The Pompous Prognosticators Hall of Fame
Chart locations are an approximate indication only. Chart shows weekly series of the Dow Jones Industrial Average.
"We will not have any more crashes in our time."
- John Maynard Keynes, circa 1926-1927
To address the question of whether this is a genuine quote from Keynes, and when he said it:
This quote may be based on the account by Felix Somary in
"The Raven of Zürich: The Memoirs of Felix Somary",
trans. by A. J. Sherman, with a foreword by Otto von Habsburg
(London: C. Hurst and Company/New York: St. Martin's Press, 1986 ),
ISBN 978-1850650188, pp146-7. The actual year in which Keynes said it is unclear.
Somary writes in chapter 33 "Lightning before the Storm, 1924-1927":
"Just after the Locarno conference in 1926, I had discussed in detail with the chief of German trade policy, Trendelenburg, the possibility of a joint external tariff for Germany and France, which he was prepared to introduce. But the West in general did not respond.
A few years later, John Maynard Keynes came to Berlin with a speech titled 'The End of Laissez-Faire', a lot of vulgarities that the nationalists greeted with fervour, for the man who at the time of the Versailles negotiations had spoken up for Germany had great influence in Berlin.
Keynes was English through and through, and his entire mind was influenced by the difficult situation his country was then going through. German protectionists since Friedrich List had always maintained that the theory of free trade was not really a doctrine with universal applicability, but simply one that accommodated England's temporary interests. And now Keynes justified these critics and shook the field of economics itself; the science of economics appeared to be merely a cover for temporary local economic policies.
I met Keynes in the Berlin apartment maintained by the Hamburg banker Carl Melchior, a partner in M. M. Warburg & Co. Keynes and Professor Sering had just had an argument about price imbalances between agriculture and industry, in which Sering propounded free-trade views and Keynes took the opposite line. The vehemence of Keynes' speech betrayed the extreme neurotic in Adler's sense who cannot discuss anything, but has to disparage others. This was all the more painful since Sering was the greatest European expert on agrarian policy, with which Keynes obviously was unfamiliar. Sering's dignified and self-assured calm contrasted all too plainly with the Englishman's pathological nervousness and trembling voice. All were relieved when Sering put an end to the painful scene by taking leave of our host. I wanted to go with him, but Melchior detained me, saying he wanted me to get to know Keynes. At first I declined, but he insisted.
Keynes asked me what I was advising my clients.
'To insulate themselves as much as possible from the coming crisis, and to avoid the markets,' I replied.
Keynes took the opposite view. 'We will not have any more crashes in our time,' he insisted, and asked me in detail for my opinions about individual companies.
'I think the market is very appealing, and prices are low,' said Keynes. 'And where is the crash coming from in any case?'
'The crash will come from the gap between appearances and reality. I have never seen such stormy weather gathering,' I said. But speculation in securities passionately interested Keynes, and despite my obvious refusal to answer, he repeatedly asked questions about which shares on continental markets were attractive purchases.
Keynes's biographer praises him for prescience about the coming crash. I could quite clearly prove the opposite. In 1928-9 I invited Keynes to debate crisis-forecasting with me at a public meeting of the Association for Social Policy in Zürich, but he declined on the grounds that his German was inadequate. Keynes, who was even then a widely praised individual, made an odd impression on me. He expressed contempt for economics as a science, and for individual economists, not excluding himself; but was obviously very proud of his talents as a speculator."
Somary doesn't give a date for the meeting with Keynes, but the lecture on 'The End of Laissez-Faire' was given by Keynes at the University of Berlin in June 1926 (Mises Institute), so if Somary met Keynes at that time, the quote can be dated to 1926. However, it is often dated to 1927, for example in another account of this statement by Keynes is given in "Business Cycles from John Law to the Internet Crash" by Lars Tvede, Second Edition, London and New York: Routledge, 2001, ISBN 0-415-27050-2, p. 108, which appears to be based on Somary's account, but with some variations:
"While Keynes' views gained popularity, so did the Austrian school, which gradually gained more adherents as students from Vienna University grew up and got important jobs. One of these was Felix Somary, who had studied under Mises. As a student Somary had been especially interested in business cycle theories, and in 1901 he had won a prize for a paper on Juglar's theories and economic crises. Somary became an investment banker in Zürich. On September 10, 1926 he gave a speech at the University of Vienna. It was a very strange experience for some of his audience, because although the economy was booming and everything appeared as rosy as ever, Felix Somary predicted that the boom would end "with the bankruptcy of governments and the destruction of banks".
