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WARREN BUFFET STORY PART 4 | The Buffett Family during the Great Depression

Updated: Jul 28, 2023

The Great Depression began on Black Thursday, October 24, 1929. How did Americans survive during those trying times? What effect did it have on the world and America? What changes did the United States make afterward? Let's continue to look at the family's journey, which we also covered in the previous article.

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Let's go back in time to find out.

A wave of bankruptcies similar to this swept the country during the winter of 1929.

A few wealthy individuals who had been enjoying a week-long vacation at sea on their yachts were informed by their banks that they had gone bankrupt when they returned to land. Anyone who borrowed money to purchase stocks, including the wealthy, went bankrupt overnight.

The entire Western US economy was in a deep depression, and even the banks went bankrupt. Indirectly impacted at the time were China, Japan, and even Europe.

Based on his observation that "he saw many people holding bundles of stock and seeking buyers, but their stocks had long since declined by more than half, if not more, and no one dared to take any more stock," the author of the report wrote.

The year 1930 saw the highest suicide rate in American history.

America suddenly had a large population of poor people because everyone had lost their possessions. To save money, they had to do things like sharpen their razors, sew up their torn clothing, and mend their torn shoes. They also had to switch out their lightbulbs for energy-efficient ones.

The streets were crowded with people waiting for relief supplies. Even the bakery was crowded with people who stayed all night waiting for a few stale loaves of bread.

When the stock market crashed, Howard Buffett—a stockbroker at the time—hid at home and dared not confront his clients. Due to the stress of life, his wife Leila fell ill for a very long time and came close to passing away. Warren was born in a time and place when everyone was in a desperate state, and the world was so depressed.

Social issues of all kinds started to emerge. Due to their family's financial instability, about three million high school students had to quit. The number of unemployed people in the country increased to eight million; among them, some were unable to handle the physical and mental suffering at the same time and committed suicide; the remaining citizens also contributed to the social unrest at the time.

The Great Depression lasted for four years, and the United States and the United Kingdom were affected by the crisis. Since there was no immediate use for bankers to save the market, there were more unemployed people than there were previously.

The U.S. stock market could experience a brief bear market for up to 25 years as a result of this stock market crash. The stock index did not gradually climb back to its September 3, 1929 level until 1954.

Americans had 25 years to consider the unprecedented destruction caused by the stock market crash. The Securities Act of 1933, the Securities Exchange Act of 1934, the Stock Ownership Act of 1935, the Trust Indenture Act of 1939, the Investment Company Act (including the Investment Advisers Act of 1940), and other relevant laws were created by Congress as legislative corrective measures to regulate the U.S. financial market from the very beginning.

A strong foundation for the ensuing stock market revival and a brand-new set of rules which was going to be relevant for Warren Buffett in the future. They were laid through a series of control measures to establish a thorough and tight management network for the entire U.S. securities market.

How did the Buffett family survive such dark times? We'll share more on that in the next article!

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