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THE late John Kenneth Galbraith attributed the longevity of his book The Great Crash 1929 — published in 1955 and never since out of print — to the tendency of history to threaten a repeat. "Each time it has been about to pass from bookstores," he wrote in a later foreword, "another speculative episode — another bubble or the ensuing misfortune — has stirred interest in the history of this, the great modern case of boom and collapse, which led on to an unforgiving depression." So here we are again. The financial crisis that has engulfed credit markets over the past year has finally crashed into the public consciousness, and the question of whether the US is headed for a second Great Depression is now a staple of bar-room debate. Little wonder, this has pushed the old Keynesian economist's book back into the Amazon charts. Almost 80 years ago, a financial crisis led directly to an economic catastrophe. The Great Crash 1929 sets out the five routes by which one became the other. Not all have direct parallels today, but some do. All these years later, Galbraith's book is still essential reading. The most extreme point for
income inequality in the US in the 20th century was 1928, thanks to a
financial boom that had handed great wealth to the rich with the funds
to play the stock market. The corporate structure was also bad this
time, as was the banking system, but the government intervention is more
proactive and the monetary authorities are also much more savvy in the
US today. There are many parallels, but it is different this time. —
By arrangement with The Independent
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