“It gave me a feeling of déjà vu, because that’s what we were doing in the ’70s — we were trying to get supply-side effects,” said Barry P. Bosworth, a senior fellow at the Brookings Institution who led the Council on Wage and Price Stability under President Jimmy Carter. The efforts failed to control overall inflation, he said.
“It doesn’t work,” he said. “As a macro policy, you can’t go around trying to put your finger in the dike everywhere it pops up.”
Wages: The trouble with spirals.
The big price spikes in the 1960s and 1970s reversed once the underlying conditions that created them eased. But not all the way — in each case, the rate of inflation bottomed out a bit higher than the time before. Many economists believe that pattern had to do with human psychology: Workers and businesses had come to expect a higher rate of inflation, and had adapted their behavior accordingly, creating a self-sustaining cycle.
Economists particularly highlight the role of wages. Businesses can cut prices just as easily as they can raise them, but cutting wages is harder. No worker wants to be told that a job that was worth $10 an hour yesterday is worth just $9.50 an hour today. And if workers expect prices to rise at 5 percent per year, they will want raises to keep up with inflation.
Most economists believe that the forces driving the current surge in inflationwill ease in the months ahead. The question is whether that will happen before expectations shift. Some surveys have found that consumers are already beginning to anticipate faster inflation to stick around, although that evidence is mixed. Wages, too, have continued rising as employers struggle to rehire workers, although it’s not yet clear that they are taking off.
One reason that temporary price increases turned into permanent wage increases in the middle of the 20th century is that many union contracts had escalator clauses that tied wage gains directly to inflation. Those provisions effectively helped lock in price increases, feeding into the price spiral, said David Card, an economist at the University of California, Berkeley, who has studied the role of union contracts in inflation. Far fewer workers are members of unions today, and few contracts have inflation clauses, in part because they haven’t been necessary in a period of low inflation.
Perhaps the largest difference of all? Time. In the 1960s, it took years of price spikes and policy failures for Americans to lose confidence that their leaders could keep inflation under control.
“What happened by the ’70s took almost 10 years to develop,” Mr. Card said. “I don’t think it’s that feasible that it could happen that quickly.”
With vaccination spreading across the United States, social life has begun to bend toward a semblance of normalcy: dinner parties, restaurants, spontaneous encounters with strangers, friends and colleagues on the street or in the office. It’s exciting but also slightly nerve-racking.
“I think there will be a period of heightened anxiety as we meet people face-to-face again,” Adam Mastroianni, a fifth-year Ph.D. student in psychology at Harvard, told me (over the phone). “I’ve heard this from a lot of my friends, that we’re worried: Have we forgotten how to be with other people?”
I’d called Mr. Mastroianni for some help in rediscovering this ancient calculus. In March, he and his colleagues Daniel Gilbert, Gus Cooney and Timothy Wilson published a paper in the Proceedings of the National Academy of Sciences — “Do conversations end when people want them to?” — on one of the stickier aspects of human interaction. Our conversation has been edited for brevity and clarity.
Prisoner’s Dilemma, and the prison is politeness.
When Your Company is Named Covid, You’ve Heard All the Jokes.”
How and when to go about viewing the Super Flower Blood Moon of 2021. (Hint: It helps if you live in Oceania, Hawaii, eastern Asia or Antarctica.)
According to researchers at the University of California, Los Angeles, there are at least 65 creatures, including humans, that make a laugh-like sound: “There could be more that, we think, are out there. Part of the reason they probably aren’t documented is because they’re probably really quiet, or just in species that aren’t well studied for now.”
Some of us were wondering — and now we know — why the iPhone’s “snooze” button provides exactly nine minutes of snoozing.
Jill Lepore, in The New Yorker, provides a brief and compelling history of burnout: “May there one day come again more peaceful metaphors for anguish, bone-aching weariness, bitter regret, and haunting loss.”
What went wrong in the Suez Canal, from a fluid dynamics perspective, courtesy of the Practical Engineering channel on YouTube.
