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Ruin on the Chalkboard: Bucket Shops and the Leverage That Broke America
Audio is available on Spreaker — see link below.
Before Black Tuesday wiped out the stock market, bucket shops had already normalised reckless leverage across American cities — and the legitimate brokerages were doing exactly the same thing at a far greater scale. This episode traces the speculative culture that made 1929 inevitable.
Audio is available on Spreaker — see link below.
Picture a storefront somewhere in Chicago. Nineteen twenty-seven.
The term "bucket shop" sounds almost quaint now. It's anything but.
Bucket shops didn't invent the appetite for leveraged speculation. They just made it accessible to people further down the economic ladder.
There was at least one figure in the financial world who saw clearly what was coming. Charles Merrill, who would later become one of the architects of modern retail investing, was already a prominent figure in the investment business by the mid-nineteen twenties.
By September nineteen twenty-nine, the market was trading at valuations disconnected from any rational measure of corporate earnings or economic output. The climb had been extraordinary.
Here's what connects the bucket shops to everything that followed. The bucket shop model represented a financial ecosystem operating almost entirely on speculation, leverage, and the expectation of rising prices with no underlying productive activity to justify those prices.
Stock prices fell eighty-seven percent from the September nineteen twenty-nine peak to the trough in nineteen thirty-two. That alone was devastating.
Unemployment reached twenty-five percent. One in four workers had no job.
Roosevelt's New Deal, beginning in nineteen thirty-three, permanently changed the relationship between the American government and its citizens. Before the Depression, the prevailing assumption was that economic hardship was largely a matter of individual responsibility.
The stock market did not recover its nineteen twenty-nine peak until nineteen fifty-four. Twenty-five years.
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