Herbert Hoovers's comment that "fundamental business of the country is on a sound and prosperous basis" was the farthest thing from the truth in 1929. In reading, John Kenneth Galbraith's The Great Crash 1929 I have come to the conclusion that the stock market crash was the culmination of a variety of reasons. First, there were many American speculators who were thoroughly primitive towards the stock market and economics. Secondly, before and after the crash, many were too stubborn to admit that there was a market crash, and instead of forming a viable solution to alleviating the crisis, many pretended that none had existed. And finally, even though some people of authority speculated that the stock market boom was dangerously overheated, there were was no conscientious efforts in preventing the crash when it did occur.

First, there was a certain naivete that many Americans had towards economics and the stock market. Many approached the stock market as a perpetual game of prosperity without considering the possible risks they were taking when they purchased magnificent amounts of stocks on credit. Moreover, the people's judgment was based on optimism and confidence rather than sound and logical business sense. As a result, most Americans had "a desire to get rich quickly with a minimum physical effort" living in a time which "inhabited not by people who have to be persuaded to believe but by people who want an excuse to believe" (pg, 3). Further, main street always "had one citizen who could speak knowingly about buying or selling stocks. However, even though these people "became an oracle" of stocks, their grasp of operations of the stock market was limited at best (pg, 75).

The most disturbing aspect was that not everyone was economically literate. Women "spoke of Steel with the familiarity of an old friend, when in fact she knew nothing of it whatsoever. Nor would anyone tell her that she did not know that she did not know" (pg, 76). Moreover, brokers' offices were often filled with such people who "crowded from 10AM to 3PM with seated or standing customer, who, instead of attending to their own business, was watching the blackboard" (pg, 80). Professionals such as Adolph Miller of the Federal Reserves Board later recalled the "easy money policy" as the greatest and boldest operations even undertaken by the Federal Reserve System . . . and resulted in one of the most costly errors committed by it or any other banking system in the last 75 years" (pg, 10). Consequently, few cared about the risks that they were taking when entering the stock markets. Many entered speculations just to look for "excuses for escaping in the new world of fantasy"; thus this culmination of the market rise in the winter of 1928 resulted in a rise of the stocks "not by slow, steady steps, but by great vaulting leaps" (pg, 12).

The foremost cause of the crash was people's buying and trading on margin. As a result, people were in reality buying and investing in expectation. The hysteria of easy money was so immense that some even resorted to trading "binders" where "not the land itself but the right to buy could be sold" (pg, 18). Accordingly, people could obtain stocks or land with a down payment of only ten percent of the original purchase price (pg, 18). Margin trading had "inefficiently and ingeniously" assisted the speculator, but consequently encouraged the extra trading which changed "a thin and anemic market into a thick and healthy one" (pg, 20). As Galbraith comments, buying stock on margin was like a "harlot" disguised as a "lovely and accomplished woman" (pg, 20). People were swarming to buy stocks on margin, but as their stocks increased in price without the costs of ownership did not" (pg, 21).

More significantly, "everywhere men of means told themselves that 12% was 12% when in fact it was only credit" (pg, 22). However, it was concerted effort by everyone to sustain the boom. This was the "most profitable arbitrage operation of all time, [for] New York banks could borrow money from the Federal Reserve Bank for 5% and re-lend it in the call market for 12" (pg, 12). The people's false and perhaps, gullible logic at the time was that a gambler "wins because someone else loses. Where it is investment all gain" (pg, 22). The practice of buying on margin was so chaotic that one investor boasts that "General Motors at $100, sells it to another at $150, who sells it to a third at $200" (pg, 23). As a result of this thinking in the late twenties, margin trading was so great that people were really investing in faith; consequently, when the crash came, few had the money to pay for their credit. Yet, with the events leading up to the crash, "more and more of the new investors in the market were relying on the intellect and the science of the trusts" (pg, 56).

However, it was not only the economic illiterates who misunderstood the mechanisms of the stock market, for even professionals were apathetic to the risks of the stock markets; consequently, their "predictions" of prosperity contributed to many people's miscalculation of the stock markets. Even Professor Irving Fisher of Yale University mistakenly observed that "Stock prices have reached what looks like a permanently high plateau" (pg, 70). Moreover, Dr. Lawrence of Princeton claimed that "Stocks are not at present over-valued" (pg, 70). Bankers were also a source of encouragement to those who wished to believe in the permanence of the boom, and as a consequence a "great many of them abandoned their historic role as the guardians of the nation's fiscal pessimism" (pg, 71). Further, the New York Stock Exchange was so arrogant, that it declared itself "the market place where prices reflect the basic law of supply and demand" (pg, 12).

