First published in 1954, this book is understandably piquing interest because of the current financial issues facing the United States and world. The causes of the 1929 crash do seem similar in many ways to the current issues of today in 2008. However, many circumstances are similar, as many are different.

But also similar, there seems to be a rule about the phenomenon of Karma in individual human behavior. And this rule of Karma seems to apply to investing behavior.

Author John Galbraith provides evidence for his argument that cheap and easy credit wasn't the major reason for the bubble-like conditions that led to the crash, but that the real factor was "speculation for the sake of speculating." Speculation for the sake of speculation caused prices to artificially rise to extremely high levels simply because investors were buying with the intent to sell for a profit ---> and the next buyer would do the same, and so on.

During the 1920s many conditions inside and outside of the US financial markets provided a sense of false prosperity which was actually based on greed and speculation for the pure sake of speculation. These strong aspects of human mind and behavior that propel steep rising bubbles and steep downward slides. It's interesting how human psychology plays such a large role when markets rise in bubbles and then sharply decline. Mania involves greed on the way up, and fear on the way down.

From this 50+ year-old book (with an update in the late 1990s), a reader will immediately realize some of the parallels of 1929 that exist in 2008: This does not mean the same results will happen, however. But they could happen....

Gailbrath notes the significant inequality in income distribution that existed in 1929, deregulation of the banking industry, poor leadership, and bad policy and decision-making by the government because of economic ignorance and myopia. This ignorance is referred to by the author as a lack of "economic intelligence." Today, look at the current cast of characters in their *appointed* economic-power positions, and the criticism they're receiving for not only what they did *not* do, but what they *did* do once the financial downward spiral started unraveling.

As a historian, the author also noted another concept from then that reminds us of current times: the Florida real-estate bubble of the 1920s. In addition to buying land, people could by the "option to buy land" on a piece of paper. They could then re-sell it, where the option would be re-sold and re-sold again, and so on, and so on. Again, speculation for the sake of speculation. These buy-options and other means, were creative financing, and over-extended lending, and excessive leveraging. Just like today, and just like then, the result was a hard fall.

Housing bubbles have happened before. A disturbing concept of until recently was people treating their owner-occupied home - the home a person lives in - as an speculative investment and ATM machine during the big leaps in equity increases. Conditions caused by human "bubble-behavior" on the way up, at the peak, and on the way down.

John K. Galbraith noted over 50 years ago in this book that "money doesn't grow on trees." Nor does money grow on Collateralized Debt Obligations (CDOs) that are fraudulently rated AAA when they are not, and then sold to the world. Credit Default Swaps, Helocs, ARMs, teaser rates, and NINJA. Money cannot be invented out of nothing. Call it Karma, physics, or the fundamental concepts of investing. Making money out of thin air can only last a short time, with negative consequences often the result. The author stated that as time passes and the seismic crash of '29 fades from memory only to be highlighted as a side-note in history books: that rampant speculation, greed, and bubbles will happen again, followed by an inevitable bust.

"Those who cannot remember the past are condemned to repeat it."
~ George Santayana, The Life of Reason, Volume 1, 1905

As a layman who consistently attempts to self-educate myself about economic events, I do see a similar, yet also very different type of crash happening today as in 1929. Currently I see it as a steady decline. A slow and steady decline, that will be long-term and bring a lower standard of living. People will to have change their focus about what is important in life, if they'll be able to cope with the new economic circumstances and world that we'll be living in.

This is a well-written and good historical book by Kenneth Galbraith.

reading this work (written in the 1950s, and updated in the 1990s) could be reading about the current world financial situation (in 2008)

Galbraith wrote The Great Crash in 1954 and he notes in his introduction that every time it was about to go out-of-print a new speculative mania would come along and a new printing would issue. One expects that the 2008 version must be in the works.

Galbraith writes for the general audience, which means he not only leaves out most of the arcane details, but he also writes in an engaging style. Galbraith's view is that the great speculative boom that preceded the Great Crash was fueled by not by easy credit, but rather by a mindset that ignored risk and assumed that the market would go ever upwards - in short, a mania. The leverage that helped raise the market to unknown heights, particularly buying on the margin, also built in the means for the sudden collapse. Once the market nosed over, margin calls went out, some were met, many were not, and the market tumbled faster and farther. Galbraith demonstrates that many leaders held onto a `boundless optimism' long after any rational support for such a view had disappeared.

Galbraith's main focus is on the market speculation and its collapse, but he also takes the view that the stock market collapse did in fact contribute greatly to the cause of the Great Depression. Galbraith asserts that the economy was not in strong shape before the stock market collapse. He likens the Great Crash to `typhoon which blew out of lower Manhattan'. The crash in the market struck the rich especially hard and because wealth was so concentrated the subsequent shrinkage in spending and investment by the rich caused serious damage to the economy. While we have significant safeguards in place today that did not exist in the 1930's, we also once again have a concentration of income and wealth eerily comparable to the pre-depression era.

Highest recommendation. Well-written, well-argued, and timely (once again). Readers may also appreciate Galbraith's equally readable A Short History of Financial Euphoria (Whittle)

THE ROARING TWENTIES REPEATED. SKY'S THE LIMIT. A GAMBLERS MINDSET. LEVERAGING. SCREW THE NEXT GUY I'VE GOT MINE. NICKLE AND DIME AN HOUR JOBS IN CHINA AND MEXICO. REMOVE ANY AND ALL CHECKS AND BALANCES. CAN'T LOSE WE'RE TOO BIG AND TOO RICH.ANYWAY, SEVEN DOLLAR AN HOUR TAX PAYERS WILL FIX IT IF IT ALL BLOWS UP...

