The Great Crash 1929 by Galbraith: Chapter 3 - "In Goldman, Sachs We Trust"

Summary

Supply and Demand

        After issues regarding economic instabilities with the Federal Reserve, there is new agitations to the domestic stock market with the "scarcity value." Common stocks no longer seem prevalent and are running out. This result can be referenced to the response of supply and demand. With the desire of people to purchase stocks at a pinnacle, it was without a doubt that the stocks would be scarce.

Market Boom of 1929

        New visions also spur such as the focus of capital. Small companies merge with larger companies not merely to eliminate competition but to dominate industries and attain control over productions and investments. The fundamental centralizing component was under the holding company system. Under holding companies, or lead companies, operating companies, smaller companies, would be purchased to increase securities and stocks at the expense of taking over existing companies. However, occasionally, companies would abide with corporate chains. These institutions would allow for the establishments of new outlets and expansion. In addition to organization, new companies arise to optimize capital. However, the Market Boom of 1929 is primarily influenced by existing enterprises. New, fanciful industries play a relatively trivial part. 

       However, soon enough, the solutions are garnered for the dearth of stocks with the investment trusts. This system basically allowed for the rearrangement of corporate securities and assets without a direct relationship to enable securities to be available according to market reactions, eliminating anxiety of possible shortage of common stocks. Furthermore, investment trusts are supplemented with investment companies. Their role is to advise for the common man auspicious sectors to invest in to engender funds, enabling more productivity. Originally, such corporations were few in existence and were obligated to adhere to rigid regulations and reveal investments. Regulating corporations such as the New York Stock Exchange and the Committee on the Stock List were cynical to investment corporations. However, by the autumn of 1929, investment trust had increased approximately elevenfold since the beginning of 1927 and credibility was being formed.

Investment Trusts

        Simultaneously, sponsorship of trusts are being executed. Usually, companies filed a management contract in which the sponsor ran the investment trust, invested the companies's funds, and obtained a fee reflective of the percentage of capital earnings. This procedure was facilitated with public appraisal and advocation and the influx of investment banking firms.

John J Raskob

         However, on the non corporate centered side, John J Raskob endeavored for equal opportunity. He believed that everyone should be in on the kind of opportunities he himself enjoyed. To implement this idea, Raskob proposed the Raskob plan. Unlike investment companies, companies under the Raskob plan would recieve money from clients and take charge in purchasing stocks and relay a portion of the benefits attained from the sales. From the public, approbation and admiration is received for the value of professional financial knowledge. A new strategy is born for increasing the value of securities and new competitions for reputable men ensue. 

        Within such a blossoming ambience, some were apprehensive of the future. Paul C. Cabot believed that dishonesty and greed were prevalent shortcomings of the new industry. However, his admonitions were undermined with responses of contempt. The twilight of illusion was near.

Analysis

        The theme that is manifested is primarily of work, exchange, and technology. Debates over economic values influencing the society is depicted with the advents of corporations such as investment companies and companies aligning with the Raskob plan because people are beginning to form connections and find value in their economy now. The prospect of attaining money attracts people to partake in the stock market. Furthermore, strategies advocating change to economic system can be displayed with the holding company system and the management contract. New strategies are endorsed to promote efficacy and optimize capital.

        A time period that aligns with the chapter would be Key Concept 7.1-7.1.A. The consolidation of corporations with management contracts and holding companies influence Americans to enhance economic growth because as companies begin to dominate sectors in the economy, people form an urge to be a part with the advent of investment companies and companies of Raskob plan.

Citations
Galbraith, John Kenneth. "In Goldman, Sachs We Trust" In The Great Crash, 1929, 
    43-65. Boston: Houghton Mifflin, 1955.
"John J. Raskob." Who Was John J Raskob. Accessed March 14,      
    2015. http://www.evi.com/q/who_was_john_j_raskob.
Right, Avenue. "Advertising Inventory and Rates: Part 1 - Supply and Demand." 
    Advertising Inventory and Rates: Part 1 - Supply and Demand. Accessed March 14,          
    2015. http://avenueright.com/entries/45/advertising-inventory-and-rates-part-1--- 
    supply-and-demand.
"Stock Market Crash Articles & Newspapers." Stock Market Crash Newspaper. 
    Accessed March 14, 2015. http://www.archives.com/genealogy/newspapers-
    stock-market-crash.html.
"Tokyo Realty Investment Management, Inc." Real Estate Investment Trust -. 
    Accessed March 14, 2015. http://www.jpr-reit.co.jp/trim/trim_e/reit.html.