All about the “cartoonishly evil-looking” amblypygid, sometimes known as the whip spider or tail-less whip scorpion but which, as Eric Boodman writes in Undark, is “neither spider nor scorpion.”
If you prefer true spiders, there’s this BBC video segment on how some make use of electric fields to get around.
When Jeffrey Epstein gave The Times columnist James Stewart a tour of his apartment a few years ago, he boasted of his expansive Rolodex of billionaires — and the dirt he had on them. A year and a half after the financier’s death by suicide in a New York jail, the fallout for those in the registered sex offender’s orbit, and increasingly those a step or two removed from it, continues to spread.
For example, the latest management reshuffle at Apollo, as we reported yesterday, can be linked back to Epstein. Tracing all the resignations and reshuffles directly and indirectly tied to the scandal will take a while (we’re working on it), but here’s a tally of some so far:
The Apollo co-founder Leon Black said in January that he would resign as C.E.O. but stay on as chairman, after an internal inquiry found he had paid $158 million to Epstein for tax advice. He unexpectedly quit both posts in March, and later stepped down as chairman of the Museum of Modern Art. Josh Harris, a fellow co-founder who had unsuccessfully pushed Black to quit immediately, said yesterday that he was stepping back from Apollo after failing to become the next C.E.O.; Marc Rowan, Apollo’s third co-founder and Black’s pick as successor, now leads the firm.
When the details of meetings between Epstein and Bill Gates burst into public view in late 2019, the billionaire’s wife, Melinda French Gates, hired divorce lawyers. The couple’s split, announced this month, could upend their numerous investments and philanthropic ventures
Les Wexner announced last February that he would step down as C.E.O. of the Victoria’s Secret parent company L Brands, under pressure from multiple internal investigations about his close ties to Epstein. Earlier this year, he and his wife, Abigail Wexner, said they would not stand for re-election to the L Brands board this month. (The company is now in the process of spinning off Victoria’s Secret.) Mr. Wexner was Epstein’s biggest early client and, a Times investigation found, the original source of the financier’s wealth.
Prince Andrew of Britain gave up his public duties last November, days after a disastrous interview with the BBC centered on his relationship with Epstein. At least 47 charities and nonprofits of which he was a patron have since cut ties to the prince.
Joi Ito resigned as the director of the M.I.T. Media Lab, a prominent research group, in 2019 and as member of several corporate boards (including The New York Times Co.), after acknowledging that he had received $1.7 million in investments from Epstein.
Alexander Acosta resigned as Donald Trump’s labor secretary in 2019, amid criticism of his handling of a 2008 sex crimes case against Epstein when he was a federal prosecutor in Miami.
HERE’S WHAT’S HAPPENING
Morgan Stanley sets up its C.E.O. succession competition. The Wall Street firm gave new roles to four top executives, marking them as candidates to take over from James Gorman: Ted Pick and Andy Saperstein were named co-presidents; Jonathan Pruzan was named C.O.O.; and Dan Simkowitz was named co-head of strategy with Pick.
The U.S. endorses a global minimum tax of at least 15 percent. The proposal, which was lower than some had expected, is closely tied to the Biden administration’s plans to raise the corporate tax rate. Global coordination would discourage multinationals from shifting to tax havens overseas.
Treasury officials said they could capture at least $700 billion in additional revenue. That would involve hiring 5,000 new I.R.S. agents, imposing new rules on reporting crypto transactions and other measures.
U.S. customs officials block a Uniqlo shipment over Chinese forced labor concerns. Agents at the Port of Los Angeles acted under an order prohibiting imports of cotton items produced in the Xinjiang region.
U.S. steel prices are soaring. After years of job losses and mill closures, American steel producers have enjoyed a reversal of fortune: Nucor, for instance, is the year’s top-performing stock in the S&P 500. Credit goes to industry consolidation, a recovering economy and Trump-era tariffs. Unsurprisingly, steel consumers aren’t thrilled about it.
