On speculation (1)

Galbraith writes:
One thing in the twenties should have been visible even to Coolidge. It concerned the American people of whose character he had spoken so well. Along with the sterling qualities he praised, they were also displaying an inordinate desire to get rich quickly with the minimum of effort. The first striking manifestation of this personality trait was in Florida. ...

In Florida land was divided into building lots and sold for a 10 percent down payment. ... The buyers did not expect to live on it; it was not easy to suppose that anyone ever would. But these were academic considerations. The reality was that this dubious asset was gaining in value by the day and could be sold at a handsome profit in a fortnight. It is another feature of the speculative mood that, as time passes, the tendency to look beyond the simple fact of increasing values to the reasons on which it depends greatly diminishes. And there is no reason why anyone should do so as long as the supply of people who buy with the expectation of selling continues to be augmented as a sufficiently rapid rate to keep prices rising.

Gentlemutt:
10% down means 10x leverage, and it means that a 10% drop in the price of the asset will wipe out your equity in that asset, so it didn't take much to pop the Florida real estate bubble of the 1920s. This is why small community banks typically require that you be able to put at least 25% down before they will think about lending you money to buy a house or car or equipment for your company. (And this 'abundance of caution' is why sleazebag lenders like Countrywide, WaMu, and countless mortgage company chop shops could step in and offer no-money-down loans once they figured out that they could sell the loans to other suckers before the loans went bad.)

Now jump forward 75 years and imagine what 20x or 30x or 40x leverage meant for firms like Bear Stearns, Lehman, Goldman, and Morgan Stanley -- razor thin ability to withstand a real downdraft in the value of the assets they held. ( 20x leverage means you put up only $5 and then borrow $95 to buy $100 of assets, so a 5% drop in the value of those assets means you are toast when your bankers refuse to extend your loans.) In retrospect Bear Stearns and Lehman Brothers were certainly broke long before the global marketplace for credit --- their bankers --- finally shut them down. (And BS and LB management may have violated the Sarbanes-Oxley law, amongst others, by pretending to be solvent long after they were not.)

Mr. Galbraith goes on to mention Charles Ponzi's imaginary residential developments near the imaginary city of Nettie, Florida. William Jennings Bryan, he of the high principles and onetime Secretary of State under Woodrow Wilson, earns honorable mention for allowing himself to be enlisted to help sell swampland to suckers and speculators. Who was the Bryan of our era? I admit to being partial to Robert Rubin, for moving effortlessly from upright dollar-defending Treasury Secretary under Clinton to Chairman of Citibank while it revved up to destroy itself, although given Rubin's earlier and quite lucrative career at Goldman Sachs he admittedly was never quite as fervent in his defense of the little guy as was Bryan. Rubin's eventual role in unleashing unregulated credit derivatives on the unsuspecting suckers, including his buddies Sandy Weil and then Chuck Prince at Citi, will be his legacy. On second thought I am being quite unfair to William Jennings Bryan.

And Peter O. Knight, a prominent businessman after whom an airport near Tampa is now named, merits special attention from Mr. Galbraith for expressing concern about the negative public relations affect from the solicitation of funds for Red Cross relief in the aftermath of the 1926 hurricane.

Mr. Knight was evidently a hard man.