The Great Crash 1929 | John Kenneth Galbraith

The Great Crash 1929 | John Kenneth Galbraith | Spooky

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The Great Crash 1929

	The Great Crash 1929 John Kenneth Galbraith Mariner Books, 1997 - 224 pages average customer review:based on 44 reviews view larger image
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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.

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Essential Reading

I found this book captivating, in a "gallows humor" sort of way.

Although written many years ago, and recounting events in the distant past, it should be required reading for anyone in the markets today. More specifically, it should have been required reading a year ago (mid 2007) for those invested in finance and property sectors.

Whether the malaise in those sectors (some stocks down 90%) spreads eventually to the general indexes remains to be seen.

Tony Loton, author --
DON'T LOSE MONEY! (in the Stock Markets)
Financial Trading Patterns

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Spooky

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?

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.

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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...

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