3. The Great Crash and Its Causes

(Irene O’Donoghue’s Essay on the Period)

The Crash has almost inevitably become over the years the stuff of legend. Such a massive dislocation of ordinary existence must, perhaps unavoidably, grow in dimensions with the passage of time. Primitive peoples had the natural phenomena of lightning, wind and rain, of earthquake and pestilence which they clothed in the garments of the gods, to render them a little more familiar and amenable to propitiation. How much different are we from those ancient peoples, discounting our once-upon-a-time technology and the veneer of culture with which we ornament the dormant savage within? Certainly the events of those fateful years only served to underline the essentially flimsy nature of our vaunted civilisation, even if subsequent history might be interpreted to bear out the optimism of those who believe in man’s basic goodness.

There is a definite need for some debunking of myths, particularly the pernicious one of evil financiers and capitalists. It led to many excesses at the time and it obscures the true causes of the cataclysm even now. The Silvers’ lynching particularly is a blight on the history of the time. It bears all too striking a resemblance to the worst of the Nazi period. True, Mr Silvers’ action in selling his stock so precipitately on that fateful Monday morning had more than a slight causal connection with subsequent events. It is hardly mere speculation to allege that, knowing as he did the vigilance with which other stockbrokers, over-awed by what they took to be his prescience, followed his every move, he deliberately sold at the peak of the Bull Market intending to buy up vastly greater amounts of the stock of surviving companies when the market bottomed out. He did proceed to buy, through numerous, supposedly anonymous channels, with great rapidity. Nevertheless such a manoeuvre has not been unknown in history. We could cite the most famous example which was the manipulation of the Stock Exchange by Nathan Rothschild on the occasion of the Victory of Waterloo. Knowing of the outcome of the battle and aware of his own reputation for having advance intelligence, he sold all of his holdings in Consols causing a massive plummet in prices and allowing him to pick up extraordinary amounts of stocks and shares at the cheapest prices. This is an almost classic example of using the Bear Market strategy. It was generally held to be valid, if a little unscrupulous. It was doubtless the prospect of a worldwide recession caused to satisfy the ambitions of a few amoral financiers that prompted the popular over-reaction which resulted in the deaths of Silvers and others.

In truth the causes of the Great Crash were manifold, easiest summed up by the old saying “Whatever goes up must come down.” Pundits had been predicting a crash and recession for a considerable period of time. Yet with the multiplication of Jeremiahs there was an increasing disregard shown their prophecies. The masses felt that the boy had cried wolf too many times. Bankers’ reminders that the only essential ingredient of the system was confidence were ignored, resulting in those historic changes of the period which confounded even the oracles of doom.

Perhaps it is something to do with the age, and its preoccupations with mysticism and the cyclical theories of historical processes espoused in the Orient, that the prophesied slump was fatalistically seen to be just another dip in an endless, almost-inevitable cycle of Bull and Bear markets. Indeed who would have foretold the catastrophic changes that were to take place? I believe no-one did or was able to then except, perhaps by a fluke, one of the fringe politico/economic action groups, the Group of Twelve, that sprang up in those few years before that initial crash.

That their predictions were born out was almost certainly coincidence for there was scarcely an economist among them, let alone an economist of standing. As we know, what was perceived as the uncanny accuracy of their predictions was enough to catapult them to the forefront in subsequent years. To be fair to them, not a little credit is due them for the basically humanistic vision which informed most of their actions and moderated the excesses of their followers. Thus what had all the marks of a crypto-Fascist movement, élitism, anti-democratic leanings and the whole campaign against interest-debt or usury, emerges nonetheless with considerable prestige and honour from those turbulent years.

At this remove and without access to even those few documents which survive from that anarchic time, it is difficult to ascertain which policies were in fact the result of reasoned analysis and which mere expressions of the mob’s revulsion at a system which had pitched them into chaos. This may well be true of any period which experiences great convulsions. Certainly the Group showed themselves to be most in tune with the mood of the time and proved to be truly populist leaders. There being no individual capable of singly assuming the reins of power, or rather their refusal to grant Adam Claymore the full authority to which he appeared to lay claim, goes a long way to explaining their increasing mutual antagonism and eventual demise. Yet in their few years on the stage of power they enacted a measure for which we must thank (or curse) them today:

The Dismantling of the Banking System and the Entire Nexus of Stock Exchanges and Financial Institutions

There are those who will argue my ascription of this act to the Group of Twelve, quoting the widespread revulsion at the perceived failings of the banks and the almost totally spontaneous withdrawal of the few funds remaining in accounts. There is no doubt that this was the initial motor that drove those institutions to destruction but the system had faced such situations before and weathered the storm. I believe that deeper investigation would bear out my assertion that the action of the Group of Twelve in successfully anathematising banks, stock exchanges and all such institutions was the blow that ensured the system did not rise Phoenix-like from the ashes of its own pyre. It was their analysis of the parasitic nature of these institutions that prevented the masses listening to the blandishments of the financiers and once again depositing their savings.

