5 ms·

For a taste of what Chinese investors are going through I highly recommend Galbraith's "The Great Crash 1929" [1]. He gives fascinating insights into to the man

by MarkMc 11y ago

For a taste of what Chinese investors are going through I highly recommend Galbraith's "The Great Crash 1929" [1]. He gives fascinating insights into to the mania and crash of the market and the futility of the authorities to prop it up. Here's an excerpt: The worst continued to worsen. What looked one day like the end proved on the next day to have been only the beginning. Nothing could have been more ingeniously designed to maximize the suffering, and also to insure that as few people as possible escape the common misfortune. The fortunate speculator who had funds to answer the first margin call presently got another and equally urgent one, and if he met that there would still be another. In the end all the money he had was extracted from him and lost. The man with the smart money, who was safely out of the market when the first crash came, naturally went back in to pick up bargains. The bargains then suffered a ruinous fall. Even the man who waited for volume of trading to return to normal and saw Wall Street become as placid as a produce market, and who then bought common stocks would see their value drop to a third or a fourth of the purchase price in the next 24 months. The Coolidge bull market was a remarkable phenomenon. The ruthlessness of its liquidation was, in its own way, equally remarkable. The rumors in China about malevolent foreign influence on the market also echo the 1929 crash. Galbraith again: What was perhaps the last word on the policy of reassurance was said by Simeon D. Fess, the Chairman of the Republican National Committee: "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." [1] http://www.amazon.com/Great-Crash-1929-Kenneth-Galbraith/dp/0547248164 http://www.amazon.com/Great-Crash-1929-Kenneth-Galbraith/dp/...

kvcc01 11y ago
It seems the indices are down 30% or so from their prior highs, which is unpleasant but nothing like the 1929-32 period. Even Nasdaq had cratered far worse in the early 2000s. By comparison, Dow Jones went from 381 to 41 in just about 3 years from its 1929 high, which is an astonishing 90% loss. Actually I didn't know it was that bad until I looked it up.
- backtoyoujim 11y ago
  From the wikipedia page about the 1929 crash ... this part was very telling: "The market would not return to the peak closing of September 3, 1929 until November 23, 1954."
  - hudj1jcnapru38 11y ago
    Also interesting to contemplate the influence of WW2 in that fact. I think I generally hear that WW2 was a big booster of economic growth, so how long would it have taken without the war?
    - chipsy 11y ago
      A glib way of answering this is to look at how much of U.S. GDP went to military spending. It was extremely high during the war and has remained at a higher average level ever since - thus Eisenhower's "military-industrial complex" remarks at the end of his term. Minus that spending, it's not clear what would have happened, since we never had a return to the old status quo. The military investments of the war motivated the early development of Silicon Valley - thus, we'd be looking at a present day where "somewhere else" might have gained the tech hub crown. That said, the current moment is one where the premises could change again. China has a strong and growing influence in the world, just as the U.S. did coming into the Depression. The particular circumstances differ, but a broad "cycle of empire" is one way to interpret things.
      - hooo 11y ago
        Plus a lot of the world was destroyed outside of the US ... leading to the post war boom here.
      - hudj1jcnapru38 11y ago
        I think it's a great example of why it's important to try to not judge history. The complications in this one scenario are just so fascinating, yet it's important to resist trying to tie it up in a neat bow.
vijayboyapati 11y ago
I've read it. Galbraith's history is ok and his writing is entertaining but his economic analysis is terribly flawed. I recommend Rothbard's America's Great Depression for a solid economic analysis of the causalities involved in taking a market crash and turning it into a depression. The book is available in pdf free online: https://mises.org/library/americas-great-depression https://mises.org/library/americas-great-depression
- rjtavares 11y ago
  Honest question: reading the "Political activism" section of the author's wikipedia article[1] gives me no hope of an unbiased analysis of the situation. In the book, does he try to give a balanced view, or is it a reflection of his own views as an anti-statist Austrian School economist? [1] https://en.wikipedia.org/wiki/Murray_Rothbard#Political_activism https://en.wikipedia.org/wiki/Murray_Rothbard#Political_acti...
  - kriro 11y ago
    It's applied Austrian Economics (what they call history as opposed to theory). It's a pretty good read even if you think Austrians are crackpot-crazy. The train of thought is pretty logically structured. I'm not really aware of a balanced view on the topic so it's a decent idea to start just reading the different views in extreme. I'd also recommend Friedman's "A Monetary History of the United States" (with a part about the Great Depression) for a Monetarist POV. "The Great Crash, 1929" by Galbraith provides yet another (institutionalist/Post-Keynesian) POV. Rothbard was a pretty good scholar even if you completely disagree with him. His "An Austrian Perspective on the History of Economic Thought" is a pretty good and well researched set of books.
    - rjtavares 11y ago
      Thank you!
- tiatia 11y ago
  "... but his economic analysis is terribly flawed." I doubt that an analysis from the Mises institute is going to enlighten us here. Austrian economics is interesting but fails on long term analysis and deeper insights due to Mises flawed understanding of Money. A former Austrian...
joe_the_user 11y ago
The Great Crash comparisons are tiresome not simply because of the difference scale so far but because history is full of crashes, some with 1929 outcomes, some with other outcomes - well, naturally all fairly bad in the short run but still with important differences. Japan's meltdown in '89, the little Dragon's crash, the 2006-8 crash, etc, etc.
fpp 11y ago
Have a look at the chart - http://finance.yahoo.com/echarts?s=000001.SS+Interactive#{"range":"max","allowChartStacking":true} http://finance.yahoo.com/echarts?s=000001.SS+Interactive#{"r... - From Oct 2008 to Oct 2009 the SSE dropped from almost 6,000 to 1,700 (after it rose from 1,800 to 6k the year before). Artificial bubble created by many different factors one being the limitations for Chinese investors / money to go abroad. So we've seen much worse or the same in 2007 / 2009.

