The Book I chose to do for my report is “The Great Crash” by John Kenneth Galbraith. He writes many things about the Great Crash, the events that led up to it and what caused the stock market crash of 1929. President Coolidge and President Hoover were couple major people that were around this time, among other individuals. John Kenneth Galbraith wrote this book to tell of the Great Crash, the causes and consequences of this time period of the late 1920s and the choices and the thinking of the people during the time period.
The Book about “The Great Crash” starts out talking about the Florida real estate rush of 1925. After the “Florida Bubble” popped, which people thought was going to continue to be a great success, people moved on to the next get rich quick proposition. Individuals started putting money into the stock market with their extra money. As people started getting rich quick, people continued to invest more and more into the stock market. Eventually citizens started obtaining loans to invest more money in the market. When some of these investments failed to pay off, people did not have the money to repay their loans. As the stock market declined, people started to not trust the market, which continued to decline and eventually the market crashed. There were many issues that caused the Great Crash and consequences by which will be talked about later.
How John starts out telling the story, is the great rush to buy Florida State Real Estate in 1925. The land was selling at “10% down payment”. Back then, that was a lot, but to us. It’s like paying someone a lousy tip at a restaurant. With the number of people buying land, the buyers would then turn around, up the price and resell the property to make a profit. This was one of the first of many “get rich quick schemes”. People thought that Florida would become populated by the “holiday-makers and the sun-worshippers of a new and remarkably indolent era”. By 1928, the “Florida Boom” ended. It was the first indication of the 1920s and the conviction that God had intended the American Middle class to become rich and powerful. Then John stated this in his writings, “Even as the Florida boom collapsed, the Faith of Americans in quick, effortless enrichment in the stock market was becoming every day more evident”.
The people in charged during this time were either oblivious to the fact or they just didn’t want to pay attention to the numbers or worth of stocks in the market. One of the Presidents of the time said in the Union address, “NO Congress of the United States ever assembled, on surveying the state of the Union, has met with a more pleasing prospect than that which appears at the present time.” One of the really rich people of the this time, Mister Rockefeller and are still very rich today stated, “Believing that fundamental condition of the country are sound…..my son and I have for some days been purchasing sound common stocks.” But by 1929, even though he was trying to help people to become sure about stock markets, the stock markets had already started to begin to fall under which we will later call “The Great Crash”.
-Talk about how everyone wanted to get rich quick (Florida land rush, stock rush, borrowing money to buy stocks, etc…)
-Talk about how everyone was involved in the stock market at the time, how time essentially stopped during the ticker times, etc…
-Talk about the causes and consequences of the Great Depression in depth
People continued to buy stocks and were confident that those stocks would pay off in the upcoming future, the value of the purchased shared would increase. As long as the people were confident in this particular stock, then the price would do nothing, but rise, and that was what happened in the years moving into the crash of 1929. People became crazed with need to get more stocks, going to any means to get them; obtaining loans from banks and pretty much anywhere else that supported the stock purchases. This would only work if the worth of the stocks stayed on the up rise. Catastrophe started when people confidences in the stocks fell. Then with such a resounding horror, the stocks that people were buying weren’t worth as much as they were originally and their worth dropped greatly.
There were many things that occurred that caused the Great Crash. One reason being insufficient investment-investments that failed to keep up with the steady increase in profits. Thank goodness wages, salaries, and prices all remained pretty stable…Although costs did eventually fall and with prices the same, profit increased. As the market increased, wages didn’t. The market could only do so much for so long on the wages and eventually collapse from lack of funding. This happened in the late 1920s The Great Crash occurred and was followed by close to 10 years of the depression in the economy.
Another cause of The Great Crash was how income was distributed in 1929 and how much was given to each individual. People that were rich received 1/3 of all personal income a year. This highly unequal income meant that the economy was dependent on these rich people to make high level investments or high level of luxury consumer spending or both. John had stated, “Both investments and luxury spending are subjected, inevitably, to the more erratic influences and to wider fluctuations than the bread and rent outlays of the $25-a-week workman.”