THE DEPRESSION began in 1929. Conventional dating of the downturn based on evidence from a variety of sources puts it near the middle of the year. But in the popular consciousness--then and now--nothing happened until the stock-market crash in the fall. Stock prices, which had increased at an exciting rate in 1928 and 1929, collapsed suddenly in October; Black Thursday, October 24, 1929, has become the symbol of the Depression.
The decline in industrial production started slowly, almost imperceptibly. It has taken subsequent research to find the high points of production in 1929 and to isolate cyclical movements from normal seasonal trends. But the change in the financial markets produced by the stock-market crash was dramatic indeed. Short-term interest rates, which had been high in 1928 and 1929 as the Federal Reserve tried to dampen the stock-market boom, fell rapidly to unprecedented levels in late 1929. The Fed, which had been debating whether to keep the discount rate stable or raise it in the middle of the year, found itself rapidly lowering it at the end. The discount rate fell from 6 per cent to 2.5 per cent in one year--a most significant turnaround.
The dramatic financial developments and the curtailment of production that was apparent by the last quarter of 1929 brought forth a variety of reassuring statements from government officials. The Hoover administration simultaneously assured the country that there was no emergency and moved to consult with businessmen and avoid the occurrence of one.1 There seemed to be some response in early 1930. Stock prices stopped declining, production appeared to pick up slightly, and wage rates were maintained in response to Hoover's urg-____________________