In 1927 he met Keynes. Keynes asked Somary what he was recommending his customers to do. Somary answered:
"To maintain the best possible protection against the coming world crises and to avoid the markets"
But Keynes was very bullish and responded:
"We will not have any more crashes in our time"
Then he asked Somary about several specific stocks, and added:
"I find the markets very interesting, and the prices low. So where should a crisis come from?"
"From the difference between expectations and reality. I have never before seen such clouds approaching in the horizon."
But the stock market kept climbing..."
"I cannot help but raise a dissenting voice to statements that we are living in a fool's paradise, and that prosperity in this country must necessarily diminish and recede in the near future."
- E. H. H. Simmons, President, New York Stock Exchange, January 12, 1928
"There will be no interruption of our permanent prosperity."
- Myron E. Forbes, President, Pierce Arrow Motor Car Co., January 12, 1928
"No Congress of the United States ever assembled, on surveying the state of the Union, has met with a more pleasing prospect than that which appears at the present time. In the domestic field there is tranquility and contentment...and the highest record of years of prosperity. In the foreign field there is peace, the goodwill which comes from mutual understanding."
- Calvin Coolidge December 4, 1928
"When the financial and business history of 1929 is finally written, developments of the past fortnight will occupy a prominent place in what will doubtless be the chronicle of an exceptionally brilliant twelve month period."
- The New York Times, July 1929
"It becomes increasingly evident that, in many respects, 1929 will be written into the commercial history of the country as the most remarkable year since the World War in point of sustained demand for goods and services."
- The New York Times, August 1929:
"There may be a recession in stock prices, but not anything in the nature of a crash."
- Irving Fisher, leading U.S. economist , New York Times, Sept. 5, 1929
"Stock prices will stay at high levels for years to come, says Ohio economist"
- The New York Times, II, Page 7, Col. 2, Oct 13, 1929
"Stock prices have reached what looks like a permanently high plateau. I do not feel there will be soon if ever a 50 or 60 point break from present levels, such as (bears) have predicted. I expect to see the stock market a good deal higher than it is today within a few months."
- Irving Fisher, Ph.D. in economics, Oct. 17, 1929
The market went into decline until Monday, October 21st, 1929
"He dismissed yesterday's break in the market as a 'shaking out of the lunatic fringe that attempts to speculate on margin.'"
- Irving Fisher, The New York Times, Oct. 22, 1929
"security values in most instances were not inflated"
"The nation is marching along a permanently high plateau of prosperity"
"any fears that the price level of stocks might go down to where it was in 1923 or earlier are not justified by present economic conditions"
- Irving Fisher, speech to a banking group, Oct. 23, 1929
"This crash is not going to have much effect on business."
- Arthur Reynolds, Chairman of Continental Illinois Bank of Chicago, October 24, 1929
Flashback to "Black Thursday," Oct. 24, 1929:
Stocks opened moderately steady in price, but traders whose margins were exhausted began selling heavily... at one o'clock the stock ticker was recording prices from half past eleven... stocks dropped 11% intra-day... After a bankers' consortium sent NYSE Vice President Richard Whitney to the stock exchange floor to offer to purchase in the neighborhood of twenty or thirty million dollars' worth of stock at the previous selling price [most likely above their quotations], the market eventually closed with only a 2% loss.Reference: xroads.virginia.edu/~HYPER/ALLEN/ch13.html - Only Yesterday: An Informal History of the 1920's, Frederick Lewis Allen, Chap. XIII (site gone)
Available as a paperback, ISBN-10: 160444519X, ISBN-13: 978-1604445190
Not long after, the stock market plummeted in two days of panic: October 28 became known as "Black Monday" (13.47% decline in the Dow), and October 29 as "Black Tuesday" (11.73% decline in the Dow). Between October 23rd and November 13th, 1929, the Dow fell by 39%.