Not surprisingly, this overconfidence and underestimation of risks led to the ultimate consequence of the ruining of the market. When the possibility that the downturn in the indexes frightened speculators, it "led them to unload their stocks, and so punctured a bubble that had in any case to be punctured in one day" (pg, 90). As the pessimism infected those "simpler souls who had thought the market might go up forever but who now will change their mind and sell." Consequently, when margin calls transpired, it forced the masses to sell, and at any price possible (pg, 90). However, became much of the peoples' stocks were thoughtlessly bought on credit, and not with hard cash, there was just not enough money to be repaid.

However, the main cause of margin trading was because of too many people's gullibility.

It was during the late twenties, when "money was exceptionably plentiful, that people were also exceptionally trusting" (pg, 133). Bank presidents who was "himself trusting . . . was unlikely to suspect his lifelong friend the cashier" (pg, 133). The ultimate consequence was that "the most spectacular embezzlement" in US history, one in which the looting of the Union Industrial Bank of Flint, Michigan was estimated at $3,592,000, took place (pg, 134).

Besides a naivete in economics, the second notable aspect of the crash was that there was no collective genuine effort in preventing the crash; instead, most authorities didn't care or just wanted to cover up any flaws in the markets. Even though Herbert suspected that the stock market speculation boom were "crimes for worse than murder for which men should be reviled and punished," he made no effort in deterring the speculation. Rather, he kept his attitude an "exceptionably well kept secret" (pg, 16).

In fact, some of those in authority actually wanted the boom to continue, for they were making money out of it, even though they had "an intimation of the personal disaster which awaited them when the boom came to an end" (pg, 24). Galbraith indicates that the men who had responsibility for these "ineluctable choices were the President of the United States, the Secretary of the Treasury, the Federal Reserve Board in Washington, and the Governor and Directors of the Federal Reserve Bank of New York" (pg, 25). They all had the power to slow down the stock market, yet they all did nothing to "puncture the bubble" (pg, 25). Moreover, President Calvin Coolidge neither knew nor cared what was going on during his tenure in office, and even a few days before leaving office in 1929, "he cheerily observed that things were 'absolutely sound' and that stocks were 'cheap at current prices'" (pg, 26). Furthermore, on the matter of stock market before and after the crash, Secretary of Treasury, Andrew Mellon "was a passionate advocate of inaction" (pg, 26). However, even the man who was given the responsibility of regulating the stock exchange by the US President, the Governor of New York, Franklin D. Roosevelt, "followed a laissez-faire policy on the matter of the stock market" (pg, 42). In addition, bankers were unlikely to "say much less advocate anything that would jeopardize the market" (pg, 72).

Likewise, the Federal Reserve Board in those times "was a body of startling incompetence" (pg, 27). Despite the fact that it would "have liked to stop the boom, but lacked the means," the board nevertheless helped intensify the crisis, for it continued to buy acceptances which resulted in commercial banks happily loaning "more money in the stock market" during the boom (pg, 30). Thus, "the Federal Reserve was helpless only because it wanted to be" (pg, 31). Had it been determined to do something, "it could for example have asked Congress for authority to halt trading on margin by granting the Board the power to set margin requirements" (pg, 32). Galbraith argues that an increase in margin to about 75% in January 1929 would have cause "many small speculators and quite a few big ones to sell" and thus would have ended the boom (pg, 32).

When the crash finally did occur, the so-called "organized support," the bankers, took a "philosophical attitude" and told the press that the situation "retained hopeful features" when in fact these bankers had no aim at maintaining any particular level of prices or to protect anyone's profit. Rather, their main purpose was to "have an orderly market, one in which offers would be met by bids at some price" (pg, 110). In fact, bankers "so far from stabilizing the market, was actually selling stocks"; as result, the "organized support" that so many pleaded for, like the margin buying, was nothing more than a hoax (pg, 113). Even Robert Lamont, Secretary of Commerce, disclosed that "organized support was really not that well organized" (pg, 122).

When the organized support failed, even the US president, Herbert Hoover did little to alleviate the emergency. His modest tax cut aside, the "President was clearly averse to any large scale government action to counter the developing depression" (pg, 140). Furthermore, there was immense ignorance and misconceptions in Congress as to what actually occurred concerning the stock market crash. Instead of offering solutions to offset the crash, Simon D. Fess, the Chairman of the Republicans National Committee accused that was a "concerted effort on foot to utilize the stock market as a method of discrediting the Administration" because "every time an administration official gives out an optimistic statement about business conditions, the market immediately drops" (pg, 149).

