|The Great Crash of 1929
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Rampant speculation. Record trading volumes. Assets bought not because of their value but because the buyer believes he can sell them for more in a day or two, or an hour or two. Welcome to the late 1920s. There are obvious and absolute parallels to the great bull market of the late 1990s, writes Galbraith in a new introduction dated 1997. Of course, Galbraith notes, every financial bubble since 1929 has been compared to the Great Crash, which is why this book has never been out of print since it became a bestseller in 1955.
Galbraith writes with great wit and erudition about the perilous actions of investors, and the curious inaction of the government. He notes that the problem wasn't a scarcity of securities to buy and sell; "the ingenuity and zeal with which companies were devised in which securities might be sold was as remarkable as anything." Those words become strikingly relevant in light of revenue-negative start-up companies coming into the market each week in the 1990s, along with fragmented pieces of established companies, like real estate and bottling plants. Of course, the 1920s were different from the 1990s. There was no safety net below citizens, no unemployment insurance or Social Security. And today we don't have the creepy investment trusts--in which shares of companies that held some stocks and bonds were sold for several times the assets' market value. But, boy, are the similarities spooky, particularly the prevailing trend at the time toward corporate mergers and industry consolidations--not to mention all the partially informed people who imagined themselves to be financial geniuses because the shares of stock they bought kept going up. --Lou Schuler
Of Galbraith's classic examination of the 1929 financial collapse, the Atlantic Monthly said:"Economic writings are seldom notable for their entertainment value, but this book is. Galbraith's prose has grace and wit, and he distills a good deal of sardonic fun from the whopping errors of the nation's oracles and the wondrous antics of the financial community." Now, with the stock market riding historic highs, the celebrated economist returns with new insights on the legacy of our past and the consequences of blind optimism and power plays within the financial community.
- Brilliant study of the Great Crash of 2008 (oops, 1929)
Galbraith's classic study of the Great Crash of 1929 retains all its freshness, and has some lessons for us today, faced as we are with a repeat.
Wall Street was, as usual, betting with other people's money, and they began to believe their own hype, that the US economy had reached a new stage, when prices would always rise.
He observed that the US economy was basically unsound because of huge inequality (the rich have larger shifts in their spending), bad corporate structure (`a kind of flood tide of corporate larceny'), a similarly bad banking structure and bad policy - raising taxes and cutting spending. The government and its tame economists focused on beating inflation, when "instead of inflation the country was experiencing the most violent deflation in the nation's history."
The Harvard Economic Society said in November 1929, "a serious depression like that of 1920-21 is outside the range of probability. We are not facing protracted liquidation." For two more years, the Society forecast recovery. As Galbraith noted, "this view the Society reiterated until it was liquidated."
Wall Street's failure harmed the real economy. In 1938, one in five was still out of work.
Some blamed `mob psychology', but it was not the `mob' that ran the Wall Street casino. The `speculative orgy' of the greedy few ruined everyone's lives.
- review of 1929 crash
tough to follow and gets a bit technical....but notbad to see what happened in the depression years...more info
- Human nature - history is present
A must read to undertand how market responds to various factors and what not to overlook.
Great book to read!...more info
- Good Book
It's not a bad book to be reading right now. I bought this book because i saw Cramer hold it up almost everyday for a month as the stock market was crashing. Sure shows ya how the same things going on right now did the same thing back then. It's kinda been wrote like the text books we all read in school, that Hoovers lack of action was the cause, when now we are looking at FRD's actions made the 1930's depression a great one. That was the only thing i didnt like about the book, guess its to be expected since its first printing was 1954. If your worried about your 401k theres a good chance you might like this book. Another thing this read might do is get you upset at Obama, Bernanke, and Geithner. Guess it depends on what side you stand on....more info
- Everything that rises must converge
When I acquired a copy of "The Great Crash 1929" several years ago, all was well with the American dollar. I'd heard that this was a particularly well written history of a time we never expected to live through again and I am always up for reading well written history. I was inspired to finally take it off the shelf recently by curiosity: how do these things come to pass, how do today's circumstances compare with 1929 and the Depression? I definitely got what I wanted when I purchased the book--fascinating history--and I got the answers to my questions.
