1928 Stock Market Crash


“Surely you mean 1929,” I hear you thinking? But there were many such market panics. Events in 1928 carefully elided from college History curricula caused a stock market crisis it would be more awkward to explain than ignore.

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But three pertinent facts coincided with a stock market “shake out” in November/December of 1928. President-elect Herbert Hoover was on a US battleship meeting with a delegation of Bolivian cabinet officials and congressmen after an October drug law became effective there. Paraguay and Bolivia were breaking off diplomatic relations and going on a war footing. Treasury agents in charge of federal narcotics investigations turned up huge trunkfuls of narcotics and stimulants belonging to Arnold Rothstein, drug trade kingpin who had been shot early in November.  By mid-November his assets included huge trunks packed with heroin and cocaine and his papers contained the names of magistrates and politicians, and controlling interest in several large corporations and a brokerage house. The stock market went berserk with the largest volume of trading ever recorded when federal agents revealed they’d been investigating Rothstein’s drug operations for the past year. Prices fell so fast the stock ticker lagged an hour and a quarter behind the trading.

That changes in prohibited or tariff-regulated drug markets have repercussion in money markets, national finances and stock exchanges is a topic more often avoided than discussed. Yet none of this is surprising to the Treasury and State Departments.

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