The Book: John Kenneth Galbraith, A SHORT HISTORY OF FINANCIAL EUPHORIA. Whittle Books/Viking, 1993 (first edition). Fine condition.
First read: 1994
Owned since: 1994
Yesterday morning I did not buy oranges, because they cost almost a dollar apiece. Last week I did not go to the opening reception for the Maine Festival of the Book, because it's a hundred-mile round trip from here to Portland, and I had already spent more than $140 on gas that week.
Hard times are not quite here -- for me, at least -- but things are getting worse. It was inevitable, and the only consolation is that if we can all hang on, things will inevitably get better again.
I bought this book in the wake of the last major downturn, in the early 1990s. If you can remember back that far, the issues were similar: collapsing real estate values, overextended credit followed by a credit crunch, high fuel costs, general anxiety. By 1994, when this book came out, the seeds of recovery were already sprouting.
Economist John Kenneth Galbraith offers this short book (110 pages) to illuminate the causes of the recession that began in 1990. In his preface, Galbraith describes the "speculative excess and collapse" of the 1980s: real estate, junk bonds, interest rate deregulation, etc. "Public confidence was shaken, corporate investment was curtailed, troubled banks were forced to restrict lending, workers were discharged and corporate executives and bureaucrats shed."
Sound familiar? It was ever thus, says Galbraith. He walks us through several earlier cycles of excess and collapse: 17th-century tulipomania, John Law's Banque Royal, the infamous South Sea Bubble, the 1920s Florida land boom, and of course the Crash of 1929.
So why don't we ever learn? Well, it's human nature. "Individuals and institutions are captured by the wondrous satisfaction from accruing wealth," writes Galbraith, and with that goes this idea that if you're making money, you must be doing something smart. In fact, most people would say that making lots of money is the only real proof of intelligence. (Donald Trump would agree.)
But making money takes as much luck as skill, and as we've seen, it's possible to be too smart for one's own good (ask Jeff Skilling).
And no one's immune to the basic principles of physics, which apply both above and below. When I was in college, a sign in a friend's bathroom summed it up: Gravity -- it's not just a good idea, it's the law.