by MarkMc 11y ago

kvcc01 11y ago

It seems the indices are down 30% or so from their prior highs, which is unpleasant but nothing like the 1929-32 period. Even Nasdaq had cratered far worse in the early 2000s. By comparison, Dow Jones went from 381 to 41 in just about 3 years from its 1929 high, which is an astonishing 90% loss. Actually I didn't know it was that bad until I looked it up.

backtoyoujim 11y ago
From the wikipedia page about the 1929 crash ... this part was very telling: "The market would not return to the peak closing of September 3, 1929 until November 23, 1954."
- hudj1jcnapru38 11y ago
  Also interesting to contemplate the influence of WW2 in that fact. I think I generally hear that WW2 was a big booster of economic growth, so how long would it have taken without the war?
  - chipsy 11y ago
    A glib way of answering this is to look at how much of U.S. GDP went to military spending. It was extremely high during the war and has remained at a higher average level ever since - thus Eisenhower's "military-industrial complex" remarks at the end of his term. Minus that spending, it's not clear what would have happened, since we never had a return to the old status quo. The military investments of the war motivated the early development of Silicon Valley - thus, we'd be looking at a present day where "somewhere else" might have gained the tech hub crown. That said, the current moment is one where the premises could change again. China has a strong and growing influence in the world, just as the U.S. did coming into the Depression. The particular circumstances differ, but a broad "cycle of empire" is one way to interpret things.
    - hooo 11y ago
      Plus a lot of the world was destroyed outside of the US ... leading to the post war boom here.
    - hudj1jcnapru38 11y ago
      I think it's a great example of why it's important to try to not judge history. The complications in this one scenario are just so fascinating, yet it's important to resist trying to tie it up in a neat bow.

vijayboyapati 11y ago

I've read it. Galbraith's history is ok and his writing is entertaining but his economic analysis is terribly flawed. I recommend Rothbard's America's Great Depression for a solid economic analysis of the causalities involved in taking a market crash and turning it into a depression. The book is available in pdf free online: https://mises.org/library/americas-great-depression https://mises.org/library/americas-great-depression

rjtavares 11y ago
Honest question: reading the "Political activism" section of the author's wikipedia article[1] gives me no hope of an unbiased analysis of the situation. In the book, does he try to give a balanced view, or is it a reflection of his own views as an anti-statist Austrian School economist? [1] https://en.wikipedia.org/wiki/Murray_Rothbard#Political_activism https://en.wikipedia.org/wiki/Murray_Rothbard#Political_acti...
- kriro 11y ago
  It's applied Austrian Economics (what they call history as opposed to theory). It's a pretty good read even if you think Austrians are crackpot-crazy. The train of thought is pretty logically structured. I'm not really aware of a balanced view on the topic so it's a decent idea to start just reading the different views in extreme. I'd also recommend Friedman's "A Monetary History of the United States" (with a part about the Great Depression) for a Monetarist POV. "The Great Crash, 1929" by Galbraith provides yet another (institutionalist/Post-Keynesian) POV. Rothbard was a pretty good scholar even if you completely disagree with him. His "An Austrian Perspective on the History of Economic Thought" is a pretty good and well researched set of books.
  - rjtavares 11y ago
    Thank you!
tiatia 11y ago
"... but his economic analysis is terribly flawed." I doubt that an analysis from the Mises institute is going to enlighten us here. Austrian economics is interesting but fails on long term analysis and deeper insights due to Mises flawed understanding of Money. A former Austrian...

joe_the_user 11y ago

The Great Crash comparisons are tiresome not simply because of the difference scale so far but because history is full of crashes, some with 1929 outcomes, some with other outcomes - well, naturally all fairly bad in the short run but still with important differences. Japan's meltdown in '89, the little Dragon's crash, the 2006-8 crash, etc, etc.

fpp 11y ago

Have a look at the chart - http://finance.yahoo.com/echarts?s=000001.SS+Interactive#{"range":"max","allowChartStacking":true} http://finance.yahoo.com/echarts?s=000001.SS+Interactive#{"r... - From Oct 2008 to Oct 2009 the SSE dropped from almost 6,000 to 1,700 (after it rose from 1,800 to 6k the year before). Artificial bubble created by many different factors one being the limitations for Chinese investors / money to go abroad. So we've seen much worse or the same in 2007 / 2009.