"There will be no repetition of the break of yesterday... I have no fear of another comparable decline."
- Arthur W. Loasby (President of the Equitable Trust Company), quoted in NYT, Friday, October 25, 1929
"We feel that fundamentally Wall Street is sound, and that for people who can afford to pay for them outright, good stocks are cheap at these prices."
- Goodbody and Company market-letter quoted in The New York Times, Friday, October 25, 1929
"The fundamental business of the country, that is production and distribution of commodities, is on a sound and prosperous basis."
- President Herbert Hoover, October 25th, 1929
"They have lost a few tail feathers but in time they will grow again, longer and more luxurious than the old ones." - The Wall Street Journal, between Oct 24 and Oct 29, 1929
"The investor who purchases securities at this time with the discrimination that as always is a condition of prudent investing may do so with confidence."
- New York Times, October 28, 1929
"This is the time to buy stocks. This is the time to recall the words of the late J. P. Morgan... that any man who is bearish on America will go broke. Within a few days there is likely to be a bear panic rather than a bull panic. Many of the low prices as a result of this hysterical selling are not likely to be reached again in many years."
- R. W. McNeel, market analyst, as quoted in the New York Herald Tribune, October 30, 1929
"Buying of sound, seasoned issues now will not be regretted"
- E. A. Pearce market letter quoted in the New York Herald Tribune, October 30, 1929
"Some pretty intelligent people are now buying stocks... Unless we are to have a panic -- which no one seriously believes, stocks have hit bottom."
- R. W. McNeal, financial analyst in October 1929
"The decline is in paper values, not in tangible goods and services...America is now in the eighth year of prosperity as commercially defined. The former great periods of prosperity in America averaged eleven years. On this basis we now have three more years to go before the tailspin."
- Stuart Chase (American economist and author), NY Herald Tribune, November 1, 1929
"Hysteria has now disappeared from Wall Street."
- The Times of London, November 2, 1929
"The Wall Street crash doesn't mean that there will be any general or serious business depression... For six years American business has been diverting a substantial part of its attention, its energies and its resources on the speculative game... Now that irrelevant, alien and hazardous adventure is over. Business has come home again, back to its job, providentially unscathed, sound in wind and limb, financially stronger than ever before."
- Business Week, November 2, 1929
"...despite its severity, we believe that the slump in stock prices will prove an intermediate movement and not the precursor of a business depression such as would entail prolonged further liquidation..."
- Harvard Economic Society (HES), November 2, 1929
"... a serious depression seems improbable; [we expect] recovery of business next spring, with further improvement in the fall."
- HES, November 10, 1929
"The end of the decline of the Stock Market will probably not be long, only a few more days at most."
- Irving Fisher, Professor of Economics at Yale University, November 14, 1929
"In most of the cities and towns of this country, this Wall Street panic will have no effect."
- Paul Block (President of the Block newspaper chain), editorial, November 15, 1929
"Financial storm definitely passed."
- Bernard Baruch, cablegram to Winston Churchill, November 15, 1929
"I see nothing in the present situation that is either menacing or warrants pessimism... I have every confidence that there will be a revival of activity in the spring, and that during this coming year the country will make steady progress."
- Andrew W. Mellon, U.S. Secretary of the Treasury December 31, 1929
"I am convinced that through these measures we have reestablished confidence."
- Herbert Hoover, December 1929
"[1930 will be] a splendid employment year."
- U.S. Dept. of Labor, New Year's Forecast, December 1929
"For the immediate future, at least, the outlook (stocks) is bright."
- Irving Fisher, Ph.D. in Economics, in early 1930
"...there are indications that the severest phase of the recession is over..."
- Harvard Economic Society (HES) Jan 18, 1930
"There is nothing in the situation to be disturbed about."
- Secretary of the Treasury Andrew Mellon, Feb 1930
"The spring of 1930 marks the end of a period of grave concern...American business is steadily coming back to a normal level of prosperity."
