The Great Crash of 1929 - Bonfire of the Vanities

"There seems little question that in 1929, modifying a famous cliche, the economy was fundamentally unsound. This is a circumstance of first-rate importance. Many things were wrong, but five weaknesses seem to have had an especially intimate bearing on the ensuing disaster. They are:

(1) The bad distribution of income...
(2) The bad corporate structure...
(3) The bad banking structure...
(4) The dubious state of the foreign balance...
(5) The poor state of economic intelligence."

"The sense of responsibility in the financial community for the community as a whole is not small. It is nearly nil. Perhaps this is inherent. In a community where the primary concern is making money, one of the necessary rules is to live and let live. To speak out against madness may be to ruin those who have succumbed to it. So the wise in Wall Street are nearly always silent. The foolish thus have the field to themselves. None rebukes them."

John Kenneth Galbraith, The Great Crash of 1929

Galbraith gives a nice description of the credibility trap in the second paragraph. No one speaks out against the fraud or injustice, because their livelihoods may depend on it, and they themselves compromised, if not by action, then by omission.

This documentary from The American Experience is also available on Netflix streaming for those who have access to it. I particularly like this piece because it does not use economic theories and phony rhetoric to obscure and gloss over the financial and banking fraud that was pervasive in the 1920's. The system had been corrupted and compromised, and the economy had been largely hollowed out, like a shell that simply collapsed. 

And the liquidationist, or in more modern terms austerity, policies that followed nearly destroyed the country in the manner of the unfolding tragedy that the world did not yet recognize in Europe.

It is fitting that we review this page of history at this time, having now overturned most of the protections that had been put in place during the 1930's by our fathers to protect the people from financial predators.

It is good for the Banks and the monied interests that the people are so foolish and easily led, that they willingly bare their childrens' throats for them, giving all for the sake of a profane ideology of sneering arrogance and self-destructive greed. 

Cruel gods make for cruel people, people who justify their rites of cruelty as expediency, practicality, and frankness, but which are in reality little more than rationales for emotional deformity, narcissism and selfishness.

Watch The Crash of 1929 on PBS. See more from American Experience.