By John Kenneth Galbraith

With the entire monetary knowledge and event of the wizards on Wall highway and in other places, how is it that the industry nonetheless is going increase and bust? How can humans be so keen to get stuck up within the mania of hypothesis while heritage tells us cave in is sort of bound to stick to? during this primer, the well known economist John Kenneth Galbraith reports the key speculative episodes of the final 3 centuries - from the seventeenth century tulip craze to the calamitous junk-bond follies of the Eighties. His insights offer very important classes on speculative economics, and exhibit conclusively that cash and intelligence usually are not inevitably associated.

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C H A p T E R 3 THE CLASSIC CASES, I: THE TULIPOMANIA; JOHN LAW AND THE BANQUE ROYALE Speculators may do no harm as bubbles on a steady stream of enterprise. But the position is serious when enterprise becomes the bubble on a whirlpool of speculation. -JOHN MAYNARD KEYNES, The General Theory of Employment Interest and Money That there were speculative episodes going back to the days of the Florentines and the Venetians none can doubt. Fernand Braudel, 28 the French economic historian and ultimate A Short History of Financial Euphoria authority on these matters, has noted that there were active securities markets in Genoa, Florence, and Venice as early as the 14th century, and long before then there was active trading in coinage and commodities, with, almost certainly, purchase and sale based not on present but on imagined prospective value.

He was to lose £20,000, now a million dollars and much more, in the speculative orgy that was to come. T 44 he South Sea Company was born in 1711 at the instigation or, perhaps more A Short History of Financial Euphoria precisely, as the inspiration of Robert Harley, Earl of Oxford, who was joined in the early years of the enterprise by one John Blunt, a scrivener by profession accomplished in the copying of legal documents and not less in learning of their contents. Its origins closely resembled those of the Banque Royale and the Mississippi Company; it similarly provided a seeming and undeniably welcome solution to the problem of floating and pressing government debt that, as in France, had been incurred in previous years in the War of the Spanish Succession.

His income of $550 million in 1987 was thought appropriate compensation for so inventive a figure, one of Edisonian stature. Mr. John Kenneth Galbraith an invention with the electric light. Again the wheel, here in an especially fragile version. The final and common feature of the speculative episode-in stock markets, real estate, art, or junk bonds-is what happens after the inevitable crash. This, invariably, will be a time of anger and recrimination and also of profoundly unsubtle introspection.

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