Oprah Winfrey to Blackstone, made its stock market debut yesterday, ending its first trading session with a valuation of about $13 billion. DealBook spoke with Oatly’s C.E.O., Toni Petersson, about the I.P.O. and what’s next for the company.
resignation letter offering both praise of SoftBank’s chief, Masa Son — and unusually pointed criticism of the company’s corporate governance.
Going out vs. staying in, charted
It’s been a while since we checked in on an alternative indicator of pandemic economic activity: the share price ratio of Clorox to Dave & Buster’s.
Wait, what? Nick Mazing, the director of research at the data provider Sentieo, came up with that metric to gauge the openness of the economy. The higher Clorox’s share price rises relative to Dave & Buster’s, the more people appear to be staying home and disinfecting everything than going out to crowded bars. By this measure, conditions have nearly returned to prepandemic levels — indeed, Dave & Buster’s recently lifted its sales forecast, as nearly all of its beer-and-arcade bars have reopened.
packed concert schedule, selling tickets to people who may have already binge-watched all of “Below Deck.” The second, however, suggests that people aren’t as eager to get back to huffing and puffing at the gym as they are content to exercise at home. As restrictions lift and people feel safer in crowds, drinking and dancing appear to be higher priorities.
new book, “Noise: A Flaw in Human Judgment,” the Princeton psychology professor and Nobel laureate Daniel Kahneman, along with co-authors Olivier Sibony and Cass Sunstein, argue that these inconsistencies have enormous and avoidable consequences. Kahneman spoke to DealBook about how to hone judgment and reduce noise.
DealBook: What is “noise” in this context?
Kahneman: It’s unwanted and unpredictable variability in judgments about the same situations. Some decisions and solutions are better than others and there are situations where everyone should be aiming at the same target.
Can you give some examples?
A basic example is the criminal justice system, which is essentially a machine for producing sentences for people convicted of crimes. The punishments should not be too different for the same crime yet sentencing turns out to depend on the judge and their mood and characteristics. Similarly, doctors looking at the same X-ray should not be reaching completely different conclusions.
How do individuals or institutions detect this noise?
You detect noise in a set of measurements and can run an experiment. Present underwriters with the same policy to evaluate and see what they say. You don’t want a price so high that you don’t get the business or one so low that it represents a risk. Noise costs institutions. One underwriter’s decision about one policy will not tell you about variability. But many underwriters’ decisions about the same cases will reveal noise.
An arm of Goldman Sachs has raised $3 billion from clients to invest in later-stage start-ups. (WSJ)
SPACs have raised $100 billion this year through May 19, a record, but new fund listings dropped sharply last month. (Insider)
Politics and policy
President Biden issued an executive order directing government agencies to expand efforts to analyze and mitigate the economic risks tied to climate change. (Axios)
“As Paycheck Protection Program Runs Dry, Desperation Grows” (NYT)
CNN said the prime-time host Chris Cuomo inappropriately advised his brother, Gov. Andrew Cuomo of New York, on how to respond to sexual harassment allegations. (NYT)
Paul Romer was one of the tech industry’s favorite economists; now he is criticizing Silicon Valley giants for being too big. (NYT)
Amazon was recently pushed to ban prominent electronics accessory makers by the F.T.C. over fake-review schemes. (Recode)
Best of the rest
Bill Gates and Warren Buffett got more than 200 billionaires to pledge half their wealth to charity. Some are falling short, but still getting massive tax breaks. (Insider)
FIFA, the global soccer governing body, secretly considered supporting the European Super League, before reconsidering amid public outcry about the now-failed competition. (NYT)
Five questions to ask before you panic about inflation. (NYT)
We’d like your feedback! Please email thoughts and suggestions to email@example.com.
The central fact of the American economy in mid-2021 is that demand for all sorts of goods and services has surged. But supplies are coming back slowly, with the economy acting like a creaky machine that was turned off for a year and has some rusty parts.
The result, as underlined in new government data this week, is shortages and price inflation across many parts of the economy. That is putting the Biden administration and the Federal Reserve in a jam that is only partly of their own making.