- Julius Barnes, head of Hoover's National Business Survey Conference, Mar 16, 1930
"... the outlook continues favorable..."
- HES Mar 29, 1930
"... the outlook is favorable..."
- HES Apr 19, 1930
"While the crash only took place six months ago, I am convinced we have now passed through the worst -- and with continued unity of effort we shall rapidly recover. There has been no significant bank or industrial failure. That danger, too, is safely behind us."
- Herbert Hoover, President of the United States, May 1, 1930
"...by May or June the spring recovery forecast in our letters of last December and November should clearly be apparent..."
- HES May 17, 1930
"Gentleman, you have come sixty days too late. The depression is over."
- Herbert Hoover, responding to a delegation requesting a public works program to help speed the recovery, June 1930
"... irregular and conflicting movements of business should soon give way to a sustained recovery..."
- HES June 28, 1930
"... the present depression has about spent its force..."
- HES, Aug 30, 1930
"We are now near the end of the declining phase of the depression."
- HES Nov 15, 1930
"Stabilization at [present] levels is clearly possible."
- HES Oct 31, 1931
"Executive Order 6102 Forbidding the Hoarding of Gold Coin, Gold Bullion and Gold Certificates
By virtue of the authority vested in me by Section 5(b) of the Act of October 6, 1917, as amended by Section 2 of the Act of March 9, 1933, entitled "An Act to provide relief in the existing national emergency in banking, and for other purposes", in which amendatory Act Congress declared that a serious emergency exists, I, Franklin D. Roosevelt, President of the United States of America, do declare that said national emergency still continues to exist and pursuant to said section to do hereby prohibit the hoarding of gold coin, gold bullion, and gold certificates within the continental United States by individuals, partnerships, associations and corporations and hereby prescribe the following regulations for carrying out the purposes of the order...
All persons are hereby required to deliver on or before May 1, 1933, to a Federal Reserve bank or a branch or agency thereof or to any member bank of the Federal Reserve System all gold coin, gold bullion, and gold certificates now owned by them or coming into their ownership on or before April 28, 1933, except the following:
1. Such amount of gold as may be required for legitimate and customary use in industry, profession or art within a reasonable time, including gold prior to refining and stocks of gold in reasonable amounts for the usual trade requirements of owners mining and refining such gold.
2. Gold coin and gold certificates in an amount not exceeding in the aggregate $100.00 belonging to any one person; and gold coins having recognized special value to collectors of rare and unusual coins.
3. Gold coin and bullion earmarked or held in trust for a recognized foreign government or foreign central bank or the Bank for International Settlements.
4. Gold coin and bullion licensed for the other proper transactions (not involving hoarding) including gold coin and gold bullion imported for the reexport or held pending action on applications for export license..."
Franklin D. Roosevelt
April 5, 1933
A whole raft of prognostications in classic style from Indian commentators
on the 265 point (3.1%) crash in the Sensex on Thursday 22nd Sep 2005:
"At 8,000 points, when we were all smiling, I see no reason for long faces when the Sensex is at 8,200... Such a correction was needed and has come... Wise investors who were either sitting on cash or had bought fundamentally good stocks have no cause for worry. It is the people in the penny stocks - they are not investors but speculators - who have been caught on the wrong foot."
- Parag Parikh, Chairman of the Mumbai-based Parag Parikh Financial Advisory Services
"...good pressure release in a market that had been overbought. Another 200-250 point fall should not worry investors who are invested in top-rung companies because fundamentally nothing has changed for the good companies..."
- Sandeep Shenoy, Strategist at Pioneer Intermediaries Pvt Ltd
"...inevitable and a welcome shakeout from which good is bound to come... The market is bound to bounce back for those who are invested in quality; but for those holding kachhra [garbage] stocks, there is going to be no tomorrow"
- Arun Kejriwal, Director of KRIS
"There is no need to panic"
- Sebi Chairman M. Damodaran
"There is no scam in the market, but there could be one or two 'adventurous' players in the market"
- Finance Minister P. Chidambaram
"We have had a long run so far, so this correction was long overdue."
