A Short History of Financial Euphoria
John Ken Galbraith

Summary

A brief history of bubbles from a world famous economist written in the early 90s. Lots of lessons and similarities to where we are in this everything bubble

Rating: 4/5

Notes

All speculative assets go up and this increase attracts new buyers who continue to bid the assets up. The specualition building on itself proceeds on its own momentum

The rule, supported by centuries of evidence: the speculative episode always ends not with a whimper but with a bang

Speculation buys up the intelligence of those involved

Criticis who point out the bubble are told to keep quiet and support those indulging their euphoric vision

Financial genius is before the fall (SBF)

All crises have inovlved debt that has become dangerously out of scale in relation to the underlying means of payment (crypto and leverage) - stablecoins and yield farming

In the aftermath of speculation, reality is ignored, specifically how the speculation started

Learn about John Law and the Mississippi company - established the company, said to find gold in Louisiana (wasn’t there) and sold shares to the public where shares were then traded and kept being bid up till you had the bubble

South sea company in England set up by Robert Harley was the same

• Isaac Newton lost a ton of money doing this and got caught in the bubble

Most of who have sizeable amounts of money to invest or manage investment operations are Republican in their politics

The 1929 bubble started in Florida real estate in the mid 20s - where Charles Ponzi made his money)

During 1929, you could buy stocks on 10% margin (10% collateral, 90% from the lender)

The most leveraged firm in 1929 was Goldman Sachs (ring a bell for 08?)

Financial memory lasts, at no more, than 20 years

There are few references in life so common as to the lessons of history. Those who don’t know it are doomed to repeat it

There is possibility of error-prone behaviour on the part of those closely associated with money

When a mood of excitement pervades the market, when there is a chain of unique opportunity based on special foresight, all sensible people should exercise caution

One thing is certain: there will be many more of these episodes in the future

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