The late economist John Kenneth Galbraith was a terrific writer. He merges history, economics and analysis in prose that moves with the rhythms of a novel. He is direct and authoritative--no "maybes," no "perhaps," no need to sort out everyone else's opinions, no academic language belabors his prose. He paints a picture of many forces gathering together and marching resolutely toward the crash: the Florida land boom (from which hatched the original Ponzi scheme), the Florida hurricane, the real estate boom, the lowering of interest rates to accommodate foreign investment, stock market fever on Main Street everywhere, the rise of holding companies teetering on credit, the insistent optimism on behalf of politicians and financial kingpins, the swindlers . . . . He also does a good job sorting through the after effects and debunking some myths (like the suicide rate).
This is an excellent review for the general reader. It may be familiar ground for economics scholars and proponents of unbridled free-marketeering will not be happy with many of Galbraith's conclusions. For me, whose head has long been stuck in the sand when it comes to economics, it was an excellent primer.
- A 50% history book to record the Great Depression !!
This book is very descriptive and fruitful to tell the readers what the whole picture before the Great Crash is. You can understand the overall process flow and what the speculators' mood change. It is somewhat disappointed that there are no more pages to describe the Great Depression.
A brief summary about this book is as follows :
There is a property boom in Florida and easy credit is flooding in anywhere. The atmosphere of margin is terrific. Even the Fed. is pushing the interest rate up, it is surely not a gate to stop the investors / speculators' madness. The holding companies and investment trusts are welcomed by every investor due to insufficient supply of securities. However, behind this irrational exurberance, the uptrend has reached its peak. Uneven distribution of income, bad corporate policy, delayed capital investment from businesses, dubious foreign balance of account, fragile banking structure and poor economic policy are eroding the economy of States. It results in a well-known 'Great Depression in 1929'...more info
- Timeless Classic -- Style A Bit Insouciant
Somebody on comp.software.year-2000 urged me to read this Galbraith volume because, he noted, "the parallels with current economic conditions -- with an out-of-control, logic-defying stock market, and happy-face government posturing in face of obvious disaster -- make it a must read." Fine. I bought this book 2 weeks ago on amazon (I'm a regular) and just finished.
True, the parallels are there. And I highly recommend the work if nothing more than to highlight in the reader's mind the elements of human nature that insure that we will always have depressions -- every 70 years or so ... secula seculorum... but in a small way, I expected more.
I find Galbraith (author of some 20 works on economics) to lack an emotional, visceral style that should have enunciated a polished telling of this critical set of events - (I say "set" because although October 24, 1929, or "Black Thursday" may have set events in motion... the bottom did not come until July, 1932). To borrow from Trekkies, if I may, I felt like I was following a history lesson from a Vulcan history professor. The chronology was well placed and organized, but there was nothing to help me "feel" the event.
Nonetheless, I appreciated the referral and the read. And I think that this work will have even more renewed interest when the world investment community eventually comes to grips with the lack of rationale in supporting stock values whose P/E ratios stretch well into infinity.
Greg Caton Lumen Foods (soybean.com) firstname.lastname@example.org March 14, 1999...more info
- It is a brilliant masterpiece as usual, typical of Mr Galbra
The book provided a good background of the Depression Years when financial crisis was at its most critical. The scenarios depicted have not hitherto been presented elsewhere. It dealt with the cold financial figures as well as the snippets of emotional side of human dramas behind.It is also a tremendously valuable piece of work in terms of its contribution to history on the topic. It should serve as a valuable "BIble" for people working intimately with the financial circles, when they construct their policy - with the Great Crash as a background reminder. As far as the analytical aspect goes, the insightful pronouncements could not have been done more brilliantly by any other author or academician, past or present.
*Did'nt have time to finish, computer lab closing....more info
- Kickin' book! I'm buying more!
Yes, I'm giving several to friends. Entertaining enough to not put my Mom to sleep yet vivid enough to show her the real risks of mutual funds ("Investment Trusts" in 1929). They can't short sell in a down market. They can't go to cash and be safe or they lose people. Anyway, Galbraith does an EXCELLENT vivid job of who did what when, dispells myths, and it's free from today's free-for-all perspective to see how insane we are over stocks....more info
- A great book to read - clear and enlightening!
Galbraith, a great writer has given us a vivid and detailed account of the worst stock market disaster in the US history. He builds up to Black Thirsday beautifully. No need to know economics or stocks just need to have a thirst to know the real truth. Read the book and you will realize that stock market crashes involve not only panics and hysteria but also personal motives at high levels. A must read for all you out there who think that this 1997 market wont crash. The time is 1929 but the lessons are universal...more info
- this is so timely in 2008
reading this work (written in the 1950s, and updated in the 1990s) could be reading about the current world financial situation (in 2008)
- Relevant Again - and Readable as Always
Galbraith wrote The Great Crash in 1954 and he notes in his introduction that every time it was about to go out-of-print a new speculative mania would come along and a new printing would issue. One expects that the 2008 version must be in the works.
