"for practical purposes, the financial memory should be assumed to last, at a maximum, no more than
20 years." 2008 => 2028
This is normally the time it takes for the recollection of one disaster to be erased and for some variant on previous dementia to come forward to capture the financial mind.It is also the time generally required for a new generation to enter the scene, impressed, as had been its predecessors, with its own innovative
genius.
The guilt lies, as always, with those who sought so eagerly and by such a transparent device to be so separated from their money.
1987 - so now the age of Ronald Reagan. Leverage came back in the form of corporate takeovers and leveraged buyouts, small ownership and control made possible by large debt.
Did Drexel do itself in? Or was it done in? The truth is that this was a case of suicide-and murder. So potent had the firm become that employees truly believed they could do whatever they wanted without fear of retribution. That's why they could threaten Fortune 500 corporations with takeovers and never expect
political retaliation. And that's why they could leverage themselves and their clients to the hilt without preparing for the day debt would go out of fashion. Says a former officer: "You see, we thought, 'We are invulnerable.'"
Stockbrokers fueled the rapid expansion of their business by offering easy credit terms.22 The call loan market, a
relatively new and rapidly growing market, rose rapidly, quite like the securitized debt market grew in 2005-07.
The diversion of funds to invest in the call loan market by corporations, foreigners, and individuals reflected a
speculation in credit, motivated by attractive interest rates, that fueled the speculative mania in stocks of the
period in much the same way the carry trade did in 2006-2007.23
Stocks sold at extremely high multiples financed by borrowing (i.e., margin). Many stocks were valued as much as 30 to 50 times earnings. Then money started to tighten. In May 1928, the Federal Reserve System began tightening credit, raising its discount rate to 4 ½%. It was raised again to 5% in July 1928 and to 6% in August 1929
20 years." 2008 => 2028
This is normally the time it takes for the recollection of one disaster to be erased and for some variant on previous dementia to come forward to capture the financial mind.It is also the time generally required for a new generation to enter the scene, impressed, as had been its predecessors, with its own innovative
genius.
The guilt lies, as always, with those who sought so eagerly and by such a transparent device to be so separated from their money.
1987 - so now the age of Ronald Reagan. Leverage came back in the form of corporate takeovers and leveraged buyouts, small ownership and control made possible by large debt.
Did Drexel do itself in? Or was it done in? The truth is that this was a case of suicide-and murder. So potent had the firm become that employees truly believed they could do whatever they wanted without fear of retribution. That's why they could threaten Fortune 500 corporations with takeovers and never expect
political retaliation. And that's why they could leverage themselves and their clients to the hilt without preparing for the day debt would go out of fashion. Says a former officer: "You see, we thought, 'We are invulnerable.'"
Stockbrokers fueled the rapid expansion of their business by offering easy credit terms.22 The call loan market, a
relatively new and rapidly growing market, rose rapidly, quite like the securitized debt market grew in 2005-07.
The diversion of funds to invest in the call loan market by corporations, foreigners, and individuals reflected a
speculation in credit, motivated by attractive interest rates, that fueled the speculative mania in stocks of the
period in much the same way the carry trade did in 2006-2007.23
Stocks sold at extremely high multiples financed by borrowing (i.e., margin). Many stocks were valued as much as 30 to 50 times earnings. Then money started to tighten. In May 1928, the Federal Reserve System began tightening credit, raising its discount rate to 4 ½%. It was raised again to 5% in July 1928 and to 6% in August 1929
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