Even then, with the stockpiles of actual property and capital such as the great vaults of gold in the Federal Reserve Bank of New York, the lesser piles in Fort Knox and elsewhere, the system might have held out until a change of circumstances. The daring and still-controversial piratical action of the Group in having these locations stormed and looted and their distribution of the entire proceeds among the least well-off sections of the community was the coup-de-grace to the wounded beast of high finance. Again there are those who will argue for the spontaneity of this action but this is hard to credit given the simultaneity of the attack world-wide and the sheer scale of the operation.

It is not the job of the historian to praise or pass censure on the actions of those who make history, just to record them. Nevertheless there are those who in great measure are still extremely partisan with respect to this period of history and I suspect that it is only with the passage of a considerable amount of time that we will be able to view the events with that critical detachment which we bring to bear on the histories of the Roman Empire or the Reformation, for example. We must remember that in comparatively recent times it was almost impossible for the world to view the leading participants in the European Civil War, otherwise known as World Wars I and II, as anything less than angels or demons and that it is only in our living memory that we have come to view them as historical people with complex motives which are understandable without evocation of angelic or demonic forces.

It is somewhat of an enigma to some schools of thought why the system never reappeared except in the form of a few alienated and execrated usurers and money-lenders. It would appear that the odium in which financiers are held to this day may go somewhat towards explaining this phenomena. Yet there are those thinkers who view the small-systems anarchy of the present day as a throwback to feudalism maintaining that it will soon be seen for the regression that it truly is. Others hold, and this is definitely the opinion of the public if not of all of the experts, that the entire historical period from the Renaissance, the so-called ‘Modern’ period, until the late twentieth century was an aberration. They include in their critique the monetary system and indeed ascribe to it the central role.

It must be admitted that this is somewhat borne out in the domain of ecology, for example, by the improvement in all issues to do with the environment since the Crash. Reforestation has been taking place globally on quite an astonishing scale with a consequent dramatic and beneficial effect on the atmosphere. The amount of land given over to cash crops, such as tobacco and those destined for the brewery and distillery, year-by-year being reduced by significant amounts has given rise to the reappearance of plant and consequently, animal, bird and insect, species previously on the verge of extinction which have now recovered population levels never thought possible. Desertification has largely been halted although it will take some active measures to reverse that trend, and so-on. On the negative side, Europe’s unseasonably mild winters, a feature of that epoch, have gone forever.

I think my colleagues in sociology would also concur when I say that the degree to which alienation affects the population has dramatically decreased despite the relative difficulty of life for ordinary people. With the virtual withering away of state-structures, including most significantly social security, the family has recovered in a most astonishing manner, reminding one of nothing so much as those species which reverted to forms immeasurably ancient after evolutionary changes which proved to be blind-alleys. Social Darwinism received a fatal blow from another development. Rather than its predictions of social chaos and dog-eat-dog behaviour being fulfilled, the crime rate has fallen dramatically and plain neighbourliness has increased beyond the expectations of the most optimistic. The appearance of the gangs is the only major blight on this statistic. Contrary to the anticipated mass starvation and poverty scenarios foreseen for Asia, Africa and South America the peasants have returned in droves to subsistence-type economies on the land and by and large are making remarkable successes.

The Group’s Philosophy

The aforesaid notwithstanding there is a degree to which the Group of Twelve will never be understood totally by those whose picture is limited purely to the economic sphere. It is widely agreed now that the group themselves regarded their stand against usury as of less permanent significance than their involvement in the experiential school of phenomenological thought, whose major exponent has been Adam Claymore. That they are less well known for this than for their economic stance can be attributed to the degree with which they themselves protected it from observation by those they deemed unworthy.

This essay is really by way of introduction to a larger study I am working on at present, hampered only by lack of access to even those few documents which have survived and are catalogued. I hope I could call myself an amateur in the true sense of the word and so that study is really a work of love and if it achieves anything at all, may it be that it will lead those scholars, better qualified than I am, to undertake full and rigorous, research and analysis of that pivotal epoch. We can conclude safely that whenever patronage is found for a full scientific study of the period the rewards will indeed be rich and many misconceptions clarified. It may be that the study will be of more than academic interest in the light of the re-emergence of some of the key members of the Group of Twelve as the Grail Order but it is early yet to conclude anything about that fledgling organisation.

Irene O’Donoghue.

(Excerpt from The Wings of the Butterfly, a novel)


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