Galbraith writes for the general audience, which means he not only leaves out most of the arcane details, but he also writes in an engaging style. Galbraith's view is that the great speculative boom that preceded the Great Crash was fueled by not by easy credit, but rather by a mindset that ignored risk and assumed that the market would go ever upwards - in short, a mania. The leverage that helped raise the market to unknown heights, particularly buying on the margin, also built in the means for the sudden collapse. Once the market nosed over, margin calls went out, some were met, many were not, and the market tumbled faster and farther. Galbraith demonstrates that many leaders held onto a `boundless optimism' long after any rational support for such a view had disappeared.
Galbraith's main focus is on the market speculation and its collapse, but he also takes the view that the stock market collapse did in fact contribute greatly to the cause of the Great Depression. Galbraith asserts that the economy was not in strong shape before the stock market collapse. He likens the Great Crash to `typhoon which blew out of lower Manhattan'. The crash in the market struck the rich especially hard and because wealth was so concentrated the subsequent shrinkage in spending and investment by the rich caused serious damage to the economy. While we have significant safeguards in place today that did not exist in the 1930's, we also once again have a concentration of income and wealth eerily comparable to the pre-depression era.
Highest recommendation. Well-written, well-argued, and timely (once again). Readers may also appreciate Galbraith's equally readable A Short History of Financial Euphoria (Whittle)...more info
I started reading this book the day before the most recent crash started. Every night I picked it up, and it mirrored the current events so closely, that it was more than a little scary. Why won't we learn from the mistakes of the past?...more info
- The Great Crash 1929
I wish that I had purchased another book. This is not a good book at all...more info
- Human Nature: Economy and.
Given the recent turmoil in world financial markets, it is hardly surprising that, from the rubble, an army of economic pundits has arisen, replete with historical parallels and a cookbook of remedies for the mess. Being of a cynical disposition, I favor those pundits who reinforce my own certainties that perfidy, greed, speculation, lack of regulatory oversight and failed government policies are at fault for the current debacle. I found validation in "The Great Crash, 1929".
John Kenneth Galbraith, is a "giant" in the field. In this book, he identified five salient weaknesses of the 1920s economy that appear to me to be strangely evocative of the current financial crises. These are: 1). Gross inequalities in income distribution, with a tiny fraction of the
population owning the vast majority of the wealth. The level of CEO compensation nicely illustrates this point (it's nearly 350 times that of the average "prole"), 2). Flawed corporate structure, one in which, "American enterprise in the twenties had opened its hospitable arms to an exceptional number of promoters, grafters, swindlers, impostors and frauds". The analogy to the present is perhaps to hedge fund managers, short-sellers, leveraged traders, purveyors of derivatives and "sub-prime" mortgages and real estate speculators, some of whom appear to share these characteristics, 3). Bad banking structure, enabled, in part, by Congress rescinding Depression-era legislation separating commercial from investment banks and by allowing unregulated investment activity on a large scale. Other components extend to failure of the SEC to regulate mortgage instruments, "naked" short selling, government-mandated requirements for the use of "fair value accounting". I'm sure there are others., 4). "Dubious" state of foreign balance. Now (in a reverse of the situation in the 1920s), the US is the chief borrower nation, with the preponderance of debt held by foreign governments (chiefly Asian and increasingly Middle Eastern) and, 5). The poor state of economic intelligence. In the present crisis, I take "intelligence" to mean "smarts", rather than access to accurate and timely data. It might also be taken to mean "responsibility". An example of lack of "smarts" might be E. Stan O'Neal of Merrill Lynch who blandly asserted his lack of understanding of "derivatives" as an excuse for his firm's demise, while allowing their purchase and sale. Dick Fuld of Lehman is a nice illustration of lack of responsibility. His activities destroyed a perfectly goodfirm, yet, he still serves as Lehman CEO (note: the current Lehman is a 14 year-old company, spun off from American Express, so don't wax too nostalgic about the demise of a "150 year-old firm").