Higher prices and the other problems that result from an economy that reboots itself are frustrating, but should be temporary. Still, the longer that the surges in prices continue and the more parts of the economy that they encompass, the greater the chances that Americans’ psychology about prices and inflation could shift in ways that become self-sustaining.
For the last few decades, companies have resisted raising prices or paying higher wages because they felt that doing so would cost them too much business. That put a damper on inflation across the economy. The question is whether current circumstances are evolving in a way that could change that.
shortage of limes, their prices spike and people use more lemons.
after a cyberattack shut down a major pipeline, are truly random events that tell us virtually nothing about underlying supply and demand or future inflation.
Some other sectors seem poised to experience price rises. Restaurants, for example, are complaining of severe labor shortages that are forcing them to curtail service or sharply raise pay for line cooks and dishwashers. If they try to reflect those higher costs in their prices, it will cause the price of food away from home to start rising faster than the (already fairly high) 3.8 percent figure over the last year.
Professional inflation-watchers are on close watch for signs that these forces might be unleashing a form of thinking about price dynamics unseen since the early 1980s, when prices rose in part because everyone expected them to.
The Fed is betting that won’t happen — that even if there are several months of surging prices, it will be at worst a one-time adjustment, and potentially something that reverses as old spending patterns return and workers return to their jobs.
“If past experience is any guide, production will rise to meet the level of goods demand before too long,” the Fed governor Lael Brainard said in a speech this week. “A limited period of pandemic-related price increases is unlikely to durably change inflation dynamics.”
For now, movements in key financial markets mostly align with the Fed view.
Futures contracts for major commodities like oil and copper, for example, suggest that traders expect prices to fall slightly in the years ahead, not rise further.
And in the bond market, even after a surge in longer-term interest rates following the high inflation reading Wednesday, most signs point to future inflation consistent with the 2 percent the Fed aims for.
Still, the level of future inflation implied by those bond prices has risen significantly in the last few weeks, meaning further moves are likely to increase worries that the inflation issues will be not-so-transitory after all. And the pattern could change abruptly if more evidence starts to arrive that the outlook for inflation is becoming unmoored.
“We aren’t obviously on the way to a very high and persistent inflation outcome,” said Brian Sack, director of global economics at the hedge fund D.E. Shaw and a former senior Federal Reserve official. “But we’re at an inflection point, in that the rise in inflation expectations to date has been a policy success, but a rise from here could become a policy problem.”
The Fed may believe that the evidence emerging in various corners of the economy is a one-time occurrence that will fade into memory before too long. The Biden administration is betting its agenda on the same idea.
Ultimately, what matters more than whatever the bond market does is how ordinary Americans who make everyday economic decisions — demanding raises or not, paying more for a car or not — view things. Can they wait for the complex machinery of the American economy to fully crank into gear?
Pelé, Dolly Parton and the Dalai Lama have little in common apart from this: Over a few days in March, they became the latest celebrity case studies for the health benefits of Covid-19 vaccines.
“I just want to say to all of you cowards out there: Don’t be such a chicken squat,” Ms. Parton, 75, said in a video that she posted on Twitter after receiving her vaccine in Tennessee. “Get out there and get your shot.”
This is hardly the first time public figures have thrown their popularity behind an effort to change the behavior of ordinary people. In medicine, celebrity endorsements tend to echo or reinforce messages that health authorities are trying to publicize, whether it’s getting a vaccine, or other medical treatment. In 18th-century Russia, Catherine the Great was inoculated against smallpox as part of her campaign to promote the nationwide rollout of the procedure. Almost 200 years later, backstage at “The Ed Sullivan Show,” Elvis Presley received the polio vaccine in an effort to help reach at-risk teenagers.
But do the star-studded endorsements really work? Not necessarily. Epidemiologists say there are plenty of caveats and potential pitfalls — and little scientific evidence to prove that the endorsements actually boost vaccine uptake.
History of Vaccines website, a project of the College of Physicians of Philadelphia.
and among the weirdest — online rituals of the Covid era.
