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on February 10, 2002
Recall the talk before the bust of the "New Economy," in which distended P/E ratios and lack of profits were to be irrelevant. Recall Enron's public proclamations of its stability and projected earnings increases. Keep these in mind as you read The Great Crash, and you will never again listen to an analyst, much less an executive.
Galbraith's theme is that market stability and corporate interests are fundamentally at odds. 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.
So why did the 1929 -- or the 2000 -- crash occur? Buying high is great as long as someone is always buying higher; however, such an aggrandized pyramid scheme is doomed to failure. It's as simple as that. So why, then, read Galbraith's book? He 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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on January 5, 2003
Galbraith's inventive work on the fascinating events leading up and preceding the 1929 stock market crash is must-read for anyone interested in the national economy, how it functions, how it fails, and what role the federal government plays in perpetuating or stifling the situation.
He very convincingly establishes a good groundwork for the reader, explaining why the stock market was in such a large expansion and how federal regulation (or lack therof) enabled the financial firms to operate in very risky and perhaps unethical ways.
Obviously, the book chronicles the disastrous declines in 1929 and further discusses the federal government's attempts to revive the American economy, those for the most part failed.
The most important lesson this book can allay to the reader is that economies are not self-sustaining structures that are only subject to supply and demand shifts. In instances like the 1929 crash, the prognosis for dynamic economies can often lie in the actions of a handful of actors/people. A good lesson to remember.
Indeed there are many lessons to be learned from this book, many that are relevant to today's economy (2003). Read this book with care and with a comparative mindset!
A must read for economists and public policy makers!
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Having just lived through the crash of the dot-com stocks, I thought it was a particularly appropriate moment to reread John Kenneth Galbraith's famous history of the stock market crash of 1929 in the United States. Professor Galbraith's final words prove to be prophetic as he suggests that as soon as the lessons of 1929 are forgotten, the speculative excesses that led to that debacle will recur. I am sure that when the dot-bomb experience is forgotten, it will be repeated with some new class of speculation in some future generation.
With the recent experience of seeing a market mania, I came away more impressed with this book than before. Professor Galbraith does a fine job of capturing the psychology that builds into and sustains a mania. He also writes like a novelist rather than like an economist. That talent makes the message easy to grasp and appreciate.
I was also impressed by how our popular perceptions of 1929 are so often wrong. For example, most people believe that many "broken" speculators committed suicide. Although some did, there was no significant rise in the suicide rate compared to a general trend in that direction.
Economists often like to fault the Federal Reserve for the crash. That blame seems somewhat misplaced when you learn that there was very little government debt that the Fed could repurchase to create liquidity. Had the Fed acted differently, the crash might have come a little sooner and not been quite so severe . . . but the fundamentals would probably not have changed too much.
Another misperception is that everyone was speculating. By even the most generous measures, the speculators probably never numbered over a million people.
Although this is a history, Professor Galbraith takes on the economic question of how the crash contributed to the Depression. Although we know very little about the economic details of 1929, I was impressed by the point about how much consumer spending was concentrated in the wealthiest people. As they lost vast sums, both spending for consumer goods and savings for capital were decimated. With the broader income distribution of today, such a cataclysm would not be so harmful (as we saw in the aftermath of the dot-com crash).
There is an excellent parallel discussion of the land boom in Florida earlier in the 1920's that is very rewarding. I was intrigued by the ways that ever increasing ways of extending leverage were created so that both bubbles could climb higher. In Florida, people didn't actually buy the land. They bought options to buy the land, and traded those. In the stock market, holding companies sold stock and then floated new holding companies. These were capitalized with common stock, preferred and debt so that all of the appreciation would accrue to the common holders. Naturally, the opposite occurred on the way down. Many stocks fell by over 99 percent, as a result.
Everyone who is tempted to buy any item primarily because it is thought to represent an opportunity for a quick buck should read this book.
Look for true value in all that you do!
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on June 14, 2000
You want to know how irrational and unpredictable the stock market can be? Read this book. Written in easy-to-read language, it is digested almost as easily as a mystery novel, and yet provides a deep insight into the dramatic events of 1929, and gives an invaluable historic lesson. You can clearly see the parallels between events preceding market collapse in 1929 and today high-tech stock market boom - "...there is here a basic and recurrent process. It comes with rising prices, whether of stocks, real estate, works of art or anything else. This increase attracts attention and buyers, which produces the further effect of even higher prices. Expectations are thus justified by the very action that sends prices up. The process continues; optimism with its market effect is the order of the day. Prices go up even more. Then, for reasons that will endlessly be debated, comes the end. The descent is always more sudden than the increase; a balloon that has been punctured does not deflate in an orderly way." Book goes on to describe the inaction of the Federal Reserve, trade on margin, mergers, Florida real estate boom, investment trusts, leverage, short selling, and so on. Yet, you do not need to be a financial whiz to understand it. This is definitely a 5-star book.
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on August 21, 1999
Why do the laissez-faire apologists wax so apoplectic about John Kenneth Galbraith? Because he punctures the myth of permanent economic expansion with such merciless glee. This work offers incredible insight into the social psychology that tempted so many Americans to bet their all on a quick fortune in the stock market during the 1920s -- and the blind panic that drove the market into a headlong freefall when thousands of suckers realized, too late, that they'd been had.
You have one guy, posting under different names, who has gone through Galbraith's entries on this site, trying to trash the man's reputation through innuendo and outright lies. Read his works for yourself. I think you'll find that Galbraith outclasses the dead apologists for the Hapsburg empire (Von Mises and Hayek)and their modern-day apostles, whose fury rises higher and higher as more people reject their mindless, far right-wing propaganda.
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on August 15, 2001
This book contains a great explanation abouth the 1929 crash. But, under my point of view, the most important aspect is that most of the features described in the book can be seen nowadays in the 90s financial crisis (speculation, asssets bought at a very high price over their real value, like a financial bubble). The book reviews most of the posible explanations economists have given to understand the causes of the 1929 crash and demonstrates that the real cause was speculation. The book would may one think about a cycles and financial crisis -maybe quite similar to what H. Minsky describes.
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on November 5, 1998
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.
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on January 31, 2000
I'm a junior in high school doing a research paper on the stock market crash of 1929. Without reading this book I would be left in the dark. Reading 6 other books, Galbraith is the only author who writes in a language that is easily understandable to someone who does not know how to calculate a beta ranking for a stock.
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on May 27, 2001
Want to know how the unthinkable could happen? Fear not this book exposes the overoptimistic attitude of the average american investor circa 1929, with amazing parallels to the dutch tulip boom the entire world market was sunk. How it happened and how we can avoid a repeat lie awaiting the reader
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on January 6, 2011
Galbraith wrote this book as a warning. People have to understand who a bubble can be created. And bubbles are pretty in every country and in every moment of the capitalism.

This was just the biggest bubble. I recommand to read this book with other about bubbles.
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