And it is also hard to re-create that storm which passed over America in 1929,
which conditioned the real history of the 1930s.… The image of the
American dream was flawed and cracked; its critics had never sounded so
persuasive.3
That storm was not fully unexpected. In October 1928, during the presidential
election campaign and a year before the 1929 crash, Alexander Dana Noyes,
financial editor of the New York Times, wrote:
An observant traveler, returning from a recent tour of the United States,
remarked that conversation on the trains and in the hotel sitting-rooms, after
directing itself in a perfunctory way to the political campaign, would always
turn with real animation to the stock market. Another testifies that even the
conversation of women which he happened to overhear, would sooner or later
be absorbed in discussion of their favorite stocks. Something like this was
observed in 1925, in 1920 and particularly in 1901.… In one respect,
however, the present situation differs strikingly from all the others. On all
these previous occasions sober financiers, perhaps believing that some
entirely new economic force had upset accepted precedent, kept silence,
hesitating to predict collapse of the speculation. In this present season, on the
contrary, conservative opinion has frankly and emphatically expressed the
unfavorable view. In a succession of utterances by individual financers [sic]
and at bankers’ conferences, the prediction has been publicly made that the
end of the speculative infatuation cannot be far off and that an inflated market
is riding for a fall.4
Clearly, evidence of speculation was available to the public, which read about
it in the news and talked about it on train cars. For example, in the year before its
1929 peak, the US stock market’s actual volatility was relatively low. But the
implied volatility, reflecting interest rates and initial margin demanded by
brokers on stock market margin loans, was exceptionally high, suggesting that
the brokers who offered margin loans were worried about a big decline in the
stock market.5
So the evidence of danger was there in 1929 before the market peak, but it
was controversial and inconclusive. A high price-earnings ratio for the stock
market can predict a higher risk of stock market declines, but it is not like a
professional weather forecast that indicates a dangerous storm is coming in a

matter of hours. Most people will heed that kind of storm warning. However, in
1929 a great many people did not heed the warning communicated by the high
price-earnings ratio. After the crash, many of them must have remembered the
warnings and wondered why they had not listened.
FIGURE 16.1. Frequency of Appearance of Stock Market Crash in Books, 1900–2008, and News, 1900–2019
This graph shows extreme short epidemics in 1929 and 1987 in news, with a long-lagged response in books.
Sources: Google Ngrams, no smoothing, and author’s calculations from ProQuest News & Newspapers.
As Figure 16.1 shows, the stock market crash narrative shot up with such
strength in 1929 that it persists today, though more in books than in newspapers.
The epidemic of stock market crash, which even today generally refers to 1929,
seems to have begun weakly in 1926, several years before the actual crash of
1929, but it was not taken seriously. In newspapers, there were two fast
epidemics, each peaking within a year, implying very strong short-run contagion.
The first assumed massive proportions in 1929 with the record 12.8% one-day
drop in the Dow Jones Industrial Average on October 28, 1929, and a further
drop the next day. The second started on October 19, 1987, when the Dow
experienced a 22.6% drop (almost double the percentage of the October 28,

1929, drop, though falling short of the two-day drop in 1929). Apart from the
1987 drop, no other stock price movement since 1929 has been widely called a
crash. Why? As we’ve seen, newspapers are very focused on records,
presumably because their readers are, and 1987 was the only record one-day
drop after 1929. Folklore suggests that the stock market epidemic generated
extremely high contagion in 1929. We know there was high contagion in the
days before October 19, 1987, too. Stories involving the news media and
investors brought to mind and amplified the story of the 1929 crash.6
The 1987 crash appears to be a flashbulb memory event (see chapter 7), like a
sudden bombing attack, an automobile accident, or a declaration of war, and thus
it is not easily forgotten. But after decades its story no longer seems to fit into
any lively narrative constellation, and hence it is no longer virulent.