Depression-Era Diary

[Subsequent annotation, dated February 12, 1936. I am re-reading this. These early buyers were badly mistaken and many of them were wiped out. The market reached bottom in the summer of 1932. After the summer of 1932 a slow upturn began.]

July 30, 1931. Magazines and newspapers are full of articles telling people to buy stocks, real estate etc. at present bargain prices. They say that times are sure to get better and that many big fortunes have been built this way. The trouble is that nobody has any money. On account of numerous bank failures, the few people who have money are afraid to spend it and are buying government securities. From the extreme of speculation in 1929, people have now turned to the extreme of caution. In my own case I find it a problem to take in enough to pay expenses and there is nothing left for investment.

August 5, 1931. The town is stunned by the news that The Home Savings and Loan Co. has suspended payments and would demand 60 days notice of withdrawals. This is followed quickly by similar announcements from The Federal Savings and Loan Co. and The Metropolitan Savings and Loan Co. All of these loan companies paid 5 ½% on savings deposits and earned their money by lending on real estate. With the coming of the depression people stopped payments on their mortgages; mortgages became frozen and the banks had no ways to get cash. Mortgages are a safe investment but cannot be liquidated quickly and are not a good investment for a bank which has agreed to pay out its deposits on demand. For the past three days these institutions have been besieged by hysterical depositors demanding their money.

This is the first in a series of Depression era diaries originally published by NEWSWEEK's content partner, TheBigMoney.com

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