TELECOM Digest OnLine - Sorted: The Lost Lessons of the 1920s and 1930s

The Lost Lessons of the 1920s and 1930s
16 Mar 2005 10:56:15 -0800

In the 1920s there was a terrific economic boom. Underneath there was
some dark clouds, like that much of the boom was based on 'nothing',
that is stocks that had no real value under them bought on margin
without any real coverage. But everyone was having such a good time
the naysayers were ignored.

The boom burst. The securities markets collapsed. Since so much was
based on nothing, underlying loans and margin accounts collapsed as
well, causing a nasty domino effect throughout the financial world.
Nobody could pay any of their debts in a long chain. Without any
money, the economy of the world ground to a halt.

In the 1930s reformers of the New Deal attempted to save the system.
The industrialists and financiers were terribly upset since until now
they had done as they pleased and answered to no one. But without
reform they would end up with nothing.

Sadly, today the descendants of those industrialists and financiers
are pulling the same crimes as was done in the 1920s.

But what is worse is that the regulators and laws that were supposed
to prevent this sort of thing have been forgotten. We need to be more
"competitive" they tell us as an excuse to allow big monopolies and
concentrated power. "This will create economic development" they tell
us while laying off thousands of employees with no other place to go.

Had the SEC and auditors been doing their job properly Enron, MCI, and
other fisascos would've been stopped early or not started at all.

But they told us "everyone is having such a good time", so we
shouldn't interfere.

Years ago the power utilities were caught in a scandal with lots of
watered stock in the form of layered "holding companies". We're going
right back to that today.

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