Library:The Great Crash, 1929
| The Great Crash, 1929 | |
|---|---|
| Author | John Kenneth Galbraith |
| First published | 1955 |
| ISBN | 978-0-395-85999-5 unverified |
| Role | Analysis |
| Domains | Business, Finance & Scams History |
| Tactics | Fraud or Scam Propaganda Technique |
The Great Crash, 1929 is a 1955 book by John Kenneth Galbraith.
Summary
John Kenneth Galbraith, the Harvard economist and later US ambassador to India, wrote this short history of the 1929 stock market crash a quarter of a century after the event. Witty and accessible, it explains how a speculative boom built on borrowed money and misplaced confidence collapsed, and how bankers, politicians and economists reassured the public until the very end. It has been reprinted many times, often selling briskly whenever markets fall.
The boom
Galbraith begins with the Florida land boom of the mid-1920s, in which buyers purchased lots, often sight unseen and sometimes underwater, intending to resell them quickly at a profit. He then traces the rise of the stock market, fueled by buying "on margin" with borrowed money and by investment trusts, companies that bought shares in other companies using heavy leverage, sometimes stacked one on top of another. He shows how rising prices attracted more buyers and how the belief in permanent prosperity became self-reinforcing.
Reassurance
A central theme of the book is the role of authoritative reassurance. Galbraith describes prominent economists, bankers and officials who insisted that stock prices reflected sound fundamentals. The economist Irving Fisher famously said in October 1929 that prices had reached what looked like a permanently high plateau. When prices began to fall, leading bankers organized a pool to buy shares and restore confidence. The rescue failed.
The bezzle
In this book Galbraith introduced the term "bezzle" to describe the inventory of undiscovered embezzlement in an economy at any moment. In good times, he argued, the bezzle grows, because money is plentiful and people are trusting; in bad times, audits become stricter and frauds are exposed, and the bezzle shrinks. The concept remains widely cited in discussions of fraud and financial cycles.
The collapse
The crash unfolded over several days in October 1929, including "Black Thursday" on October 24 and "Black Tuesday" on October 29. Galbraith argues that the crash did not by itself cause the Great Depression but exposed and worsened deep weaknesses in the economy, including inequality, a fragile banking system and poor corporate structures.
Relevance to Bullshitopedia
Galbraith's account shows how optimism, leverage and authoritative reassurance combine to sustain a bubble, and how fraud flourishes when confidence is high. His concept of the bezzle helps explain why frauds such as Ponzi's, Madoff's and Enron's are discovered when markets turn.
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