Yes, it seems obvious that regulation will be required as, left to their own devices, the "masters of the universe" will continue to refine and evolve their penchant for making lots of money by devising new financial instruments, which will lie outside the latest regulatory umbrella. Yes, people will live beyond their means, if given the option and easy credit is an enabler. This all seems to be part of human nature. Yes, it's a mess. However, it is unlikely to be "a national disaster for the United States". It's just business. However, you never know......more info
- EXCELLENT INTRODUCTION TO THE 1929 CRASH
There are bigger and more detailed accounts of the 1929 Crash, but Galbraith's effort is excellent at distilling and depicting what happened and why. It's a great place to begin a study of the Great Depression. I was surprised at how well Galbraith wrote, and his command of the subject. None of it is difficult to grasp, which is why it's a great place to begin. ...more info
- 4.5 Stars-Galbraith could have gotten 5 stars if he had integrated the ancient wisdom of Adam Smith into his book.
Galbraith does an excellent job in demonstrating how the private sector commercial bankers' unregulated short run,short sighted, penny wise ,pound foolish profit and sales maximizing behavior provided the financing and leverage for the real estate and stock market bubbles of the mid to late 1920's that led to the financial collapse of the DOW by mid 1931.The writing and analysis is excellent.
I have one major criticism.No mention is made of the analysis provided by Adam Smith of precisely the problem discussed by Galbraith in this book. Smith's analysis covers nearly 100 pages and correctly identifies what the problem is-loans made by private commercial banks to 3 different categories of borrower-prodigals,imprudent risk takers(the "new" balloon payment financing of the 1925-1928 real estate bubble closely resembles the sub prime and alternative- A loans of the 2003-2006 period).Galbraith certainly could have used the analysis provided by Smith on pp.250-340 of The Wealth of Nations [1776;Modern Library (Cannan)edition] to buttress his position . Unfortunately,it appears that Galbraith never read Smith's book. He could have made use of the support provided by Smith,universally acknowledged as the world's greatest economist. The WN is a timeless classic that is just as applicable and relevant today as it was in 1776. Washington and Hamilton used Smith as the base of early American economic policy .The reader of Galbraith's book is advised to purchase a copy of WN as well....more info
- Economics at its best
When I was an undergraduate, the church around which the campus was centered hosted informal luncheons twice a month. These affairs were held in the church's large and comfortable basement, and usually had nothing to do with religion. The enticement for students to attend the luncheons (aside from a free box lunch) was the reputation or position of a fellow diner the church had managed to ensnare, and to be included at a gathering, a student had only to sign up while space was still available. Sometimes this personage would be as humble as the Dean of Student Affairs. On one occasion, it was John Kenneth Galbraith.
Galbraith, I remember, was arrogant, intelligent, and witty, and all three of these attributes permeate his contribution to the literature on the crash. Galbraith himself remarks in the introduction that he "never enjoyed writing a book more," and I can well imagine that he laughed out loud as he penned the hilarious passages that make this book so enjoyable. His explanation of the increase in embezzlement during the late twenties, which he euphemistically calls "informal financial arrangements," and the fall of various illustrious personages associated with the Wall Street crash make for some of the funniest reading I have ever encountered.
There is a serious side to the book, however, wherein Galbraith succinctly analyzes the causes of the crash (in his humble opinion). For those looking for parallels in today's market, there is one striking similarity between 1929 and today: the impact that the collapse in securities prices had on the well-to-do. Because the well-to-do, then as now, "disposed of a large proportion of consumer income," and "were a source of a lion's share of personal saving and investment," the losses suffered by this group of investor's "had broad effects on expenditure and income in the economy at large." This, perhaps, is Galbraith's indictment of the capitalist system, and the fact that he offers no remedy for this situation is tacit acceptance of the inherent flaw of capitalism. Galbraith, though, is no socialist or economic radical. As he casually claimed during the luncheon I attended, he ran the US economy during World War II, and I've never heard of any extreme economic policies that were instituted during the war. On the other hand, I'm not now, nor have I ever been, an economist.
Galbraith does a brilliant job of tracing the fluctuations in the market from 1927 to 1932, demonstrating in the process that the crash was not confined to a single day, nor even to a single month. He explodes a few myths about the crash (it was caused by a lack of available securities; suicides after the crash skyrocketed) and explains the impact of the growth of investment trusts and the lack of involvement by regulatory bodies (such as they were). It is unlikely a better short course on the crash of 1929 exists, and it is a certainty that no more entertaining book on the subject exists. Galbraith's little tome is convincing evidence that the dismal science need not be. ...more info
- Black Tuesday ..
