- Taschenbuch: 224 Seiten
- Verlag: Mariner Books; Auflage: Reprint (30. April 1997)
- Sprache: Englisch
- ISBN-10: 0395859999
- ISBN-13: 978-0395859995
- Größe und/oder Gewicht: 14,6 x 1,9 x 21,6 cm
- Durchschnittliche Kundenbewertung: 13 Kundenrezensionen
- Amazon Bestseller-Rang: Nr. 865.253 in Fremdsprachige Bücher (Siehe Top 100 in Fremdsprachige Bücher)
- Komplettes Inhaltsverzeichnis ansehen
The Great Crash 1929 (Englisch) Taschenbuch – 30. April 1997
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Rampant speculation. Record trading volumes. Assets bought not because of their value but because the buyer believes he can sell them for more in a day or two, or an hour or two. Welcome to the late 1920s. There are obvious and absolute parallels to the great bull market of the late 1990s, writes Galbraith in a new introduction dated 1997. Of course, Galbraith notes, every financial bubble since 1929 has been compared to the Great Crash, which is why this book has never been out of print since it became a bestseller in 1955.
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
A study of the stock market crash of 1929 reveals the influential role of Wall Street on the economic growth of America.Alle Produktbeschreibungen
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The financial crisis 2007/2008 is one of many reasons to read Galbraith's book, edition 1997, with a new introduction by the author, to identify differences between and communalities of these two crises; it could also induce to compare the findings in this book with those of Liaquat Ahamed in his book "Lords of Finance - 1929, the great depression, and the bankers who broke the world, edition 2010".
The following excerpts from Galbraith's book could motivate to read this very interesting book:
"One thing in the twenties should have been visible even to Coolidge [30th U.S. President 1923-1929]: the great Florida real estate boom 1925. It contained all of the elements of the classic speculative bubble. (Page 3)
Hoover was elected  in a landslide [31st U.S. President 1929-1933]. (16)
Over the whole year of 1928 the Times industrial average gained 86 points, or from 245 to 331. (17)
But there was still another and even more significant index of what was happening in the market. That was the phenomenal increase in trading on margin. (18)
In principle, New York banks could borrow money from the Federal Reserve Bank for 5 per cent and re-lend it in the call market for 12. This was, possibly, the most profitable arbitrage operation of all time.
Never had there been a better time to get rich, and people knew it. (22)
As Walter Bagehot once observed: `All people are most credulous when they are most happy.' Footnote: Lombard Street, 1922 ed. P. 151. [Bagehot wrote his excellent book in 1873 and it is still today considered the bible of central banking - see Timothy Geithner's outstanding book "Stress Test", edition 2014, Page 118) (23)
No one, wise or unwise, knew or now knows when depressions are due or overdue.
One of the oldest puzzles of politics is who is to regulate the regulators. But an equally baffling problem, which has never received the attention it deserves, is who is to make wise those who are required to have wisdom. (24)
The Federal Reserve Board in those times was a body of startling incompetence. (27)
By early 1929, loans from these non-banking sources were approximately equal to those from the banks. (31)
The Federal Reserve authorities took for granted that they had no influence whatever over this supply of funds. ... In fact, the Federal Reserve was helpless only because it wanted to be. (32)
In the early months of 1929, there was worry that the country might running out of common stocks. (42)
It was a golden age for professors. (55)
That autumn  Professor Irving Fisher of Yale made his immortal estimate: `Stock prices have reached what looks like a permanently high plateau.' Irving Fisher was the most original of American economists. (70)
The Harvard Economic Society remained persuaded that no serious depression was in prospect. In November it said firmly that `a severe depression like that of 1920-21 is outside the range of probability. We are not facing protracted liquidation.' This view the Society reiterated until it was liquidated. (71)
However, there were exceptions. One was Paul M. Warburg of the International Acceptance Bank, whose predictions must be accorded the same prominence as the forecasts of Irving Fisher. They were remarkably prescient. In March of 1929, he called for a stronger Federal Reserve policy and argued that if the present orgy of `unrestrained speculation' were not brought promptly to a halt there would ultimately be a disastrous collapse. It would `bring about a general depression involving the entire country.' (72)
On September 3, by common consent, the great bull market of the nineteen-twenties came to an end.
On September 4, the tone of the market was still good, and then on September 5 came a break.