To help track the phenomenon, New York Magazine over the winter kept a running list of newly vaccinated celebrities that includes Christie Brinkley (“piece of cake”), Whoopi Goldberg (“I didn’t feel it”) and Mandy Patinkin (“One of the few benefits of being old”). Journalists in India have done the same for Bollywood film stars.
getting their shots while shirtless have generated a bunch of memes. An epidemiologist in Oregon, Dr. Esther Choo, joked on Twitter that the French health minister, Olivier Véran, was carrying out a public-relations campaign that she called “Operation Smolder.”
stubbornly persistent in the United States and beyond. The rapid-fire testimonials by Pelé, Ms. Parton and the Dalai Lama in March, for example, collectively reached more than 30 million followers and prompted hundreds of thousands of engagements across Twitter, Instagram and YouTube. In April, the singer Ciara hosted a star-studded NBC special meant to promote vaccinations, with appearances by former President Barack Obama and his wife, Michelle Obama, as well as Lin-Manuel Miranda, Jennifer Hudson, Matthew McConaughey and others.
“These kind of endorsements might be especially important if trust in government/official sources is quite low,” Tracy Epton, a psychologist at the University of Manchester in Britain who has studied public health interventions during the coronavirus pandemic, said in an email.
That was the case in the 1950s, when Elvis Presley agreed to receive the polio vaccine to help the National Foundation for Infantile Paralysis reach a demographic — teenagers — that was “difficult to educate and inspire through traditional means,” said Stephen E. Mawdsley, a lecturer in modern American history at the University of Bristol in Britain.
“I think Elvis helped to make getting vaccinated seem ‘cool’ and not just the responsible thing to do,” Dr. Mawdsley said.
had a colonoscopy live on the “Today” show in 2000, for example, the number of colorectal screenings in the United States soared for about nine months.
experiment that when 46 celebrities agreed to tweet or retweet pro-immunization messages, their posts were more popular than similar ones from noncelebrities. That was especially true when the celebrities delivered the message in their own voices, rather than citing someone else, researchers found.
“Their voice matters,” said Vivi Alatas, an economist in Indonesia and a co-author of that study. “It’s not just their ability to reach followers.”
For the most part, though, the science linking celebrity endorsements to behavioral change is tenuous.
One reason is that people generally consider those within their own personal networks, not celebrities, the best sources of advice about changing their own behavior, Dr. Najera said.
He cited a 2018 study that found few gun owners in the United States rated celebrities as effective communicators about safe gun storage. The owners were far more likely to trust law enforcement officers, active-duty military personnel, hunting or outdoor groups, and family members.
among the first in the country to receive a Covid shot in January. “Don’t be afraid of vaccines,” he told his Instagram followers, who numbered nearly 50 million at the time, almost a fifth of the country’s population.
That night, he was spotted partying without a mask, and accused of breaking the public’s trust.
“Please you can do better than this,” Sinna Sherina Munaf, an Indonesian musician, told Mr. Ahmad and her nearly 11 million followers on Twitter. “Your followers are counting on you.”
“I think it’s a giveaway to the rich,” she told reporters last month. “So, I do not believe in holding the entire infrastructure package hostage for a full repeal and abolishing the cap. I think we can have a conversation about the policy, but it’s a bit of an extreme position, to be frank.”
There’s no debate that the SALT deduction goes mostly to wealthier taxpayers. About 85 percent of its benefits accrue to the richest 5 percent of households, according to an analysis by the Institute on Taxation and Economic Policy in Washington. Were the cap to be repealed, about two-thirds of the benefits — about $67 billion — would go to families making over $200,000 a year.
Exactly how that is distributed is subject to an overlapping crosscurrent of tax policies whose effects vary from place to place. Since the 2017 tax cut broadly lowered taxes, even for residents of high-tax states, the $10,000 cap meant that affluent people in blue states ended up with smaller tax cuts than those in lower-cost red states.
