Saturday 11 October 2014

The Great Crash, 1929

I have just finished reading "The Great Crash, 1929" by John Kenneth Galbraith.  Although written in 1954 about events in America in 1929, an awful lot of it seems very familiar: only the dates and locations have changed.  Its all there: lax monetary policy; rampant credit-fueled speculation (in stocks rather than property) driving prices to stratospheric levels; people investing in assets with little or no idea what those assets actually were (how many people bought apartments in Bulgaria off the plans could actually find Bulgaria on a map, I wonder ?); incompetent regulators asleep at the wheel; a parade of self-appointed experts loudly proclaiming that the upward trend would go on for ever (remember when the term "new paradigm" was briefly in vogue ?) and those who sounded any note of dissent were pilloried and practically accused of treason; predictions of a "soft landing" when it started to become apparent that the end of the boom was in sight.  Its a fascinating read and quite entertaining, despite the subject matter. The last paragraph of the last chapter sums it up well:

"But now, as throughout history, financial capacity and political perspicacity are inversely correlated. Long-run salvation by men of business has never been highly regarded if it means disturbance of orderly life and convenience in the present. So inaction will be advocated in the present even though it means deep trouble in the future."