The big surprise of this book basically was how much I enjoyed reading it, I finished it in less than 10 hours (in more or less one straight sitting) and never got tired of it. Galbraith provides a very detailed study, he does not try to overanalyze, but instead intends of providing his readers with enough information to pass judgment themselves. He shows the failure of market participants as well as regulators while also pointing out that the crash was inevitable and a market failure. Its size or impact could have been impacted by the Fed, the Treasury and a number of other actors, but they could have not prevented the bubble from bursting.
I find these economic subjects highly frustrating at times, simply because they are so inconclusive, everything is based on assumptions that might (or might not) be logically coherent but not necessarily true. Even if after reading this book I feel like I understand the nature of these bubbles, these crashes, better, it still seems to be such a superficial understanding, such a shallow knowledge. I guess there ain't nothing but to keep on reading.
I just found my notes for this book again and just wanted to add a few comments:
- Galbraith argues that 'cheap credit [is] not sufficient as an explanation for a speculative bubble' which I found highly interesting considering that's what Europeans claim the Americans did wrong these last few years (also I think this is what Greenspan usually is criticized for).
- The high income gap in the United States before 1929 (low Gini-efficient) contributed to a dependency on luxury goods for continued economic growth. When the stock markets crashed a relatively low percentage of people were directly affected by this, but these were the guys that were needed to keep consumption at high levels. Basically (and this is me, not Galbraith), if the United States had been a more just (in terms of income) society the Great Crash wouldn't have had such an astounding (and long-term) effect. I wonder what that means for today's society, considering that thanks (to some extent) to Bush's economic policies the rich have gotten richer while everyone else stagnated.
- 'The bipartisan emphasis on balancing the budget in 1932 worsened the developing depression.' Let's just say I hope that Frau Merkel is reading some economics texts too, I'd like to find a job next summer after all.
- Highly amusing:
'Persons high in Republican circles are beginning to believe that there is some concerted effort on foot to utilize the stock market as a method of discrediting the Administration. Every time an Administration official gives out an optimistic statement about business conditions, the market immediately drops.'