- Vibhav Kapoor, Chief Investment Strategist, IL&FS
The Indian Express, Sep. 24 2005:
Day after, Sensex swings to end flat
The Hindu Business Line, Sep. 23 2005:
'Market fall a welcome shake-out'
"The U.S. economy is, by all appearances, starting to purr like a well-tuned engine"
- CNN Money, August 14, 2003
"I think all the stars are aligned for the economy to pick up...
It's been growing, it just hasn't been growing fast enough to create new jobs
but I think the tax package on top of easy money will probably kick it over...
I think there's so much slack that we can have very large rates of growth without it causing a problem...
Very likely the backup in rates recently reflects a better expectation about the economy
and if you expect the economy to start growing, you can't have those interest rates as
low as they had gotten..."
- Dallas Federal Reserve President Robert McTeer, on CNNfn's Money Morning program, July 22 2003
"The US economy is coiled like a spring and ready to go"
- US Treasury Secretary John Snow, in an interview with The Times, July 17, 2003
It's not just boosterism: the US upturn is for real--Times Online
It's not just boosterism: the US upturn is for real--Times Online [mirror]
"We do believe there is quite a bit of evidence that we are in the early stages of an economic recovery period"
- Treasury Secretary Paul O'Neill, at a meeting of business leaders and officials from the Chicago futures and options exchanges, Monday February 25, 2002.
"First quarter GDP growth would be quite modest. Second quarter GDP growth a little bit more robust, and then
very robust in third and fourth quarters... The recovery will be under way throughout the year"
- Glenn Hubbard, chairman of the White House Council of Economic Advisers, Thursday January 24, 2002.
"We believe that the fundamentals are in place for a return to ... a 3 percent to 3.5 percent real rate of growth, clear, as we move through the 12 months of this year...
I think the balance is now decidedly on the positive side and I think it foretells movement back into significant positive growth as we go through the year"
- U.S. Treasury Secretary Paul O'Neill, at an annual meeting of the National Retail Federation, Tuesday January 15, 2002.
"We're probably a little closer to the end (of the recession) than we are the beginning. There are the signs that we're beginning to turn the corner"
- Commerce Secretary Donald Evans, in an interview with NBC's ''Meet the Press'', Sunday January 13, 2002.
"It is too early to pick a precise date for the recession trough, but there is a bottoming out feel to the data"
- Federal Reserve Bank of St. Louis President William Poole, Friday January 11, 2002.
"So what stocks should you buy?... In energy, Cohen favors industry leader Enron.
The stock has stumbled lately, and she now sees it as a "good value."
She also singles out AOL Time Warner (MONEY's parent) as a "content-rich global leader"
in the media business..."
- "Guru" Abby Joseph Cohen, Chief U.S. portfolio strategist at Goldman Sachs
2001 Ultimate Investment Club, Business 2.0, October 2001 Issue
"Over maybe the next year, I certainly expect it (U.S. economic growth) to return to those kind of levels of (potential) growth" [between 3.0 percent to 3.5 percent]
- US Commerce Secretary Don Evans to a Washington news conference, Wednesday August 29, 2001.
"[the country is] on the edge of a golden age of prosperity...
I think we're not doing badly for the kind of correction that we're in right now...
It's easy to find gloom and doom, but consumers are hanging in there, their spending rates are still quite good...
The contraction occurred ... in the investment sector, where we had an overexpansion."
- Treasury Secretary Paul O'Neill, on ABC's "This Week.", Sunday June 24, 2001.
Treasury Secretary Sees 'Golden Age' (Wayback machine archive of www.foxnews.com/story/0,2933,28015,00.html, Aug 22 2010
Treasury official predicts 'golden age of prosperity'
O'Neill says Fed's aggressive rate cuts have not had impact
"Despite the current slowdown, however, intermediate and longer-term prospects for the U.S. economy are still very bright"
- Federal Reserve Bank of Richmond President Alfred Broaddus, in a speech to the Virginia Housing Coalition, June 14, 2001.
"The U.S. has entered a new era of wealth that is only beginning"
- Economist Brian Wesbury (who published a book titled "The New Era of Wealth" in October 1999), Wall Street Journal, October 21st, 1999.
