I picked up John Kenneth Galbraith's The Great Crash the other day. I hoped it would convince me that we can recover from economic collapse, but after reading the book, I wasn't so much heartened that we've been through this and survived as I was disheartened that we've been through this and learned nothing.
We're repeating history. The economy collapsed in 2008 for the same reason it collapsed in 1929: people invested money they had borrowed on the strength of profits they had yet to earn. There are some differences in strategy--a credit default swap, for instance, is a recent invention; in the 20s there was no fake insurance against losses (aside from optimism)--but it's the same house of cards, and it toppled for the same reason: debtors were called to pay back loans they took out to buy into, but that were also "secured" by, the house of cards.
Incredibly, some of 1929's money changers recovered from the crash and lived on to wreak the current chaos. Galbraith, writing in 1954, faults companies whose names you'll recognize: Goldman Sachs, Lehman, Chase.
More books by Galbraith:
John Kenneth Galbraith: The Affluent Society and Other Writings
The Economics of Innocent Fraud
A Short History of Financial Euphoria
A Journey Through Economic Time
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