The immediate cause of the break was clear - and interesting. Speaking before his Annual National Business Conference on September 5, Roger Babson observed, `Sooner or later a crash is coming, and it may be terrific.'(84)
The end had come, but it was not yet in sight. (87)
From the foregoing it follows that the crash did not come - as some have suggested - because the market suddenly became aware that a serious depression was in the offing. A depression, serious or otherwise, could not be foreseen when the market fell. (90)
In England on September 20, 1929, the enterprises of Clarence Hatry suddenly collapsed. (91)
On October 15, 1929, Professor Irving Fisher made his historic announcement about the permanently high plateau and added, `I expect to see the stock market a good deal higher than it is today within a few months.' Indeed, the only disturbing thing, in these October days, was the fairly downward drift in the market. (94)
Monday, October 21, was a very poor day. There was no way of telling what was happening. (96)
Professor Fisher said that the decline had represented only a `shaking out of the lunatic fringe.' (97)
Thursday, October 24, is the first of the days which history - such as it is on the subject - identifies with the panic of 1929. (98) The panic did not last all day. It was a phenomenon of the morning hours. (99)
Representatives of thirty-five of the largest wire houses assembled at the offices of Hornblower and Weeks and told the press on departing that the market was `fundamentally sound' and `technically in better condition that is has been in months.' (104)
On Monday, October 28, 1929, the real disaster began. (107)
The singular feature of the great crash of 1929 was that the worst continued to worsen. What looked one day like the end proved on the next day to have been only the beginning. (108)
On the evening of the 28th no one any longer could feel "secure in the knowledge that the most powerful banks stood ready to prevent a recurrence' of panic.
Tuesday, October 29, was the most devastating day in the history of the New York stock market, and it may have been the most devastating day in the history of markets. Selling began as soon as the market opened and in huge volume. (111)
On the evening of the 29th, Dr. Julius Klein, Assistant Secretary of Commerce, friend of President Hoover, and the senior apostle of the official economic view, took to the radio to remind the country that President Hoover had said that the `fundamental business of the country' was sound. (118)
In these three days, November 11, 12, and 13, the Times industrials lost another 50 points. Of all the days of the crash, these without doubt were the dreariest.
Clerks in downtown hotels were said to be asking guests whether they wished the room for sleeping or jumping. Two men jumped hand-in-hand from a high window in the Ritz. (126)
In mid-November 1929, at long, long last, the market stopped falling - at least, for a while. The low was on Wednesday, November 13. On that day the Times industrials closed at 224 down from 452, or by almost exactly one half since September 3. (135)
On July 8, 1932, they were 58. (141)
Things were far worse with the investment trusts.
The fears of November 1929 that the investment trusts might go to nothing had been largely realized.
No one any longer suggested that business was sound. (142)
November 15, 1930: `We are now near the end of the declining phase of the depression.'
A year later, on October 31, 1931: `Stabilization at [present] depression levels is clearly possible.' Even these last forecasts were wildly optimistic. Somewhat later, its reputation for infallibility rather dimmed, the Harvard Economic Society was dissolved. (145)
Professor Irving Fisher tried hard to explain why he had been wrong. (146)
With the advent of the New Deal the sins of Wall Street became the sins of the political enemy. What was bad for Wall Street was bad for the Republican Party. (155)
After the Great Crash came the Great Depression which lasted, with varying severity, for ten years.
In 1933, Gross National Product was nearly a third less than in 1929. Not until 1937 did the physical volume of production recover to the levels of 1929, and then it promptly slipped back again.
Until 1941 the dollar value of production remained below 1929.
In 1933 nearly thirteen million were out of work, or about one in every four in the labor force.
In 1938 one person in five was still out of work.
On the whole, the great stock market crash can be much more readily explained than the depression that followed it. (168)
The causes of the Great Depression are still far from certain.
When people are least sure they are often most dogmatic. (171)
There seems little question that in 1929, modifying a famous cliché, the economy was fundamentally unsound. This is a circumstance of first-rate importance. Many things were wrong, but five weaknesses seem to have had an especially intimate bearing on the ensuing disaster. They are:
1) The bad distribution of income. In 1929 the rich were indubitably rich.
2) The bad corporate structure. The most important corporate weakness was inherent in the vast
new structure of holding companies and investment trusts.
3) The bad banking structure.
However, although the bankers were not unusually foolish in 1929, the banking structure was inherently
4) The dubious state of the foreign balance. This is a familiar story. During the First World War, the United
States became a creditor on international account.
5) The poor state of economic intelligence. Mass employment in particular had altered the rules.
Events had played a very bad trick on people, but almost no one tried to think out the problem anew.
The balanced budget was not the only strait jacket on policy. There was also the bogey of "going off"
the gold standard and, most surprisingly, of risking inflation. The fear of inflation reinforced the demand
for the balanced budget. (177ff)
The avoidance of depression and the prevention of unemployment have become for the politician the most critical of all questions of public policy. Action to break up a boom must always be weighed against the chance that it will cause unemployment at a politically inopportune moment. (190)
My conclusion which I want to share with you: policy makers, bankers, investors, entrepreneurs, business managers, employees, workers, students etc. should make themselves familiar with the phenomena, intricacies and effects of financial crises.
This is not a long book, I read it in one sitting. Exciting as any good thriller.
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!