Goldman Sachs Trading Corporation's leveraged collapse
In December 1928 Goldman Sachs launched an investment trust at $104 a share. Within two months speculators bid it to about $222.
The Great Crash 1929
4 ideas
The bezzle: undiscovered embezzlement as wealth
The bezzle is the stock of embezzlement that has occurred but not yet been discovered. During it, the thief feels richer and the victim does not yet feel poorer, so it counts as net psychic wealth. In booms, money is plentiful and trust is loose, so the bezzle swells. In a crash, audits and suspicion shrink it abruptly, and exposed fraud deepens the sense of collapse.
Authorities won't puncture a boom they fear
Officials who could curb a speculative mania rarely act, because whoever stops it will be blamed with certainty for the losses, while inaction only risks a later collapse no one can pin on them. So they substitute ritual reassurance, declaring the economy 'fundamentally sound' and holding meetings that project confidence. Talk replaces action precisely because action carries personal cost.
Five structural weaknesses turning crash into depression
The market crash became a depression because it struck an economy with five fragilities. Income was concentrated at the top, so spending depended on luxury purchases and the investment of the rich. The foreign balance was propped up by American lending, and economic advice pushed the government toward balanced budgets and a gold standard that worsened the contraction.