The Great Depression. Why did it happen? Can it happen again?
Those are the bottom-line questions, as Wall Street analysts would say.
But, frighteningly enough, although the 10-year worldwide depression is probably the most thoroughly studied economic event in history, the answer to both questions 50 years later is: No one knows for sure.
One cannot help but made comparisons between the performance of the stock market this month with its performance a half-century ago.
Stock prices haven fallen sharply in recent weeks. Bond prices have collapsed.
Other comparisons to 1929 are apt as well.
Speculation once again is rampant in the United States, this time not to cash in on the boom, but to hedge against inflation.
But stocks habe been replaced as the great speculative tool by metals (including gold, which played a similar role in the 1920s), trading in stock options and trading in futures.
Consumers and companies are carrying a heavy debt burden.
Once again the international economic order -- after 25 years of post-war U.S. hegemony -- is in something of trumoil.
Less developed countries deep in debt and the industrialized countries are borrowing heavily, too. Countries, the United States included, are being swept by waves of protectionism, as workers and industries fight out foreign competition.
Some new problems are on the horizon as well. Inflation is threating at a double digit rate and a worldwide cartel of oil producers holds the industrialized and nonindustrialized nations in thrall.
Most American date the beginning of the Great Depression to that Black Tuesday -- 50 years ago tomorrow -- when the stock market collapsed.
And well they should. For the promise of getting rich quickly through investing in stocks had infected a large number of Americans.
Joseph P. Kennedy, the multimillionaire father of Sen. Edward Kennedy and the late President John F. Kennedy, pulled out of the stock market shortly before it crashed. Why? Because his shoeshine boy was giving him stock tips.
History has not recorded what happened to the bootblack's portfolio. Presumably his fortunes tumbled like those of many other Americans who believed the business leaders and economist who saw no reason why booming prosperity could not make everyone rich.
Kennedy went on to head the Security and Exchange Commission, set up in the aftermath of the depression to police the nation's stock trading.
While the great crash of Oct. 29, 1929, is the line dividing prosperity from poverty in the minds of many Americans, in fact, the recession started at different times for different Americans. And some citizens continued to work and prosper throughout the entire decade of the 1930s.
American farmers were in trouble throughout most of the 1920s. Worldwide over production of foodstuffs and a concerted attempt by Europeans to keep out foreign producers kept U.S. farmers from sharing in prosperity.
American homebuilding prospered throughout most of the 1920s -- in part satisfying pent-up war demand for housing -- but began to sag in 1927.
Even the average American consumer -- despite the interest of bootblacks in the market -- did not do all that well during the 1920s. Much more than today, the rich were getting richer and the poor poorer.
But the average American shared the optimism of the high-income American, even if he did not share in his wealth.
And that optimism was dissipated when the market began to nosedive.
A stock market crash by itself would not have been so bad but for the shaky credit arrangements on which much stock was purchased and for the repercussion it had on banks -- who were not only making many of the loans but were also into the securities markets themselves.
In 1928 and 1929 investors were buying stocks for as little as 10 percent down, financing the rest through loans from their brokers. At one point, more than a quarter of the loans outstanding in the nation were supporting stock purchases.
During the same period, the price of stocks nearly doubled, generating for many investors big profits, which they used to buy more stocks or to buy such products as automobiles, radios and household appliances with those newfangled electric motors in them.
This sent many consumer goods industries off on a binge that camouflaged some of the problems other sectors of the economy -- notably farms and construction -- were having.
The boom in stock prices was caused partially by the prosperity of many companies. But it was also caused by insider dealings and outright frauds.
For example, a pool of insiders in RCA stock kept buying one week, driving the price from $82 to $102 a share. Members of the pool then sold out, taking their profits, and the price dropped back to $87.
When the inevetable crash came, not only were individual investors hurt, the banking system that had made huge loans, wheeling and dealing along with everyone else, was hit hard.
The first round of bank failures, however, was touched off in the agricultural sector, where continued low prices and drought forced many farmers into bankruptcy.
But the impacts of falling stock prices -- and, then, falling consumption -- were felt in other areas of the economy. With demand declining, prices fell. When prices fell, profits fell. Other loans became uncollectible.
The government did not understand what was going on.Instead of taking steps to pump money into the economy, the Federal Reserve took the opposite tack.
Politicians, even Roosevelt, strove hard to balance the budget.
Those actions drained even more buying power from the economy.
The depression might not have been as severe as it was -- despite what economists like to call the imbalances that existed in the economy in 1929 -- had it not been a worldwide phenomenon.
It was not U.S. farmers who were hurt by the depressed prices that resulted from overproduction of commodities. It was a worldwide problem.
Europe was hard-hit by war debts and reparations payments.
There was no longer a world leader to right the international economic system. Britain was too weak and the United States was still withdrawn into the isolationist cocoon it spun for itself after World War I.
Nations reacted to their own internal difficulties by setting up tariff barriers to keep out low-priced goods from their neighbors. Bank failures in Europe -- starting with Austria's Creditanstalt in 1931 -- added the same waves of panic that bank failures did in the United States.
The Great Depression both in the United States and Europe, continued -- with recoveries and new slumps -- until World War II.
It left a scar on the world that has not yet been obliterated. In the U.S. it triggered serious stock market reforms and split commericial banks that accept deposits and make loans from investment banks that finance and deal in securities.
It set the stage for big government -- a government from which many are today recoiling.
The depression also triggered a new wave of internationalism in the world economic order. The International Monetary Fund, the World Bank and other, less formal, institutions sought to ensure that the world would never again be trapped into the begger-thy-neighbor policies that made the Great Depression so much worse than it otherwise might have been.
But governments and economists, like generals, tend to plan for the last war, not the next one. That is why it is hard to say for sure that another depression could not occur.
The stock market has been cleaned up substantially.
But if it is harder to speculate in stocks, it is not hard to speculate in other areas.
Investors can contract in gold, copper or wheat futures for a fraction of the ultimate cost of the contract. If, in 1929, $10 could control stocks worth $100, today $10 can control contracts for commodities worth even more than $100.
Consumers are heavily in debt, as they were in 1929. Corporations, too, are carrying more debt than ever before.
Debt burdens are similarly heavy outside the U.S. Lesser-developed countries are borrowing heavily from U.S. and other multinational bands to pay oil bills. Industrial countries are also borrowing to pay their oil bills.
The U.S. banking system has been growing at a dizzy pace. The conservative banker who ran the financial institution in 1950 and 1960 -- and in 1950 and 1960 -- and still had 1929 etched firmly in his mind -- has been replaced by a new brand of manager.
Bankers learned some lessons in 1974 and 1975 when they faced severe loan losses.
They have put theirs houses in better order. But because of domestic restrictions on U.S. banks that date back to the recession, many big multinational banks are borrowing and lending heavily overseas, out of the reach of much regulation.
It doesn't matter much if it is Peru or Chrysler that defaults on a debt.
Furthermore, banking portfolios are beginning to feel the pinch of tighter Federal Reserve policy plus sharp declines in the value of the bonds they own. Credit still is not tight by any stretch, but if bond prices continue to slump, banks will find it harder to make new loans and might be forced to call in some outstanding ones.
And yet, the case for another Great Depression on the global scale of 1930 is hard to make.
Economics is a fuzzy science. It does not always see clearly even with hindsight. And it has a tougher time with the future. Even when economists offer the proper solutions, it is far from assured that the political leaders will accept them.