The Great Crash, 1929
The Great Crash, 1929 is a book written by John Kenneth Galbraith and published in 1954; it is an economic history of the lead-up to the Wall Street Crash of 1929.
The book argues that the 1929 stock market crash was precipitated by rampant speculation in the stock market. Beyond the crash, Galbraith argues that the Great Depression was caused by a mixture of five main weaknesses: First, an imbalance in the income distribution. Galbraith asserts "that the 5 per cent of the population with the highest incomes in that year [1929] received approximately one third of all personal income"; Second, problems in the structure of corporations. Most specifically, he cites newly formed investment entities of the era (such as holding companies and investment trusts) as contributing to a deflationary spiral due in no small part to their high reliance on leverage; Third, the bad banking structure. Bad loans made principally to foreign governments and entities led to a domino effect of bank failures, wiping out the savings of their depositors; Fourth, foreign trade imbalances. During World War I, the US became a creditor nation, exporting more than it imported. High tariffs on imports contributed to this imbalance. Subsequent defaults by foreign governments led to a decline in exports, which was especially hard on farmers; And finally, "the poor state of economic intelligence." Galbraith says that the "economists and those who offered economic counsel in the late twenties and early thirties were almost uniquely perverse." The book, which was one of Galbraith's first bestsellers, written to coincide with the 25th anniversary of the crash, at a time when it and the Great Depression that followed were still raw memories - and stock price levels were only then recovering to pre-crash levels.
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