But the political bottom line is that capping a very visible benefit angered the sorts of voters on whom high-tax states rely — families in a place like Long Island or Orange County, Calif., who might make a six-figure income, own a home and pay tens of thousands a year in state income and local property taxes. In the psychology of paying taxes, a slightly smaller savings might seem worse than no savings at all, particularly if you feel singled out, as blue state taxpayers clearly were.
Giveaway or not, there is political logic in trying to restore the unlimited benefit. Affluent suburban voters helped Mr. Biden win the White House, and there is even some evidence to suggest that anger over the lost deduction helped Democrats flip a handful of Republican seats during the 2018 election.
Though the debate affects Democratic districts disproportionately, SALT is less about rote partisanship than about representing voters from wealthy areas with high housing costs. The handful of Republicans who voted against the 2017 tax cuts mostly did so because of the loss of tax breaks like SALT, and today Representative Young Kim, a California Republican from Orange County, supports a repeal of the cap.
There’s also little doubt that the cap falls much harder on blue states. Before the 2017 tax cuts, the average SALT deduction in New York was $22,169 — twice the national average of $10,233 — according to data compiled by the Government Finance Officers Association. It was $19,664 in Connecticut, $18,437 in California and $17,850 in New Jersey.
Even people with Ms. Scott’s resources can’t prevent swindlers from using their names. Scammers have copied the webpage of the federal Small Business Administration and impersonated the Federal Trade Commission, one of the agencies trying to combat exactly these sorts of cons.
Ms. Scott gives to institutions — universities, food banks, other frontline charities — not individuals. She has no accounts on social media like Facebook and Instagram, only her Medium page and a verified Twitter account with just three tweets. Her organization would never request fees upfront from grant recipients, a person with knowledge of her giving said. The person declined to comment directly on online deception taking place in Ms. Scott’s name or what actions she might take to help prevent it.
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Ms. Churchill did more research and realized it was highly unlikely that Ms. Scott had been in touch with her directly, but still she could not cut herself off from the scammers right away. She had invested everything she could pull together in unlocking those promised funds.
“My son needs it for a better life. And I have already lost so much,” she said at the time.
Ms. Churchill shared dozens of screenshots and web pages, unveiling a complex network invented to prey on the hopes of the needy. She said the scammers had known that she had no money, that she was borrowing from her grandmother and her sister to cover the mushrooming fees.
After a few weeks, Ms. Churchill went to the local police. They told her that she had been conned and that there was no way to get her money back.
“This experience has ruined my life, to be honest,” she said.
She had already been struggling. Raising five children largely on her own, she relies on government support. Her mother is nearby in Sydney, but she is on dialysis and not able to help much. After Lachlan, her third born, received a diagnosis of autism, doctors said he needed specialized schooling and interventions she could not afford. Her GoFundMe page raised less than $500.
At the time the message from the “MacKenzie Scott Foundation” appeared in her inbox Ms. Churchill seemed to be in the kind of emotional distress that makes people more vulnerable to scammers, said Stacey Wood, professor of psychology at Scripps College.
We are in a second Roaring Twenties, or so you might think, from the countless comments suggesting that we are entering an exuberant decade that echoes the one of a century ago.
The 1920s were marked by frenetic celebration, amazing stock market returns — and, ultimately, one of the worst crashes and most devastating depressions in modern history.
A century is a long time, and the original Roaring Twenties have become something of a lost world, glimpsed through legend, movies and pop fantasy.
It’s worth looking back more closely. History doesn’t provide a clear guide to the future — many economists avoid studying it, preferring instead to dwell on mathematical models, the latest changes in fiscal and monetary policy and statistically significant leading indicators.
Alexander Dana Noyes wrote both of “the most reckless stock speculation” and of a series of “exceedingly favorable” factors protecting the economy: a “sound banking system,” “expanding production and consumption,” “large profits,” “stability of prices,” “conservative methods of trade,” “labor’s high wages” and “increasing exports.”
As stocks rose, people who had little knowledge of the market blithely bought shares for the first time, as Eunice Fuller Barnard described in “Ladies of the Ticker,” a firsthand account in April 1929.
