0547248164
John Kenneth Galbraith
Notes
There would also be, we may be certain, the traditional reassuring words from Washington. Always when markets are in trouble, the phrases are the same: “The economic situation is fundamentally sound” or simply “The fundamentals are good.” All who hear these words should know that something is wrong.
The purposes (Wall Street serves) is to accommodate the speculator and facilitate speculation. But the purposes cannot be admitted… Wall Street in these matters is like a lovely and accomplished woman who must wear black cotton stockings, heavy woolen underwear, and parade her knowledge as a cook because, unhappily, her supreme accomplishment is as a harlot.
That premium was, in effect, the value an admiring community placed on professional financial knowledge, skill, and manipulative ability. To value a portfolio of stock “at the market” was to regard it only as inert property. But as the property of an investment trust it was much more, for the portfolio was then combined with the precious ingredient of financial genius.
Between human beings there is a type of intercourse which proceeds not from knowledge, or even from lack of knowledge, but from failure to know what isn’t known. This was true of much of the discourse on the market…Wisdom, itself, is often an abstraction associated not with fact or reality but with the man who asserts it and the manner of his assertion.
Cause and effect run from the economy to the stock market, never the reverse. In 1929 the economy was headed for trouble. Eventually that trouble was violently reflected in Wall Street.
The singular feature of the great crash of 1929 was that the worse 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 ensure that as few as possible escaped the common misfortune…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.
Our political life favors the extreme of speech; the man who is gifted in the arts of abuse is bound to be notable, if not always a great figure. In business things are different. Here we are surprisingly gentle and forbearing. Even preposterous claims or excuses are normally taken, at least for all public purposes, at their face value.
Wall Street’s crime, in the eyes of its classical enemies, was less its power than its morals. And the center of immorality was not the banks but the stock market. It was on the stock market that men gambled not alone with their own money, but with the wealth of the country.
Speculation on a large scale requires a pervasive sense of confidence and optimism and conviction that ordinary people were meant to be rich. People must also have faith in the good intentions and even in the benevolence of others, for it is by agency of others that they will get rich… Such a feeling of trust is essential for a boom. When people are cautious, questioning, misanthropic, suspicious, or mean, they are immune to speculative enthusiasms …Speculation, accordingly, is most likely to break out after a substantial period of prosperity, rather than in the early phases of recovery from a depression.
…very specific and personal misfortune awaits those who presume to believe that the future is revealed to them.