For Argentinean readers, perhaps the question should be “Will Great Banks Ever Open their Doors Again?”

This first classic photo, according to an article from the Winston-Salem Journal, hangs on the wall at a day-trading company in Winston-Salem to warn people to “keep things in perspective”.

With few people left around who directly remember The Great Depression and the real human tragedy of the 1930s, what might happen when the lessons of the past are ignored?

Consider the implications of the recent repeal of those depression-era laws, such as the 1933 Glass-Steagall Act. Was this necessary to allow the creation of ever-larger banks ("too big to fail?") whose merged entities would have fallen foul of Glass-Steagall? But this act was put in place by the US Congress in order to prevent a repeat of The Great Depression and the 1929 crash. Isn’t it perhaps reckless to take away the safeguards? Are conditions today that much safer than in 1929?

Contributing to the 1929 crash was lax regulation of companies where investors were susceptible to fraud and hype. “Individuals did not know whether companies were doing as well as they claimed to be doing and whether companies’ financial reports were reliable.” Haven’t we seen a repeat of this kind of thing in the spread of “pro-forma” accounting, where losses (according to generally accepted accounting principles) are auto-magically transformed to profits, and company results famously beat the Street by precisely one penny- time and time again? Hype is back with a vengeance- what market observer has not heard the new expression “pump-and-dump” (I wonder what the equivalent expression would have been in 1929)?

The 1929 Stock Market Crash

Haven’t we seen, in Enron, the modern-day version of lax regulation, where financial transactions are hidden in derivatives and entities that do not show up on the books that the auditors see? And what of investors’ confidence in companies such as Arthur Anderson, tainted by Enron-itis? And Allied Irish, where internal supervision procedures do not seem to have benefited from the lessons of Barings?

During The Great Depression and after the 1929 stock market crash, 4,000 banks failed because depositors, having suffered a loss of confidence in the system, rushed to withdraw their savings which they perceived to be at risk. Haven’t we just seen this happen in Argentina? Well, no, because apparently the authorities have learned something, which the people shouldn’t be allowed to get as far as getting their hands on their own money. Can people in the G7 world imagine that what just happened in Argentina could not happen to them? But aren’t we seeing a financial catastrophe in Japan, which not long ago was one of the world’s leading financial powerhouses, ahead I might suggest, of the United Kingdom.

Here are anxious crowds during The Great Depression gathered outside the doors of a branch of one of the large United States banks that failed in December, 1930. The numerous bank failures led to the passing of stricter banking laws.

Congress thought, in 1933, that the Glass-Steagall Act would ensure that such a tragedy would never be repeated in America. Little did they know, that in the closing stages of the 20th Century, that their work would be thrown away to help prop up mega lame-duck businesses whose only hope of survival was to get “too big to fail”.

Banks are supposed to invest their depositors’ funds in low risk business ventures or securities. If a bank has an inside opportunity as a stockbroker to influence the market for the securities in which the bank has a position, we have a conflict of interest that is clearly not governed by the laws of competition or fairness, and tends to inflate the value of assets without requiring them to earn that value through genuine strength or soundness of business. And if the only way to survive is through being big, where are tomorrow’s great businesses going to come from, as “great oaks grow from little acorns”?

Merger mania results in the creation of a small number of very large organizations. Despite their ability to move the markets because of their size, large organizations remain vulnerable- as demonstrated by Enron. As “too big to fail” organizations, they have to be propped up and this allows unsound business to be perpetuated, and robs the taxpayer or the sound businesses from which the propping-up resources are taken. Ultimately this will mean that the day of reckoning is merely put off and will have more devastating consequences-, which can hardly be in a nation’s interest.

Above is a portion of one of the “bread lines” that had already become necessary in American cities by the autumn of 1930. As The Great Depression dragged its weary length from month to month and from year to year, more and more money was required for unemployment relief. Private charity, local funds, even state funds, were insufficient, and at length Congress had to appropriate huge sums to keep people from starving.
Could such measures one day be needed again?

History’s warning: All booms go bust

BOZEMAN, MONT. — Limitless prosperity, endless economic growth—such is the mantra that echoes in the halls of the Republic. The resulting mood is pervasive.

Here at Montana State University, I teach men and women between the ages of 18 and 25, for the most part. This is not a school of rich kids. Many have to take on one or more part-time jobs to afford the tuition even a land-grant college must charge.

Yet they are sleek with optimism, as certain of the future as if they had all been born with silver spoons in their mouths. During the summers, they somehow get to places like Nepal and Kenya, Mongolia and Cambodia. Many talk of taking a year or two off after college to see even more of the world before turning to the productive work that surely will await them.

They save little, spend much, use their credit cards as if they were rubbing enchanted lamps. And why shouldn’t they?

Everything they know, everything they hear and see, from MTV to the financial pages, when they read them, tells them that tomorrow is golden, that the great middle-class dream of affluence that has driven so much of our history is finally and inevitably theirs for the taking.

There is no denying it: With notable exceptions, the ‘90s have been very good to Americans. Though the market has been erratic of late, and there are jitters about inflation, many pundits say there seems to be no reason why this saraband of prosperity cannot continue indefinitely, and confidence continues to ring from nearly every quarter of society.

That includes the young men and women who surround me. I look upon them and wonder if my generation is the last to remember that there is no such thing as limitless prosperity. All booms are followed by busts. All of them!

Most of us grew up with the memory of the worst bust of all, The Great Depression, firmly fixed in our family consciousness; even I, born in 1936, have floating in my mind shadowy images of destitute men, women and children traveling along Route 66, near where my family lived in California, and my mother and father carried the Depression’s scars all their lives.

They used their experience as a cautionary tale, and it is as real to me as the nightly news, sometimes more so.

Yet I find myself reluctant to play the Cassandra to a generation that seems not to know or want to know the reality written in my family bones: that there once was a time very like theirs in which, as Frederick Lewis Allen put it in “Only Yesterday,” “the prosperity bandwagon . . . rolled down Main Street,” but that the era ended abruptly and catastrophically, particularly for people of precisely their age and glimmering hopes.

They cannot imagine that at one point 28 percent of Americans had no incomes at all—a figure that, if applied to today’s population, would come to nearly 73 million human beings.

Nor can they imagine that grown men and women, people just like themselves, once were driven to begging in the streets and fighting like junkyard dogs over scraps buried in garbage heaps, or that we still do not know precisely how many people were killed in the longest and bloodiest period of class warfare in our history.

Above all, they cannot conceive that a repeat of The Great Depression could happen again—that to one degree or another, it will happen again, and maybe to them.

I do tell them all this, of course, when they are willing to listen, but I do not think they really believe me.

Oh, they accept the historic fact of the Great Depression, as they would that of the Black Plague of the 17th century, but they no more expect economic calamity in their lifetimes than they worry that buboes will suddenly appear in their armpits.

I envy them. I wish I could share their insouciance. There is something magical in it, something that smacks of the innocent hopefulness that has defined us as a people, that has made our story, as the historian Bernard DeVoto wrote, “mad with the impossible.”

But even as I envy them, I fear for them.

As my mother and father’s generation learned with brutal clarity, innocence and hope are fragile shields against the implacability of fate.

-- T.H. Watkins, a professor of Western American studies at Montana State University and author of ‘’The Hungry Years: A Narrative History of the Great Depression in America,’’ wrote this article for the New York Times.

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