Recently, there has been a parallel rise in trades by inexperienced retail investors.
Playing the market, with games and gadgets
Early in the 1920s, people played the market as a grand game, abetted by technological innovation and new mass media.
In 1923 the Trans-Lux company came out with the “movie ticker” — a large illuminated screen showing rapidly changing stock prices. For the first time, a crowd at a retail brokerage could watch together as a facsimile of the stock ticker tape whizzed by in bright light.
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And they heard about the stock market on the radio, the hot new technology of that era. Westinghouse, in Pittsburgh, created one of the world’s first commercial radio stations, KDKA, which broadcast Warren G. Harding’s victory in the presidential election on Nov. 2, 1920. Sports events, comedy shows and stock market reports soon followed, and radio stations spread throughout the United States and the world.
The world entered homes electronically, giving people an immediate sense of the possibility of new technologies and access to a global narrative about financial success.
What is startling, in retrospect, is that while there was plenty of discussion of the brave new horizons for investing in the 1920s, there was very little skeptical scrutiny of the underpinnings of the markets available in mass media, at least at first.
CAPE, which enables us to say stock prices today are quite high on a historical basis.
But my research suggests that in the early 1920s, scarcely anyone, outside of investment professionals, knew what a price-earnings ratio was. There was not a single use of the phrase in the ProQuest News & Newspapers database before 1928.
The mood shifts
This inattention shifted in the months before the October 1929 crash. In May 1929, for example, The New York Herald Tribune published “Price-Earnings Ratio Ignored by Traders in Present Market.”
It was a sign of worry. Suddenly, many people became aware that this important measure was at record highs, indicating that prices were difficult to justify. The article helped to spread a pessimistic narrative about the stock market that began to dominate discourse.
“The purchaser of securities on tips, who gives no thought or study to intrinsic values, must suffer the consequences of his own lack of reasonable care in conserving his resources,” the article said.
As the crash approached, newspapers reported that many people had taken excessive loans from brokers, noting that the severity of a market decline could be amplified when brokers made “margin calls,” requiring repayment of those loans.
As early as March 1928, an article in The Timessaid there was a widespread “uncomfortable feeling” about the “unpleasant possibilities” for the still roaring stock market. Such a feeling exists today, though perhaps not in as severe a form.
the risk of excessive speculation. Yet the Standard & Poor’s Composite Index rose 29 percent from Jan. 1 to Sept. 8 that year. (The increase in the S&P 500 from March 23, 2020, to Thursday, at 86 percent, is even larger.)
In 1929, the warnings only heightened public attention to the market.
In February 1929, the singer Eddie Cantor had a hit pop song about the dangers of living. Its title was a form of baby talk: “I Faw Down an’ Go Boom!” The lyrics included this: “I got a tip to buy some stocks, lost my shirt, lost my socks. The minute that I buy some stocks, they faw down an’ go boom.”
An article by Joseph Dineen in The Boston Globe on Feb. 10, 1929, said the song had gone viral: “‘I faw down and go boom.’ Did you ever hear anything sillier, more ridiculous and inane in your life? This wisecrack is positively cuckoo, a snatch of baby talk which has swept the country, used every day in every way by broad-shouldered huskies and lithesome lounge lizards as the last word in high-powered repartee. Every broadcasting station tossed it off into the air at least once a night.”
The song, and others like it, helped to prime people into thinking about the possibility of a crash.
Are there similarities today? Certainly. The current widespread fascination with the rising market accompanied by recent concern about a possible downward spiral and strained stock market valuations echo those of 100 years ago.
That said, there is no particular reason to expect a market collapse that would be as bad as the 1929 crash, and the government and the Fed have shown themselves to be far more adept in staving off prolonged recessions than their predecessors. But we shouldn’t be surprised if uncomfortable feelings about the market grow to unmanageable proportions, leading eventually to a major stock market decline.
Robert J. Shiller is Sterling professor of economics at Yale.