WELCOME TO THE THE GREAT CRASH OF 2008. MY ADVICE: STOCK PILE SOMETHING TO EAT AND WEAR. GET SOME SPARE PARTS FOR YOUR CAR. START A GARDEN AND GOOGLE BREAD AND SOUP RECIPES.
YOU GONNA NEED THEM...HEE HEE HO HO.

I started reading this book the day before the most recent crash started. Every night I picked it up, and it mirrored the current events so closely, that it was more than a little scary. Why won't we learn from the mistakes of the past?

I wish that I had purchased another book. This is not a good book at all

Given the recent turmoil in world financial markets, it is hardly surprising that, from the rubble, an army of economic pundits has arisen, replete with historical parallels and a cookbook of remedies for the mess. Being of a cynical disposition, I favor those pundits who reinforce my own certainties that perfidy, greed, speculation, lack of regulatory oversight and failed government policies are at fault for the current debacle. I found validation in "The Great Crash, 1929".

John Kenneth Galbraith, is a "giant" in the field. In this book, he identified five salient weaknesses of the 1920s economy that appear to me to be strangely evocative of the current financial crises. These are: 1). Gross inequalities in income distribution, with a tiny fraction of the
population owning the vast majority of the wealth. The level of CEO compensation nicely illustrates this point (it's nearly 350 times that of the average "prole"), 2). Flawed corporate structure, one in which, "American enterprise in the twenties had opened its hospitable arms to an exceptional number of promoters, grafters, swindlers, impostors and frauds". The analogy to the present is perhaps to hedge fund managers, short-sellers, leveraged traders, purveyors of derivatives and "sub-prime" mortgages and real estate speculators, some of whom appear to share these characteristics, 3). Bad banking structure, enabled, in part, by Congress rescinding Depression-era legislation separating commercial from investment banks and by allowing unregulated investment activity on a large scale. Other components extend to failure of the SEC to regulate mortgage instruments, "naked" short selling, government-mandated requirements for the use of "fair value accounting". I'm sure there are others., 4). "Dubious" state of foreign balance. Now (in a reverse of the situation in the 1920s), the US is the chief borrower nation, with the preponderance of debt held by foreign governments (chiefly Asian and increasingly Middle Eastern) and, 5). The poor state of economic intelligence. In the present crisis, I take "intelligence" to mean "smarts", rather than access to accurate and timely data. It might also be taken to mean "responsibility". An example of lack of "smarts" might be E. Stan O'Neal of Merrill Lynch who blandly asserted his lack of understanding of "derivatives" as an excuse for his firm's demise, while allowing their purchase and sale. Dick Fuld of Lehman is a nice illustration of lack of responsibility. His activities destroyed a perfectly goodfirm, yet, he still serves as Lehman CEO (note: the current Lehman is a 14 year-old company, spun off from American Express, so don't wax too nostalgic about the demise of a "150 year-old firm").

Yes, it seems obvious that regulation will be required as, left to their own devices, the "masters of the universe" will continue to refine and evolve their penchant for making lots of money by devising new financial instruments, which will lie outside the latest regulatory umbrella. Yes, people will live beyond their means, if given the option and easy credit is an enabler. This all seems to be part of human nature. Yes, it's a mess. However, it is unlikely to be "a national disaster for the United States". It's just business. However, you never know...

I found this book captivating, in a "gallows humor" sort of way.

Although written many years ago, and recounting events in the distant past, it should be required reading for anyone in the markets today. More specifically, it should have been required reading a year ago (mid 2007) for those invested in finance and property sectors.

Whether the malaise in those sectors (some stocks down 90%) spreads eventually to the general indexes remains to be seen.

Tony Loton, author --
DON'T LOSE MONEY! (in the Stock Markets)
Financial Trading Patterns

There are bigger and more detailed accounts of the 1929 Crash, but Galbraith's effort is excellent at distilling and depicting what happened and why. It's a great place to begin a study of the Great Depression. I was surprised at how well Galbraith wrote, and his command of the subject. None of it is difficult to grasp, which is why it's a great place to begin.

Galbraith does an excellent job in demonstrating how the private sector commercial bankers' unregulated short run,short sighted, penny wise ,pound foolish profit and sales maximizing behavior provided the financing and leverage for the real estate and stock market bubbles of the mid to late 1920's that led to the financial collapse of the DOW by mid 1931.The writing and analysis is excellent.

I have one major criticism.No mention is made of the analysis provided by Adam Smith of precisely the problem discussed by Galbraith in this book. Smith's analysis covers nearly 100 pages and correctly identifies what the problem is-loans made by private commercial banks to 3 different categories of borrower-prodigals,imprudent risk takers(the "new" balloon payment financing of the 1925-1928 real estate bubble closely resembles the sub prime and alternative- A loans of the 2003-2006 period).Galbraith certainly could have used the analysis provided by Smith on pp.250-340 of The Wealth of Nations [1776;Modern Library (Cannan)edition] to buttress his position . Unfortunately,it appears that Galbraith never read Smith's book. He could have made use of the support provided by Smith,universally acknowledged as the world's greatest economist. The WN is a timeless classic that is just as applicable and relevant today as it was in 1776. Washington and Hamilton used Smith as the base of early American economic policy .The reader of Galbraith's book is advised to purchase a copy of WN as well.