John Kenneth Galbraith was a media darling and rock star economist. Born in rural Ontario, Canada in 1908 (the same year as Ian Fleming – creator of James Bond, and Mel Blanc – creator of Bugs Bunny’s voice). He was educated in the stereotypical one room country schoolhouse yet rose to stellar heights intellectually, as well as physically: the man was just about 7 feet tall! He was a professor at Harvard for many years and served in 4 US administrations starting with Roosevelt and ending with Johnson and he dictated the economic scene remaining solidly in the public’s eye till passing away just lately in 2006.
Friends with Kennedy
Galbraith was buddies with Kennedy too, who despatched him to be ambassador to India the place he grew to become buddies with Nehru in the early 60s and was ultimately awarded India’s second highest civilian distinction, the Padma Vibhushan. He additionally picked up a few Presidential Medals of Freedom in the US, as well.
Prior to all that gadding about, however, Galbraith coincidentally was an editor of Fortune Magazine 1943 – 1948, exactly the time that Alfred Winslow Jones, the father of the hedge fund, was employed there. Did Galbraith recruit Jones and tell him to write about anything other than finance? This was Jones’ original remit and it is an intriguing question. Galbraith was a political economist using a dry wit and a keen observer of humanity also. This truly shows in in “The Great Crash 1929,” a book about the Depression, published in 1954 which has never been out of print. He was a prolific writer and had almost 50 publications to his name with “The Affluent Society,” perhaps his greatest recognized book. Yet another book of his I have examined is, “A Short History of Financial Euphoria,” where he looks at the a variety of speculative booms and busts mankind has produced for itself – all driven by extraordinary debt piled upon a lot more unbelievable greed. A excellent line from that book is:
“The world of finance hails the invention of the wheel over and over again, often in a slightly more unstable version.”
He writes on the infamousnotorious South Sea Bubble, a time of white hot speculation, when money was being raised for all types of insane ventures. A significant amount of the “promotions” of the day had been: “To make Salt Water Fresh,” or “For constructing of Hospitals for Bastard Children,” or my favorite, “For importing a number large jackasses from Spain.” !!
Sounds Familiar
When you examine “The Great Crash,” (TGC) you are hit by how relevant his observations recorded over 60 years ago are today. As Galbraith writes,
“Always when markets are in trouble, the phrases are the same: ‘The economic situation is fundamentally sound.’ All who hear those words should know that something is wrong.”
Didn’t I hear Bush use those actual lines just before the crash? Isn’t Obama executing the same and the Europeans too, as markets melt down? The “power of incantation” is a running theme all through his book – as well as all through recent political speeches.
Back again to TGC, Galbraith’s writing skilfully places us in the life and times of the people who lived in the course of the late 1920’s and its terrible aftermath. And again, like nowadays, readers may not be surprised to see that Goldman Sachs was also front row and center for the spectacular bust bringing “trading corporations” to marketplace where they had 10% and offered 90% to the open public, right at the top. (Read the chapter, “In Goldman, Sachs We Trust” and recall this was published in 1954! The details don’t seem to change very much).
His examination of simply how devastating the crash was – and for how long it advanced – is alone, the reason why you should read this book now. Look at:
“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. Nothing could have been more ingeniously designed to maximize the suffering, and also to insure that as few as possible escaped the common misfortune.”
Bankers lost their prestige and jobs in addition to their money and were constant victims and clowns of the media and congressional committees for a 10 years or so right after the crash. Better legislation in the kind of the Securities Act of 1933 and the Securities Exchange Act of 1934 set the guidelines which we carry on to live with today.
Why Did It Happen?
After a bust people constantly ask,”Why did this happen? Why didn’t the authorities do a thing to stop it?” Yet again, the echoes of this passage can bemight be heard all the way to Greenspan and the present day:
“Booms, it must be noted, are not stopped until after they have started. And after they have started the action will always look, as it did to the frightened men in the Federal Reserve Board in February 1929, like a decision in favor of immediate as against ultimate death. As we have seen, the immediate death not only has the disadvantage of being immediate but of identifying the executioner.”
Not only accomplishes “The Great Crash 1929” provide you with a sense of how it was like dwelling through those tumultuous times but it precisely describes much of which we see happening today. Immediately after re-reading the book and reviewing recent newspaper headlines, yeah, I feel decidedly nervous. “The Great Crash 1929” is highly recommended.
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