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Title: The Great Crash of 1929
ISBN: 0395859999
Author:
John Kenneth Galbraith
Publicate Date: 1997-04-30
Publish: 1997-04-30
List Price: $14.00
Average Customer Rating: 4.0
Format: Paperback
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Amazon Lowest New Price: $7.90
Amazon Lowest Used Price: $7.49
Amazon Merchant Price: $9.71
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| Customer Review: |
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1: ...it was the worst of times
I keep this book around to read occasionally. My edition has a printing history going back to 1954. The stock market crash is a point in history that I've tried to understand. mmm...the bankers kept pumping money into the system...until they couldn't do it anymore. Who were these people and how did this happen? Well, today I picked it up again.
According to Galbraith, the US economy was already in a Depression by October 1929 as the stock market reacts to the economy and never the reverse. It became fashionable for working people to get into the stock market. Before the crash, there were some signs of economic downturn, but no one expected the disaster it became. It was a bubble that had to be pricked. This sounds so familiar now.
In John Kenneth Galbraith's able hands, the story is revealed. Galbraith was, along with other talents, an excellent writer and storyteller. Not a huge book full of dry details but a story brought to life. Recommended reading.
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2: The History of Now
First published in 1954, this book is understandably piquing interest because of the current financial issues facing the United States and world. The causes of the 1929 crash do seem similar in many ways to the current issues of today in 2008. However, many circumstances are similar, as many are different.
But also similar, there seems to be a rule about the phenomenon of Karma in individual human behavior. And this rule of Karma seems to apply to investing behavior.
Author John Galbraith provides evidence for his argument that cheap and easy credit wasn't the major reason for the bubble-like conditions that led to the crash, but that the real factor was "speculation for the sake of speculating." Speculation for the sake of speculation caused prices to artificially rise to extremely high levels simply because investors were buying with the intent to sell for a profit ---> and the next buyer would do the same, and so on.
During the 1920s many conditions inside and outside of the US financial markets provided a sense of false prosperity which was actually based on greed and speculation for the pure sake of speculation. These strong aspects of human mind and behavior that propel steep rising bubbles and steep downward slides. It's interesting how human psychology plays such a large role when markets rise in bubbles and then sharply decline. Mania involves greed on the way up, and fear on the way down.
From this 50+ year-old book (with an update in the late 1990s), a reader will immediately realize some of the parallels of 1929 that exist in 2008: This does not mean the same results will happen, however. But they could happen....
Gailbrath notes the significant inequality in income distribution that existed in 1929, deregulation of the banking industry, poor leadership, and bad policy and decision-making by the government because of economic ignorance and myopia. This ignorance is referred to by the author as a lack of "economic intelligence." Today, look at the current cast of characters in their *appointed* economic-power positions, and the criticism they're receiving for not only what they did *not* do, but what they *did* do once the financial downward spiral started unraveling.
As a historian, the author also noted another concept from then that reminds us of current times: the Florida real-estate bubble of the 1920s. In addition to buying land, people could by the "option to buy land" on a piece of paper. They could then re-sell it, where the option would be re-sold and re-sold again, and so on, and so on. Again, speculation for the sake of speculation. These buy-options and other means, were creative financing, and over-extended lending, and excessive leveraging. Just like today, and just like then, the result was a hard fall.
Housing bubbles have happened before. A disturbing concept of until recently was people treating their owner-occupied home - the home a person lives in - as an speculative investment and ATM machine during the big leaps in equity increases. Conditions caused by human "bubble-behavior" on the way up, at the peak, and on the way down.
John K. Galbraith noted over 50 years ago in this book that "money doesn't grow on trees." Nor does money grow on Collateralized Debt Obligations (CDOs) that are fraudulently rated AAA when they are not, and then sold to the world. Credit Default Swaps, Helocs, ARMs, teaser rates, and NINJA. Money cannot be invented out of nothing. Call it Karma, physics, or the fundamental concepts of investing. Making money out of thin air can only last a short time, with negative consequences often the result. The author stated that as time passes and the seismic crash of '29 fades from memory only to be highlighted as a side-note in history books: that rampant speculation, greed, and bubbles will happen again, followed by an inevitable bust.
"Those who cannot remember the past are condemned to repeat it."
~ George Santayana, The Life of Reason, Volume 1, 1905
As a layman who consistently attempts to self-educate myself about economic events, I do see a similar, yet also very different type of crash happening today as in 1929. Currently I see it as a steady decline. A slow and steady decline, that will be long-term and bring a lower standard of living. People will to have change their focus about what is important in life, if they'll be able to cope with the new economic circumstances and world that we'll be living in.
This is a well-written and good historical book by Kenneth Galbraith.
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3: 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)
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4: 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)
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5: THE NOT SO GREAT CRASH
THE ROARING TWENTIES REPEATED. SKY'S THE LIMIT. A GAMBLERS MINDSET. LEVERAGING. SCREW THE NEXT GUY I'VE GOT MINE. NICKLE AND DIME AN HOUR JOBS IN CHINA AND MEXICO. REMOVE ANY AND ALL CHECKS AND BALANCES. CAN'T LOSE WE'RE TOO BIG AND TOO RICH.ANYWAY, SEVEN DOLLAR AN HOUR TAX PAYERS WILL FIX IT IF IT ALL BLOWS UP...
WELCOME TO THE THE GREAT CRASH OF 2008. MY ADVICE: STOCK PILE SOMETHING TO EAT AND WEAR. GET SOME SPARE PARTS FOR YOUR CAR. START A GARDEN AND GOOGLE BREAD AND SOUP RECIPES.
YOU GONNA NEED THEM...HEE HEE HO HO.
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