2017 = 1929?

“Of all our studies, history is best qualified to reward our research.”  Malcolm X

I just picked up John Kenneth Galbraith’s outstanding “The Great Crash of 1929,” an incredibly well-written study of the factors leading up to the Great Depression.  Much of the book reminds me of the late 1990s, and 2008, and now Bitcoin; these two quotes, from the first twenty or so pages, seemed to leap out of the page at me:

“No one was responsible for the great Wall Street crash.  No one engineered the speculation that preceded it.  Both were the product of the free choice and decisions of thousands of individuals.  The latter were not led to the slaughter.  They were impelled to it by the seminal lunacy which has always seized people who are seized in turn with the notion that they can become very rich.” 


“It is another feature of the speculative mood that, as time passes, the tendency to look beyond the simple fact of increasing values to the reasons on which it depends greatly diminishes.  And there is no reason why anyone should do so as long as the supply of people who buy with the expectation of selling at a profit continues to be augmented at a sufficiently rapid rate to keep prices rising.”

Galbraith seemed to be writing it as a cautionary tale – as Michael Lewis did when he wrote “Liar’s Poker.”  In “The Big Short,” I seem to remember Lewis mentioning that he wrote Liar’s Poker in the hope that young college graduates would read it and flee from Wall Street as quickly as they could.  One of his frustrations, though, was that students started reading it as a “how-to” manual and contacted him with questions: “Could you introduce me to the guy who screwed the pensioners out of $400m?  I’d like to learn from him…”  I’m wondering if Galbraith’s book may be read for identifying future bubbles and avoiding them.  For, as he points out,

“Historians and novelists always have known that tragedy wonderfully reveals the nature of man.  But, while they have made rich use of war, revolution, and poverty, they have been singularly neglectful of financial panics.  And one can relish the varied idiocy of human action during a panic to the full, for, while it is a time of great tragedy, nothing is being lost but money.” 

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