“Dow at 10,000 as Crisis Ebbs”
Benjamin Roth, the diarist who watched the economy, and his family on Thanksgiving in 1937.
— Wall Street Journal headline on Thursday
In January 1931, a lawyer named Benjamin Roth, 38 years old, solidly Republican, a solo practitioner in Youngstown, Ohio, decided to start a diary. Realizing that he was “living through an historic thing that will long be remembered” — as he put it in one early entry — he wanted to keep a record for posterity.
Mr. Roth’s diaries have just been published in book form — “The Great Depression: A Diary” — edited by his son Daniel, who worked in his father’s law practice for many years, and James Ledbetter, the editor of The Big Money, a financial site run by Slate. It is an eye-opening read, though not necessarily in the ways you might think.
Because it was written in the 1930s, Mr. Roth’s diary is not the kind of tell-all we’ve come to expect in this less restrained age. Although he mentions repeatedly the struggles of lawyers and other “professional men” during the depression — Mr. Roth always uses the lower-case “d” — he never shares how his family struggled through it, or how he was able to send his daughter to college in 1937. (Daniel Roth told me that his father, who died in 1978, later divulged that he had had a good life insurance policy, which he borrowed against to keep food on the table.)
Instead, every few days — or every few weeks during some stretches — Mr. Roth jotted down his thoughts and fears as the Depression deepened. “Banks are absolutely terrible in their insistence on payments of notes and mortgages,” he wrote in 1931. “It is the old story of lending you an umbrella when the sun is shining and then demanding it back when it rains.”
He recounts painful conversations with friends and acquaintances who had accumulated some wealth by speculating in the stock market, and then lost everything when stocks plummeted and they couldn’t meet margin calls. He is obsessed with the stock market; he is constantly noting the prices of the blue chips of his day, and his writing shows him to have the instincts of a good value investor, a term that hadn’t yet been invented. But, as he also constantly points out, he never has any money to invest, much to his chagrin.
Mr. Roth is horrified when the local banks fail (“I still cannot believe that the Dollar Bank — the Gibraltar of Youngstown — has closed its doors”) and points out that even after the banks reopen, customers aren’t allowed to withdraw more than a small fraction of their savings. He explains how entrepreneurs with money buy up people’s frozen passbook accounts for 50 cents on the dollar and how barter and scrip come to replace the money people no longer have.
Events that we know about from the history books he was reacting to in real time. He was furious to learn, thanks to a series of highly publicized Congressional hearings, that some of the nation’s most prominent bankers did terrible things during the Roaring Twenties. (“By manipulation the officers boosted and unloaded on the public their own stock in National City Bank as high as $650 per share when its book value was only $60.”) But he makes no mention of the Securities and Exchange Commission, whose birth was the direct result of those incendiary hearings.
Mr. Roth is skeptical of President Franklin D. Roosevelt’s New Deal programs, and worries that the president’s fondness for deficit spending will ultimately be disastrous. He keeps thinking inflation is right around the corner. He worries about the rise of Hitler. He writes about gangs of farmers who threaten sheriffs, judges and anyone else who tries to foreclose on a farm. He watches the rise of unions, another trend he finds troubling.
Mr. Roth, of course, is writing without the benefit of hindsight. Today, when we look back on the Great Depression, we have a clear narrative in mind — a narrative that has been fine-tuned this last year or so, as we’ve re-examined it through the prism of the current crisis. On Wednesday, for instance, I attended a forum at Columbia University, where one of the speakers was the historian Alan Brinkley, who has written several fine books about the Depression.
“The only way to break the economic deadlock brought on by the Depression was to shock it back to life,” said Mr. Brinkley, who then added that for all of Roosevelt’s willingness to experiment and spend, the reason the Depression lasted so long was that the president didn’t spend enough.
That, of course, is what most people believe today — and that dogma is the reason the government last year threw literally trillions of dollars at the banking system to keep it from collapsing.
Mr. Roth’s diaries have no narrative. But they are compelling reading nonetheless, because they force readers to reflect on both the similarities and the differences between then and now. What particularly struck me was watching Mr. Roth, in his diaries, grope from day to day, and year to year, searching for an answer that wouldn’t be clear until long afterward. He’s like the proverbial blind man who feels an elephant’s trunk and thinks elephants look like a rope. Not unlike the way we are today, as we grope our way through our own financial crisis.
Mr. Roth’s inflation fears are one good example. A rock-ribbed Republican, he can’t understand why Roosevelt’s New Deal programs — and the spending they require — don’t bring with them the kind of scary inflation that had occurred in Germany after World War I. He keeps waiting for it, predicting it, ever fearful that it will make an awful economic situation even worse. He is baffled that inflation remained subdued. He can’t get outside of his mental framework and see — as we can today — that Roosevelt’s programs are the only things keeping the economy alive.
Read Full Article »