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"GREAT CRASH 1929, THE' (JOHN KENNETH GALBRAITH).
Term Paper ID:26498
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Essay Subject:
Reviews work on causes, effects & economic lessons of stock market crash.... More...
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4 Pages / 900 Words
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Paper Abstract:
Reviews work on causes, effects & economic lessons of stock market crash.
Paper Introduction:
In his book The Great Crash 1929, John Kenneth Galbraith, a leading economist, examines the meaning of the stock market crash of 1929 which has become a persistent fear for Wall Street ever since. Recent downturns in the market were compared to the Great Crash, for instance, and many were watching to see if the protections put in place to stop this kind of crash would work and prevent a repeat. They did seem to work, and many believe that a crash such as occurred in 1929 is simply impossible given the current structure of the market and of governmental and other controls. Galbraith finds that what happened in 1929 was not an isolated action, however, and that earlier in history there had been other speculative splurges, beginning in 1637 when Dutch speculators invested in tulip bulbs. Galbraith also notes that we are now going through a similar period, but he makes no predi
Text of the Paper:
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The FederalReserve Bank could have acted, but while it had the power and the mystique,at the time it was also incompetent. All other uses were irrelevant.Speculation in the market provided early returns and less responsibility,and people were buying stocks on margin so they could have the increase inprice without the costs of ownership. Galbraith also notes that we are now going through a similar period, buthe makes no predictions about the outcome. The boom had to end, and Galbraith sees this in retrospect assomething that should have been noted. By 1927 theincrease in speculation was obvious. It was believed by many that the prices ofcommons stocks were only catching up with the increase in corporateearnings. (1997). Some believed that there were indications that theboom would continue, while others began to be concerned. However, what washappening was not readily apparent on a day that had the third greatestsales volume in history. Monday, October21, is said by galbraith to have been a very poor day. There were events prior to the Great Crash showing that the marketmight draw back. The 192 s was a good time, but the people were showing aninordinate desire to get rich quickly. Work Cited Galbraith, John Kenneth. What is missing from this element is an explanationof the protections the market has instituted, information that can begleaned elsewhere. Galbraith begins in 1928 as President Calvin Coolidge saw onlyoptimism after the boom period of the 192 s and failed to see the stormthat was coming. Hisattitude was kept secret, however, so his election did not cause the panicit would have otherwise. Galbraith sees this as a mass escape into make believe. People of all walks of life were in the stock market then, thoughthe great majority of Americans were not in the stock market. The aftermath of the Great Crash is examined in several chaptersshowing how serious were the problems developing from the crash. In his book The Great Crash 1929, John Kenneth Galbraith, a leadingeconomist, examines the meaning of the stock market crash of 1929 which hasbecome a persistent fear for Wall Street ever since. Certain officials in Washington had theresponsibility for any such effort. New York:Mariner Books. Many such trusts were organized in 1928 and were widelypromoted. He notes that the accepted view has been that the economy waswell into a depression by the autumn of 1929, but he notes that there wasonly a modest decline in economic activity by October of that year.Various signs began to cause concern, however, and confidence disintegratedover a period of time. The new introduction on the book, though, does link the analysis tobroader issues concerning the market of today, and this makes the analysismore interesting as the reader compares what Galbraith describes to theforces at work today. However, in some ways theanalysis is not as profound as it might be. Galbraith details theaftermath as it was manifested among different groups in American society. The market finallystopped falling for a time in mid-November. CRITICAL EVALUATION Galbraith's book offers a good history of the Great Crash and someindication of the market forces underlying it. Trading was heavy and continued all year, with no summer lull.The market become more important and dominated both the news and theculture. The New York Federal Reserve Bank wasstronger and might have done something, but it had a change of leadershipin 1928. When he wasSecretary of Commerce, he had tried to get the market under control. As soon as prices stopped rising,ownership on margin would become meaningless, everyone would want to sell,the market would not level out, and the market would fall. They did seem to work, and many believethat a crash such as occurred in 1929 is simply impossible given thecurrent structure of the market and of governmental and other controls.Galbraith finds that what happened in 1929 was not an isolated action,however, and that earlier in history there had been other speculativesplurges, beginning in 1637 when Dutch speculators invested in tulip bulbs. They wereaffected by it indirectly, but they were not investors. The events of thenext several days are noted as the idea of a crash spread through thecountry. The financialcommunity tried to regroup and control the problem. The marketbubble might have been burst more slowly and carefully, but accomplishingthis is difficult and delicate. President Coolidge did not know whatwas happening and would not have cared, says Galbraith. Galbraith does not link theperiod very strongly to the market structure that existed before and doesnot delve deeply into the Great Depression that would follow. Another concern of the era was that Wall Street would run out ofcommon stocks, while there was an increase in the volume of securities.Galbraith describes the business structure of the period and notes how thedemand of the public for common stocks was satisfied with the investmenttrust or company. This was occurring as Britain wasbecoming an unattractive place to buy because of a long series of exchangecrises, and America benefitted. Stock speculation was one of theresults. Recent downturns inthe market were compared to the Great Crash, for instance, and many werewatching to see if the protections put in place to stop this kind of crashwould work and prevent a repeat. The stock market boom was evident by the middle of the decade,though it is not possible to say precisely when it started. The firstweek was the slaughter of the innocents, says Galbraith, while the secondwas the downfall of the well-to-do and the wealthy. Galbraith cites one such in June of 1928 when in fact thedeath of the bull market was predicted, but this prediction was premature.Herbert Hoover would be elected President in 1929, and he had beenconcerned about the rising tide of speculation for some time. People had theidea that the market was in the hands of mysterious leaders who directedits actions. Ownership of property was rewarded by this timeonly in terms of an early rise in price. The Crash is described in a way that Galbraith follows throughout --he notes the accepted view of events and then counters with the reality heperceives. There were delays in recording transactions sosales were made on stocks that were already dropping. The Great Crash 1929. Galbraith describes many of the things that could have been donebut were not.
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