COLUMNISTS General Electric, bellwether of corporate America, has cut its dividend – its first reduction since 1938. This year we will probably see the largest reduction in dividends since 1938. But 1938 is not generally remembered as a remarkable year in economic history. What happened?
An explanation takes us back to the history of the Great Depression, as recounted entertainingly by J.K. Galbraith and influentially by Ben Bernanke, chairman of the US Federal Reserve. The Wall Street crash of 1929 was not, initially, a dramatic event: by the standards of more recent history, the share price correction was modest. What was remarkable was that the share price decline went on and on. By 1933, US equities had lost three-quarters of their 1929 value.
