The Great Crash 1929 by Galbraith: Chapter 1 - "Vision and Boundless Hope and Optimism"

Summary

President Coolidge

        In 1928, President Coolidge views the economic relations within both the domestic and foreign scope as "sound" in contrast to historians who assail him for maintaing "superficial optimism." They concur with the liberal misanthropes who believe the schism between the rich and poor is becoming perpetual. However, Coolidge, himself, has truth to his perspective as the economy is developing a level of stability and capitalism is attaining a "lively phrase." 

        This auspicious vision for the industry is supplemented with the fantasy like hope for an effortless gain of wealth. Such examples are manifested with the Florida real Estate Boom of 1925. Within Florida, there was a mixture of speculation and statistical assurance with the rise of profits gained from sales. However, with the advent of the catastrophic hurricanes, there was a slight drop in the supply of new buyers. Despite this setback, Florida continued to have a boom, as it was associated with the Riviera of America, which was magnificence; as a result, people were reluctant to expunge their belief in the "effortless enrichment" of the stock market.

Florida Real Estate Boom

        However, there is ambiguity to the origins of the stock market boom. In the last months of 1924, prices of securities began to rise and had a setback in February of 1926. In April of 1926, the market renewed again but dipped in October with the hurricane in Florida, gradually recovering at the end of the year. Then in 1927, Henry Ford's closure of Model T for the preparation of Model A insinuated talks of depression but was elevated by the time of production. However, there is a paramount moment in 1927 that foments, what is believed by the Federal Reserve Board, as the demise of the stock market of America through a "generous but ill advised" act. The act is classified as internationalism. As British transitioned into a new system of pounds to purchase goods and erupted in strikes during 1926, United States enacted the easy money policy to aid Britain. Whether this policy engendered the great crash is uncertain; however, the simplicity and facility to exonerate American society called upon such speculation geared towards foreign influences.

Federal Reserve Board

        Thus, by 1928, even the most conservative minds could realize the rise in stocks and profit margins. However, 1928 marked the return of speculation and escape from reality. Prevalence of such actions were evinced with gains of 10 to 15 to 20 points in the market within a single day and the Stock Exchange, which is coined as a theory in which the basic law of prices is directly correlated with the interaction of supply and demand, began to be influenced from components such as personal affiliations and murky ideas like "destiny" and "big men" (people who had power). Impressive candidates associated with the term big men were John J. Raskob, William Crapo Durant, The Seven Fisher Brothers, and Arthur W. Cutten. Far greater indicators were the skyrocketing shares. March 12 3,875,910 shares were traded. March 27 4,790,270 shares were traded. June 12 5,052,790 shares were traded. November 16 6,64,250 shares were traded. 

Process of Stocks: Securities & Loans

        Therefore, capitalism was termed as a "genius" with its prospect of profit for corporations. Buyers also acclaimed the system for their benefits with securities, which are increases in value of stock, without the increase in the loan, which was the initial product purchased. Despite the fact that earnings were lower than loans, speculators invested at the chance of capital gain. Both sides believed Wall Street's ability to separate speculation from burdens of ownership was "beautiful." 

Analysis

        Through "Vision and Boundless Hope and Optimism," the predominant theme employed is work, exchange, and technology. Economic policies influencing the American society is manifested as market capitalism instigates optimism. Like president Coolidge, who associated capitalism with liveliness, and the people in Florida, who became inured to beliefs of "effortless wealth," capitalism spurred the rise of elated sentiments. In addition, capitalism is bolstered with skyrocketing shares and the stock exchange. As a result, capitalism was depicted as "genius," allowing for the growth of the stock market and speculation, which will be further explored in the next chapter. A

        A particular time period of relation would be that of the Gilded Age (Key Concept: 6.3 I). Economic policies such as capitalism are beginning to rise as new cultural movements as capitalism is becoming associated with interpersonal movements such as the idea of "effortless wealth." This movement eventually engenders an obligation for reform as the Great Crash ensues.

        From the author's style and narrative is one of great formalities and credibilities. Appropriate word usage and precise dates and statistical numbers further his validity.  Aspects of interesting appeal are areas in which he employs theories or rationales such as "men sought not to be persuaded of the reality of things but to find excuses for escaping into the new world of fantasy" and "in the growth of boom, property ownership becomes irrelevant except the prospect for an early rise in price." However, areas of confusion include usage of aphorisms and metaphors which require supplementary knowledge apart from the book such as "courage is required of the man who, when things are good, says so" and "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."

Citations

Coca, Onan. "Meet My Favorite President - Calvin Coolidge! - Eagle Rising." Eagle Rising. January 
    23, 2015. Accessed February 13, 2015. http://eaglerising.com/14239/favorite-president-calvin- 
    coolidge-words/.
Colombo, Jesse. "The 1920s Florida Real Estate Bubble." RSS. June 26, 2012. Accessed February 
    13, 2015. http://www.thebubblebubble.com/florida-property-bubble/.
Galbraith, John Kenneth. ""Vision and Boundless Hope and Optimism"" In The Great Crash, 1929, 
    1-24. Boston: Houghton Mifflin, 1955.
"Principles of Finance/Section 1/Chapter/Financial Markets and Institutions/Federal Reserve." - 
    Wikibooks, Open Books for an Open World. Accessed February 13, 2015. 
    http://en.wikibooks.org/wiki/Principles_of_Finance/Section_1/Chapter/Financial_Markets_
    and_Institutions/Federal_Reserve.
"Securities Lending Explained." PASLA -. Accessed February 13, 2015.    
    http://www.paslaonline.com/static3.html.