USA Financial Markets Collapse: Impact on Europe Uncertain

Following a short lived rally after the disastrous 11% market decline of October 24th, the American financial markets collapsed on the 29th. Lead downward by the stock exchange in New York, which lost another 13% of its market value on the 28th followed by a further 11% decline the next day, American investors went on a panicked selling spree that evaporated over $30B(US) of market value in less than two days. American financiers, among them the Rockefellers and the Durants, were said to be purchasing vast amounts of equities in an effort to stabilize the markets, but stock prices continued to decline at a record pace on record volumes.

The scene on New York's Wall Street as the US stock
markets collapsed on October 29th.
(AP Photo)

Internationally the price of gold soared to $120 (US) per ounce from its pre-crash price of $80 (US) and European bourses fell slightly as investors, banks and governments began to assess the damage. In London, noted economist John Maynard Keynes issued a statement saying that, "The extraordinary speculation on Wall Street in past months has driven up the rate of interest to an unprecedented level." He went on to suggest that the crash was only a severe correction to these speculative excesses and that once the speculators had been "driven out" prices would quickly stabilize at a sustainable level.

In Germany, reaction was muted but concern over the value of investments in American stocks and the effect on American imports of German products was beginning to take hold. Economics Minister Robert Schmidt released a statement yesterday urging calm and echoing Keynes earlier statement that the precipitous decline was merely a correction and that princes would soon stabilize.

Economics Minster Robert Schmidt
arrives for a Cabinet meeting on
October 29
(AP Photo)

Meanwhile in Washington, US President Herbert Hoover reiterated his strong support for the pending Hawley-Smoot Tariff Bill, which is expected to raise US import duties on over 20,000 agricultural and industrial products, including many from Germany, to near record levels. Canada, Britain, France and Germany have been strongly urging the measure not be adopted, but it is poised for final passage by the US Senate in the next few weeks. Hoover's statement that the market downturn would not change his support for the bill is said to have depressed prices further on the 29th, with investors concerned about Canadian and European retaliation. German President Paul von Hindenberg had made a personal appeal to Hoover to reconsider his support for the legislation but to no apparent effect.

With one more trading day before the markets close for the weekend, the eyes of the world are on Wall Street and the American President. As calls for calm seemingly fall on deaf ears, investors have moved from nervousness to a full scale panic, suggesting that the "hands off" approach favored by most governments and economists is not having a salutary effect.

German markets have declined an average of 6% over the past 2 days.