It was this sort of ignorance which increased the hardships of the crash, for long before 1929 there were numerous signs and warnings from experts that a recession was imminent; yet each time such when warnings existed, they would be buried underneath a wave of ignorance. The Florida boom was the first indication of the mood of the twenties and the "conviction that God intended the American middle class to be rich" (pg, 6). Yet when the boom collapsed, the "faith of Americans in quick, effortless enrichment in the stock market" became evident when most refused to heed the signs the same could occur to the stock market (pg, 7). In fact, during the boom, the people "asked only that the disturbing voices of doubt be muted and there be tolerably frequent expression of confidence" (pg, 69). A Boston firm of investment counselors echoed similar sentiments when it publicly warned that America had "no place for destructionists" (pg, 70).

Furthermore, there were already numerous warnings from economists and professionals that the excessive prosperity in the boom was dangerous, yet few took the paid any attention.

When Paul Warburg argued for a stronger Federal Reserve policy and debated that if the present orgy of "unrestrained speculation" were not brought promptly to a halt there would ultimately be a disastrous collapse which would "bring about a general depression involving the entire country," he was quickly denounced by the media as "sandbagging American prosperity" (pg, 72). When the Times industrials dropped ten points, Roger Babson warned that "Sooner or later a crash is coming, and it may be terrific," suggesting that what had happened in the Florida crash would now happen to Wall Street. To quell any signs of distress, Barrons swiftly dismissed Babson as the "Sage of Wellesey" and advised people not to take Babson seriously, dismissing the "inadequacy of his past statements" as evidence (pg, 85).

Finally, the third element which contributed to the severity of the stock market crash, there was a collective effort to restore order rather than finding an immediate solution to preventing another similar tragedy. Even after the crash, the same economists who predicted perpetual prosperity still refused to accept that the stock market crash was catastrophic after 1929. Irving Fisher concluded that "There might be a recession in stock prices, but not anything in the nature of a crash" (pg, 86). On October 15^th 1929, just a few weeks after the crash, Charles E. Mitcheel remarked that "The markets generally are now in a healthy condition" even though numerous speculators who had lost their fortunes because of the stock market had already committed suicide (pg, 94). To mend further chaos, the Wall Street Journal interjected that "price movements in the main body of stocks yesterday continued to display the characteristic of a major advance temporarily halted for technical readjustment" (pg, 86).

Finally, when the decline in stock prices continued into the Winter, many people, including Wall Streets's "two prophets," Fisher and Mitchell, continued to feign confidence and refused defeat. Fisher claimed that the decline represented only a "shaking out of the lunatic fringe" and Mitchell added that the conditions "were fundamentally sound, and again that too much attention had been paid to the large volume of brokers' loans," and concluded that the situation "was one which would correct itself if left along" (pg, 97). Instead of channeling their attention to a solution of alleviating the crisis, many speculators continued to add fuel to the fire by refusing to admit that the crash had occurred.

Perhaps the most disturbing aspect of this crisis was the sheer fragility of the stock market. It was controlled not by the masses, but by a few powerful Wall Street individuals, and "even the most devout Wall Streeter allows himself on occasion to believe that more personal influences have a hand in his destiny" (pg, 12). The boom was started in March because "the big men decided to put the market up, and even some serious scholars have been inclined to think that a concerted move catalyzed this upsurge" (pg, 13). For example, when one of Wall Street's most influential figures, John Raskob "spoke favourably of prospects for automobile sales," the magic of his name automatically "sent the market into a boiling fury," and immediately the General Motors stock surged from 5 points to 199 in one weekend. (pg, 13). More importantly, Raskob's words had set off a chain reaction which "set off a great burst of trading elsewhere in the list" (pg, 14). Yet even though many suspected this already, few were willing to stop the delirium, for everyone who played the stock market was making a profit. Nevertheless, as Ivan Kreuger summarizes, which is the typical thinking during and after the boom, "Whatever success I have had may perhaps be attributable to three things: one is silence, the second is silence, while the third is still more silence" (pg, 93).

In reading, John Kenneth Galbraith's The Great Crash 1929 one comes to the opinion that stock market crash occurred as a collective effort; it was initiated by a handful of speculators and then ameliorated by the masses who participated in the boom. Because there were so many unqualified novice speculators coupled with the unrestrained overoptimism at the time for easy money, the ultimate effect was it helped cultivate and ameliorate the abrupt halt of the stock markets. Furthermore, after the crash became a reality, most continued to fool themselves and others by offering stop-gap explanations and assurances stability. Instead of offering solutions to abate the chaos, those who were in authority persisted in their laissez-faire attitude towards the economy, and thus helped prolong the hardships caused by the stock market crash of 1929.