And by “short” he really means “short”. Only some 70 pages or so in length Galbraith gets right to the point and does so in plain English. This is no Economic tome requiring lengthy rereadings to understand. Its simple in its supposition and examinations declaring unabashedly that all financial crashes are, at their root, caused by speculation in the “markets". Whether the speculation is in tulips, real estate, stocks, art, etc. doesn’t matter. What matters is the psyche of the public at large that causes these events through heavy investment of capital in any subject that is viewed as being infallibly worth more tomorrow than it is today.
I grabbed this book due to the recent (and quite moronic) speculation in various cryptocurrency “coins” and stocks (see the utterly worthless speculation in Gamestop). Recognizing these events for what they are—ponzi schemes in which ever dumber and dumber people pile in with ever more and more capital they cannot afford to lose, I wanted to read on those who have summarized such events in the past—crash of ‘87, ‘29 and on and on and on.
Galbraith brilliantly goes through these various events and covers the inability of the “market”—his words for the “common folk” to recognize speculation for what it is and for people’s over-valuing of the opinions of those with money. Its his belief that people of means get there largely through luck, happenstance, or willingness to go along to get along and not intelligence, wisdom, or other characteristic often associated with wealth. Combine the gullible, “keeping up with the Jonses”, FOMO, nature of the public with the lack of selfawareness of the investing class (what today would be the SPAC speculators and those in Silicon Valley thinking they know all) and you have a recipe for disaster that repeats over and over. Which is another of his lessons…that we never learn. The “market” is too willing to believe that THIS time is different, that they aren’t as stupid as those of the past…and of course…they’re wrong.
None of which is to say that I take all of Galbraith here to heart. I doubt the man has ever met a government program he doesn’t like, he attributes all crashes to pure speculation discarding regulatory and governmental issues as being inconsequential, he was a huge fan of both Communist China and the USSR, and a host of other issues. Add to that his Harvard base of academia and “I know better than the proles” attitude and…well…I imagine he was insufferable as a human being.
But here? Solely in regards to the destruction that unwarranted speculation can be attributed to, he is remarkable in the ability to cut through the BS and slap society in the face, placing the blame squarely where it belongs—on the rubes who participate in such speculation simply because they are jealous of the rich, their neighbor, or attribute financial acumen on those possessing wealth rather than looking at the root of their income.
And perhaps that is why I enjoyed the book greatly. It preaches skepticism in all things. Much like Carl Sagan and others I have enjoyed, it asks the public to ask hard questions, not accept easy answers, not follow the herd, and forge one’s own path. In this case its the financial and investment arena he is asking you to apply this too. Its a shame more won’t listen to this…but instead we’ll get more Madoffs, more Enrons, more of the lower classes being defrauded of their income out of a blind faith in the news and family and friends. Then we’ll turn around and blame some faceless “system” for the cause rather than looking inward at our own stupidity. I don’t have faith enough in humanity to be able to assess themselves honestly…and neither did Galbraith. Anyone who has even contemplated following along with dimwit Redditors and Instabook investment hardos should consider this a must read.