Unhappy anniversary: We had it worse in '29

The stock market's famous Black Tuesday was exactly 80 years ago. Today's investors can be excused if they feel somehow like they witnessed it firsthand.

Most of this decade, the stock market has been in bear territory. The current recession is quite old by historical standards, though believed to be technically over, and foreclosed and vacant homes pockmark the land. So do empty storefronts.

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The Chicago Daily News' extra edition of Oct. 29, 1929.
(File)

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The Dow Jones industrial average recovered more quickly between the fall of 2008 and '09, compared with the fall of 1929 and '30.
(Sun-Times)

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Chart: Bear markets since the 1920s How LaSalle Street bore the Crash

Credit was too freely given before the crisis started, and it may be unjustly denied now, especially to homeowners or businesses trying to restructure debt.

It feels like the Great Depression and hence its informal name, the Great Recession. And yet it's not in the same league.

So far this year, federal authorities have closed 106 banks across the country, a number that's gotten substantial attention. In the early 1930s, 10,000 banks shut down, and that was before the protections of the Federal Deposit Insurance Corp.

The Great Depression shaved about 30 percent from the value of the nation's economic output. The Great Recession has cost about 5 percent.

Unemployment during the 1930s was more than 20 percent. Today, the official rate is 9.5 percent. It might be in the mid-teens if you count people who have given up the job hunt, or taken just part-time work to get by, but by that standard, the figures from 70 years ago probably understate the problem too.

Compared with the Depression, the current crisis is more localized, both in terms of geography and economic sectors, said John Binder, associate professor of finance at the University of Illinois at Chicago. He said it started when home prices, which for years rose faster than people's incomes, couldn't be sustained anymore.

That spread to the financial companies behind the bad mortgages, then to sectors such as retailers or hotels that feel even the slightest letdown in consumer spending. Other industries, such as health care companies or manufacturers that ship goods worldwide, have been less affected.

Another major difference is the government's answer. Many economists believe that the earliest federal responses to the 1929 crash and bread lines made matters worse. Credit was restricted, for example, and the United States instituted tariffs that started a trade war, closing markets to American goods.

This time, government has provided billions of dollars in stimulus funds.

Marshall Front, chairman of the Chicago-based investment advisory firm Front Barnett Associates LLC, said the government pump-priming helped, "But we are going to become an economy that suffers for a long time because of the excesses."

An anecdote about billionaire Joseph Kennedy said that before the 1929 crash, he got a stock tip from a Manhattan elevator operator. Kennedy bailed out of the market, deciding that if even elevator operators were playing it, things were out of hand. The money he saved helped him build the Merchandise Mart, among other things.

The bear markets since the 1920s, as measured by monthly data on the total return of the Standard & Poor's 500 index: