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Quote of the Day

“Lenin is said to have declared that the best way to destroy the Capitalist System was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security, but at confidence in the equity of the existing distribution of wealth. … Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”

 

— John Maynard Keynes, in his 1919 book, The Economic Consequences of the Peace The book became a best seller and vaulted Keynes into one of the world’s most famous economists. The book strongly criticized the peace treaty between Germany and the Allies, and unfortunately proved true. After learning the lessons from the Treaty that ended World War 1, the Marshall plan, enacted after the end of World War 2 would be largely based on Keynes’ ideas.

 

 

November 7th – This Day in Stock Market History

 

1918 – At noon, a news flash comes across the wire:

“GERMANY GIVES UP. WAR ENDS.”

Euphoria erupts throughout the country and the New York Stock Exchanges closes at 2pm to celebrate. However, the news would prove false. German officials were traveling to meet with Allied commanders, but an armistice would not be signed until November 11th.

New York Times coverage of a false report that closed the NYSE on November 7th 1918
New York Times coverage of a false report that closed the NYSE on November 7th 1918

 

The Dow Jones Industrial Average would close up 1.14% on the news before the exchange closed. The post war rally would last a few months, but as government spending subsided and factories laid off jobs, the U.S. economy would struggle for several years. The U.S. economy would quickly enter a recession after the end of World War 1 and the stock market would decline more than 45% before bottoming in 1921.

Chart from Macrotrends
Chart from Macrotrends




Best November 7th in Dow Jones Industrial Average History

1940 – Up 4.37%, 5.77 points

 

Worst November 7th in Dow Jones Industrial Average History

1930 – Down 3.51%, 6.34 points.

 

 

Read of the Day

Besides being one of the world’s most famous economists, John Maynard Keynes was also a very successful investor. We have a post about Keynes’ fascinating journey as an investor, which included multiple failures that nearly left him bankrupt. Learn from his lessons here:

John Maynard Keynes – The Evolution of a Super-Investor