Most Helpful Customer Reviews
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40 of 42 people found the following review helpful:
5.0 out of 5 stars
What Actually Happened in 1929?, 5 Jul 2004
Having recently 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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22 of 23 people found the following review helpful:
5.0 out of 5 stars
An excellent book and highly recommended to anyone with any interest whatsoever in economics or the dark days of 1929. , 4 Jan 2007
One of the most surprising and delightful things that I found about the book, particularly in view of the potentially heavy subject matter, was how wonderfully readable Professor Galbraith is. There are not that many world renowned experts in any field who can write as well as they can understand their subject. It's a bit like finding that a world class footballer can also play first violin. This book reads like the work of a top drawer professional writer who has immersed him/herself in the subject for a period and, with ongoing expert guidance and hands-on editing, has brought the subject home in fine style. It reads to me a bit like Tom Wolfe (of the Right Stuff etc), wonderfully literate, sardonic prose. It really is quite unexpected. Marvellous. You will have more than one chuckle out loud which may raise one of the live-in's eyebrows. Chuckling at economics now? Hmmm.
Anyway, the stock market fell, measured by the Times Industrial Average, from 542 down to 224, from October through Nov 1929, and then more gradually to only 58, basically a tenth of its peak 1929 value, by July 1932. Drastic times indeed. This residual value that the market held, 58, in 1932, was roughly the same amount by which the market fell, in only one day, 28/10/1929, Black Thursday. The Professor's contention seems to be that the Depression and the Crash, while not totally unrelated, were less connected than popular opinion held then, or holds now. The contention is that prior to the crash, that the economy was not fundamentally sound. Although there were no glaring warning signs in the economic indicators reported in the first half of 1929, there were some red lights flickering. The Professor goes on to detail and explain those. Of course I am still no expert on what happened in 1929 and why. But due to this book I have a better idea. And it has encouraged me to read more about it. Which I intend to do shortly. And further works by the extremely readable Professor Galbraith will most certainly be on my list.
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15 of 16 people found the following review helpful:
5.0 out of 5 stars
What Actually Happened in 1929?, 10 April 2004
Having recently 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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