how it would live on in history.
Dow had almost doubled in a year by its September 1929 peak, was down only 17% in 1929. There were no major bank failures or big corporate bankruptcies that year.
Part of the national nonchalance was that the stock market had been down 33% eight years earlier, in 1921, before beginning a long bull run. And in early 1930 the market recovered half of the value lost from 1929.
Then things got bad.
The Dow was down a third by the end of 1930. It fell by half in 1931.
By 1932 it was down 80% from the 1929 peak.
The explosion of bank failures started in late 1930, alongside the terrible unemployment, the breadlines, the Depression.
Market manias are “excellent fundamentals euphorically extrapolated,” in the words of fund manager Jeremy Grantham.
Both then and now, the source was technology. To crib from Robert Shiller’s Irrational Exuberance,
https://en.wikipedia.org/wiki/Irrational_Exuberance_(book)
the 1920s saw breathtaking adoptions in electrification, vacuum cleaners, washing machines, talking movies...
During 1929, the Fed raised the discount rate to 6%, compared with 3.5% at the start of 1928, and publicly discouraged banks from lending to “speculators.”
Of Hoover, Sorkin writes: “On entering the White House, he knew the economy had been running too hot for too long and he tried to make that case to Wall Street, Congress, and the nation. Unable to gain any traction, however, he gave up and turned to other matters.”
The primary lessons of 1929 seem fresh: that the mania couldn’t be easily contained, the correction couldn’t be non-divinely stopped, no one was really punished for things that mattered, and Wall Street lived to crash another day.
Gary Sernovitz Bloomberg September 19, 2025
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