the great crash of 1929 by john kenneth galbraith

Investors were using margin loans to increase their holdings of common stocks. He notes that the crash of 1929 was fuelled by leverage primarily centred around stocks. Galbraith provides a clear account of the stock market bubble and the ensuing crash.

Galbraith provides a sweeping account subtly revealing sign posts to help investors navigate future market cycles. It allows the investor to try and filter out the noise from the herd and replace it with healthy scepticism. Knowing that we are wired to repeat the mistakes of history is enlightening. the economy is strong and it will continue to be strong. This is a tendency to interpret information in a way that confirms existing beliefs i.e. A psychological bias known as confirmation bias is to blame. Interestingly, strong economic growth begets strong economic growth, awakening animal spirits. Galbraith captures the enthusiasm and distinction of the era. This period was characterised by a period of vigorous economic growth. The 1920s was a period of significant prosperity, they were called the ‘Roaring ‘20s’ for good reason. Bernard Baruch, the American financier, in The American Magazine noted that “the economic condition of the world seems on the verge of a great movement forward”. In 1929, while the champagne corks were popping, the optimists pumped up the market. Unfortunately, understanding these deficiencies does not help to correct them. Galbraith provides an educational recount of these simple shortcomings. As humans, we tend to forget past mistakes, then repeat them. Reading this book, one cannot help but reflect on our own flaws. If you ever hear these words uttered, it is time to pause and reflect. In fact, one prognosticator questioned, “Where is that group of men with the all-embracing wisdom which will entitle them to veto the judgement of this intelligent multitude?”. It is amazing to read how the politicians and prognosticators reassured the public as to the strength of the underlying economy. Both periods were fuelled by heavy speculation. In fact, one can draw many parallels between 19. The Great Crash 1929, provides a timeless reminder of the factors driving a stock market crash.

The great crash of 1929 by john kenneth galbraith