It's interesting to know more about one of the most dramatic events in the history of financial markets. If you really want to know what really speculation is, you have to read this book, because great part of the problem that happened that bloody October of 1929 was due to an overvalued market thanks to the speculators. It is also interesting to note that in those days, despite the stocks prices were dropping, there was always somebody buying for the rise. This crash of the stock market took on a bad foot the economy, igniting the great depression. In my opinion the problem with the book is that is not very engaging, but despite of that this book was a good reading --- 3,5 stars!...more info
- A good overview
I wasn't sure whether to give this 3 or 4 stars (I would have preferred 3.5), so I rounded down. Sorry.
As for the book, itself, this is a light, quick and even entertaining take on the market mania that caused the 1929 crash. While the book doesn't go into great detail, it does provide some good insights into both the crowd psychology that always produces crashes as well as the objects of their desire.
The investment trusts which were bid up so ridiculously in the late 20's bear just a bit more than an eerie resemblance to the tech stocks of the late 90's, the subprime paper of present day, the M&A mania that recently burst, the housing market, ethanol, sovereign wealth funds and... well just about everything on CNBC these days. More seriously, the similarities between than and now are quite extensive, and one can learn a valuable lesson from the largest calamity in U.S. financial history.
I do wish that the book would have gone more into all of the reasons behind not only the crash but also the Great Depression. While the 2 are intertwined, this book only offers insight into the stock market and, sadly, leaves the entire story untold....more info
- The Hobo Philosopher
This is the best book that I have read so far on the 1929 depression. Galbraith is so easy to read. He has a great sense of humor - dry but great. He is logical, sensible and supports his prejudices with numbers and facts. Anyone who is interested in the 1929 depression should have this on their list as required reading.
Books written by Richard Noble - The Hobo Philosopher:
"Hobo-ing America: A Workingman's Tour of the U.S.A.."
"A Summer with Charlie"
"A Little Something: Poetry and Prose"
"Honor Thy Father and Thy Mother"
"The Eastpointer" Selections from award winning column. ...more info
- Financial Reporting at its finest....
All writers of market histories should read and absorb Galbraith's short and eminently readable history of the start of the depression. Going beyond popular ideas it gets to the heart of the matter and provides sobering lessons to speculators in today's markets. I give this a hearty 5 stars!...more info
- Pretty Good
This gives a pretty good examination of the economic crash of 1929 and important events in the preceeding decade.
However, since this was originally published in 1954, there was at least one section in the book where the "rhetorical present" of the author's narration was in the 1950s (in its comparison on the 1929 crash with circumstances extant in the 1950s); however, in this same section, it refers to 'our current situation' in the late 1990s, and then later in the same section, it reverts back to the reference to the 1950s as 'our present.'
Also, the tone of the narration occasionally comes off as elitist when it refers to 'others who aren't intelligent enough to understand this discussion' (my paraphrase-I don't have the time/inclination to cite the exact page number).
All-in-all, though I would encourage the reading of this book for an understanding of the events leading up to and surrounding the 1929 crash and the following depression....more info
- A little brief, but a good intro for me to the Crash
I'm not a big expert in the politics and economics of the Great Depression. I do have interests in American history, however, and I felt that this would be a good intro to both Galbraith and the nature of the Crash. For me, the day-to-day specifics of the Crash were a little rushed. I didn't get the full-blown treatment of narrative history that would have enabled me to walk away from this text feeling like a newly born expert in the field. Nor did I walk away with a great desire to learn more about the principal players in the Crash. What I did walk away with was helpful, though. This book is a more a sketch of the psychology of the American market than a history of the Crash. Galbraith strives to show that Americans want to be fooled into believing that speculative gains can lead to fulfillment of dreams of wealth. Of greater importance, this book emphasizes how our political and economic culture does not provide adequate incentives for leaders who wish to dampen our enthusiasm. Yes, there are a few villains in this book. But the greater cause for concern is our tendency to blow up balloons that will inevitably burst.
I hope that sound investing and the Great Crash our taught with great care in our schools, and I would consider this either a passable quick intro or a source for supplementary insights into the nature of how our culture can lead to this kind of market failure.
- JKG thinks he funny. He's not.
While I did find the book informative and a good supplement to Robert Sobel's The Great Bull Market: Wall Street in the 1920s, Galbraith interjects his sarcastic view of the participants in the 1920s Bull Market way too much. This makes parts of the book extremely difficult to read. While I persevered to the end, I fouynd Sobel's account as informative and much more enjoyable to read....more info