The Great Crash Of 1929

In The Great Crash 1929, John Kenneth Galbraith considers the significance of the stock market crash of 1929 and the depression which followed. In the introduction, which was included for the 1988 release, he discusses the comparisons between the Great Crash of 1929 and the Crash of 1987. He refers to the date October 19, 1987, as "the most devastating day in the history of financial markets at least since the bursting of the South Sea Bubble." He asks, how many economists and investors were observing to see if the safeguards put in place to stop this kind of crash would work and prevent a repeat of 1929? These protections did appear to work and many believed that another crash, such as the Great Crash of 1929, was impossible given the current set-up of the market, governmental screening, and other controls now put in place. Galbraith finds that The Great Crash of 1929 was not a random event. He observes that earlier in history there had been many other preceding examples.

Galbraith begins in 1928, as President Calvin Coolidge gave his last State of the Union address to Congress where he expressed a great deal of optimism after the booming progress of the 1920's. President Coolidge talked about the economic success of the country. "There was much good about the world of which Coolidge spokeÐ'... The rich were getting richer much faster than the poor were getting less poor. " According to Galbraith, there was a high employment rate as well as production. "Wages were not going up much, but prices were still stable. Although many people were still very poor, more people were comfortably well-offÐ'..." He goes on to make mention of the land boom in Florida earlier in the 1920's. People were flocking to Florida, buying up land with the hopes that the values would greatly increase. Even though the real estate boom in Florida came to an end, it expressed the ideology of Americans at that time. "They were displaying an inordinate desire to get rich quickly with a minimum of physical effort." This idea of getting rich quickly without having to do much rapidly caught on, causing the stock market to sky rocket. The stock market became an obsession of so many, and buying stocks on margin, or to benefit from an increase in price without having to front the costs, made it possible for millions to own a piece of the market.

Galbraith goes on to discuss in the second chapter, which is titled Something Should Be Done, the incompetence of the Federal Reserve Board. He states that the "Federal Reserve was helpless only because it wanted to beÐ'...and was less interested in checking speculation than in detaching itself from responsibility for the speculation that was going on." The crash of the stock market was inevitable, but the panic was postponed because of a man named Charles E. Miller who loaned whatever was necessary to "prevent liquidation." Over time, many people hired and put their full trust in "professional financers" or investment trusts. These businessmen were manipulative and lied about the stability of the market to increase their own profits. These trusts were described by Paul C. Cabot as "dishonest, inattentive, unable, and greedy." By 1929, the stock market consumed the news and the economy. "It became central to the culture." Stock prices climbed to unbelievable heights as investors speculated in the market. Out of control buying and selling of stock ended in a great crash on October 24, 1929. The years following brought about The Great Depression, in which Galbraith states, "The causes of the Great Depression are still far from certain." He goes on to list five weaknesses that can be attributed to these years: 1) The bad distribution of income, 2) The bad corporate structure, 3) The bad