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The Great Crash 1929 Paperback – September 10, 2009
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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 --This text refers to an out of print or unavailable edition of this title.
"Most intriguing for its depiction of the delusion that swept the culture, and the ways financiers and bankers, wishful academics and supine regulators willfully ignored reality and in the process encouraged the epic collapse of the stock market." (New York Times )
"Paints a vivid picture of how the supposedly rational capitalist system seemed to lose its collective mind, and it has spooky parallels with what we are witnessing now." (Fortune ) --This text refers to an out of print or unavailable edition of this title.
Top Customer Reviews
A negative is that the Kindle version is very poorly copyedited. The electronic version is rife with misspellings, missing words, and other copy errors. Buy the print copy.
Galbraith's theme is that market stability and corporate interests are fundamentally at odds. After pumping up prices by gambling with borrowed money, the financiers and executives simply hope to cash in and make it out alive. In the ensuing crisis, CEOs will never speak evil about their own companies or the condition of the market, so their speech is about as useful to an investor as a pre-game pep talk is to a bettor. Analysts, as well as executives, are salesmen of their own stock, and their primary objective is to get you to buy high.
Galbraith is a talented storyteller, and he highlights themes that are likely to accompany future bubbles so that the reader knows what to be skeptical about. This is a very entertaining read, and if you actively compare what Galbraith tells you of the 20's to what you know about the 90's, you'll likely not be swept away by future investing mania.
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Having learned a thing or two since I wrote that, I can think of no book better suited to explain our current predicament to the layman. Excessive leverage, housing bubble, financial deregulation, and crony capitalism -- sound familiar? You'll read about this stuff happening back in the '20s and shake your head in disbelief.
According to John Galbraith, the stock-market crash that took place in the fall of 1929 was typical of this prototype. Mr. Galbraith, a Harvard economist, traced the optimism to the Florida real-estate bubble of 1925 which made people forget the elementary rules of money making. What follows is an elegant narrative that interweaves economics with history to produce one of the most telling and lucid accounts of the developments, economic and otherwise, that lead up to the October 1929 crash.
The crash, according to Mr. Galbraith, was caused by an admixture of bad income distribution (economy too dependent on luxury spending and investment), bad corporate structure, bad banking structure, foreign imbalances, and bad economic intelligence. In seeking compelling explanations, the "Great Crash" often resists conventional wisdom: for example, to those who blame the abundance of credit, Mr. Galbraith answers: "on numerous occasions before and since credit has been easy, and there has been no speculation whatever." Mr. Galbraith looks beyond central banking and interest rates to compile a rich and diverse history of the 1929 crash.
So what about preventing future crises? Here, Mr. Galbraith is ambivalent. Regulation has and can play a substantial role in preventing future troubles. But the problem lies elsewhere: people continue to believe that they have been blessed, and that they can make money with little or no effort. When wise men see such folly and decide to partake in it rather than spoil it, a bubble that later crashes is inevitable. For all those who seek an economic solution to this economic problem, Mr. Galbraith surely disappoints. The surest protection against over-speculation, he writes, is to remind people that you can never get something from nothing. Those in love with central banking might find the idea simplistic, yet its beauty lies with its simplicity.