The Great Crash, 1929

The Great Crash, 1929 is a book written by John Kenneth Galbraith and published in 1955; it is an economic history of the lead-up to the Wall Street Crash of 1929. The book argues that the 1929 stock market crash was precipitated by rampant speculation in the stock market, that the common denominator of all speculative episodes is the belief of participants that they can become rich without work and that the tendency towards recurrent speculative orgy serves no useful purpose, but rather is deeply damaging to an economy. It was Galbraith's belief that a good knowledge of what happened in 1929 was the best safeguard against its recurrence.

Galbraith wrote the book during a break from working on the manuscript of what would become The Affluent Society. Galbraith was asked by Arthur M. Schlesinger Jr. if he would write the definitive work on the Great Depression that he would then use as a reference source for his own intended work on Roosevelt. Galbraith chose to concentrate on the days that ushered in the depression. "I never enjoyed writing a book more; indeed, it is the only one I remember in no sense as a labor but as a joy." Galbraith received much praise for his work, including his humorous observations of human behavior during the speculative stock market bubble and subsequent crash. The publication of the book, which was one of Galbraith's first bestsellers, coincided with the 25th anniversary of the crash, at a time when it and the Great Depression that followed were still raw memories - and stock price levels were only then recovering to pre-crash levels. Galbraith considered it the useful task of the historian to keep fresh the memory of such crashes, the fading of which he correlates with their re-occurrence.

The Florida property bubble of the 1920s established the mood "and the conviction that God intended the American middle classes to be rich," a sentiment so strong that it survived the ensuing crash of property prices. In the early 1920s, yields of common stocks were favourable and prices low. In the final six months of 1924, prices began to rise and continued through 1925. From 106 in May 1924 stock prices rose to 181 by December 1925. After a couple of short downturns during 1926, prices began to increase in earnest throughout 1927, the year in which conventional wisdom saw the seeds of what became the Great Crash sown. Following Britain's return to the Gold Standard, and subsequent foreign exchange crises, there followed an exodus of gold from Europe to the United States.

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