Next time someone sounds sure about what's going to happen, read this

By: Ray Pellecchia

File Under: NYSE

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I just finished John Kenneth Galbraith's "The Great Crash: 1929." Highly, highly recommended.

My favorite passage is this one long paragraph in which Galbraith punctures the pundits. Enjoy.

The Harvard Economic Society, it will be recalled, had come up to the summer of the crash with a valuable reputation for pessimism. This position it abandoned during the summer when the stock market kept on rising and business seemed strong. On November 2, after the crash, the Society concluded that "the present recession, both for stocks and business, is not the precursor of a business depression." On November 10 it made its notable estimate that "a serious depression like that of 1920-21 is outside the range of probability." It repeated this judgment on November 23 and on December 21 gave its forecast for the new year: "A depression seems improbable; [we expect] recovery of business next spring, with further improvement in the fall." On January 18, 1930, the Society said, "There are indications that the severest phase of the recession is over"; on March 1, that "manufacturing activity is now -- to judge from past periods of contraction -- definitely on the road to recovery", on March 22, "the outlook continues favorable"; on March 29, that "the outlook is favorable"; on April 19, that "by May or June the spring recovery forecast in our letters of last December and November should be clearly apparent"; on May 17, that business "will turn for the better this month or next, recover vigorously in the third quarter and end the year at levels substantially above normal; on May 24 it was suggested that conditions "continue to justify" the forecasts of May 17; on June 21, that "despite existing irregularities" there would soon be improvement; on June 28 it stated that "irregular and conflicting movements of business should soon give way to sustained recovery"; on July 19 it pointed out that "untoward elements have operated to delay recovery but the evidence nonetheless points to substantial improvement" and on August 20, 1930, the Society stated that "the present depression has about spent its force." Thereafter the society became less hopeful. On November 15, 1930, it said: "We are now near the end of the declining phase of the depression." A year later, on Ocober 31, it said "Stablilization at [present] depression levels is clearly possible." Even these last forecasts were wildly optimistic. Somewhat later, its reputation for infallibility rather dimmed, the Society was dissolved. Harvard economics professors ceased forecasting the future and again donned their accustomed garb of humility.

Tags: "The Great Crash: 1929", John Kenneth Galbraith, Great Depression