Great Crash of 1929

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The Great Crash of 1929 is a book written by John Kenneth Galbraith, in which he describes key factors that eventually led to the Great Depression of the early 20th century. Looking at the issues that Galbraith stressed, many resemble those that were present in the recent recession of 2008. John Galbraith first states that one of the main causes of the Crash of 1929 was the significant difference of the income distribution in the population. High-income families, which accounted for 5% of the population, were responsible for one-third of all personal income (personal income includes rents, dividends, and interest). Comparing this to the recession of 2008, one can see the resemblance. In recent years, the income gap has widened between high-grossing families and lower-income families. It has come to the extent that the middle class is considered to be in danger of disappearing. Families are now considered to be lower-income families or higher-income families.

The second factor Galbraith stressed was the structure of corporation in the United States. Many companies of the 1920s, specially the new companies coming up such as investment trusts and holding companies, borrowed money and used extreme amounts of loans to keep the business going. Once the source of the loans went under, the corporations followed, or the corporations borrowed too much of an amount, to the point where they were not able to pay it off. This was also evident in the case of many corporations during the time leading up to the Great Recession of 2008. The Lehman Brothers case was probably the most talked about. Lehman Brothers was a global services financing firm, which was forced to declared bankruptcy for bad financial practices. They covered up their financial troubles (not earning enough profit, and forced to borrow too much) using illegal financial accounting practices.

The third issue was the bad banking structure. Many banking units were working independently of each...
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