References and Further Reading:
Note: Without an authoritive source such as a newspaper from the relevant era, or a learned journal,
or a book, or traceable reference with ISBN or Library of Congress numbers, prudent skepticism
should always be applied to quotations found on the internet.
You are encouraged to do your own research, and check references for yourself.
"Only Yesterday" by Frederick Lewis Allen and "The Great Crash 1929" by John Kenneth Galbraith (mainly HES quotes) [thanks to Susan J. Barretta]
Bang! went the doors of every bank in America (Wayback machine archive of www.smithsonianmag.com/history-archaeology/banks-abstract.html, Jan 8 2011)
"... on March 6, 1933, Franklin Roosevelt, just sworn in for his first term as President, suddenly shut all 18,000 banks in America, aiming to overhaul them as fast as possible, and so reestablish people's faith in government and America's banking system..."
Liberalism at High Noon: The New Deal (Wayback machine archive of us.history.wisc.edu/hist102/lectures/lecture19.html)
"... when the banks reopened, the American public entrusted them with their money once more, which actually made the banks solvent. Merely by restoring public confidence in the banking system of America, Roosevelt saved it..."
Understanding How Glass-Steagall Act Impacts Investment Banking and the Role of Commercial Banks
"... by 1933 the U.S. was in one of the worst depressions of its history. A quarter of the formerly working population was unemployed. The nation's banking system was chaotic. Over 11,000 banks had failed or had to merge, reducing the number by 40 per cent, from 25,000 to 14,000. The governors of several states had closed their states' banks and in March President Roosevelt closed all the banks in the country..."
BANKING ACT OF 1935
"... to provide for the sound, effective, and uninterrupted operation of the banking system, and for other purposes..."
Main Causes of the Great Depression [Gusmorino, Paul A., III., (May 13, 1996)] (mirror of www.gusmorino.com/pag3/greatdepression/index.html)
Main Causes of the Great Depression, Paul Alexander Gusmorino 3rd : May 13, 1996 - Wayback machine archive of www.gusmorino.com/pag3/greatdepression/index.html, Mar 13 2015
Citations and Back Links
Request for quote/attribution from Marc Faber, www.gloomboomdoom.com, 22nd March 2008 (whether it was used, is not known)
Linked on www.pgtigercat.com by Gale Bullock (AKA Ole Bear). The site is gone - changed ownership, but see the following articles:
Stock market news today; understand market Manipulation first
The Dow has never been in a true bear market. True or False?
Eco-Economy: The Toy Boys of Fraud…)
Gale Bullock: Weekend Reading On Realty Reality
Activism, Effrontery and Moral Decay
Roundtable: Have Central Banks Won the War on Gold?
Cited at home.golden.net/~pjponzo/1929-crash.htm June 2001 by Peter Ponzo (site gone)
"I've posted a link to your chart of Pompous Prognosticators at Prudent Bear and it was a big hit." (14 May 2001)
- Susan J. Barretta (beartopia.net) - Also provided more quotes for Pompous Prognosticators chart (cited above).
Listed on beartopia Opinion page as "Colin's Financial Pages" - Wayback Machine archive, Feb 10 2002
Sonja L. Myhre (economist at the Federal Reserve Bank of San Francisco), May 2001:
"...I very much like your chart on pompous stock market prognaticators [sic]..."
Book: L'ABC...per perdere il vostro denaro -
Breve indagine sul masochismo economico degli italiana, alla ricerca di emozioni più sane.
By Simone Mariotti
(The ABC ... to lose your money - Short survey on the economic masochism of Italians, in search of healthier emotions. By Simone Mariotti)
"On the unreliability of past performances now there is such a literature that further discussion becomes boring ... Going much further back in time, a nice collection of statements at the time of the 1929 crisis is..."
A Storm Unforeseen, Always About to Pass - THE NEW YORK TIMES, OCT. 11, 2008
Used as source material for this article, request for excerpt permission received from Chris Conway, Fri, 10 Oct 2008
Cited on blueworksbetter.com/1929CrashPredictions by Manny Goldstein, Jan 2006 (site gone)