It is often said that perception surpasses reality and this is often the view of the stock market. News that a particular stock might be rising can trigger a buying spree, while a suggestion that a certain stock might be falling might entice people to sell. The fact that no one really knows what will happen one way or another is irrelevant. John Kenneth Galbraith uses the concept of speculation as a major theme in his book The Great Crash 1929. Galbraith's portrait of the market before the crash focuses largely on massive speculation in overvalued stocks that would inevitably collapse and reduce shareholder wealth . with it. After all, prices couldn't keep rising forever. Widespread speculation was undoubtedly a major factor in the collapse, but many other factors also came into play. While the speculative argument has some merit, the reasons for the collapse and its lasting effects had many moving parts that cannot be explained so simply. Speculation does not happen in a vacuum and therefore has to come from somewhere. Galbraith points to the flow of gold into the United States starting in 1925 and the subsequent reduction of the Federal Reserve's rediscount rate as the first step. He is quick to point out that the available funds will not in themselves lead to speculation. This is a fair assumption given that people with a significant amount of savings or income will not always dive into the market to double their money. Indeed, Galbraith notes that most people in this period did not have substantial savings or high incomes. The author also highlights the lack of distribution of wealth as the fundamental cause of the collapse because the economy depended on financial contribution… middle of paper. 11. n. 1 (1956): 100-101. http://www.jstor.org/stable/2976547 (accessed 4 October 2011). Pitzer, Matt. “The Case Against Goldman Sachs.” Last modified 04/21/2010. Accessed October 5, 2011. http://www.business.missouri.edu/ifmprogram/reports/2010WS/GS.docArchibald, Robert, and David Feldman. “Investing during the Great Depression: Uncertainty and the Role of the Smoot-Hawley Tariff.” Southern Business Journal. 64. n. 4 (1998): 857-879. http://www.jstor.org/stable/1061208 (accessed 7 October 2011). Cooke, Lorne. “Review: The Great Crash 1929 by John Kenneth Galbraith.” The finance journal. 11. n. 1 (1956): 100-101. http://www.jstor.org/stable/2976547 (accessed 4 October 2011). Pitzer, Matt. “The Case Against Goldman Sachs.” Last modified 04/21/2010. Accessed October 5, 2011. http://www.business.missouri.edu/ifmprogram/reports/2010WS/GS.doc