This book is the first (and only) book to solve the mystery of the most famous bubble in world history: Tulipmania in 17th century Netherlands. It Is a legendary event but explanations have been lacking. People blame irrational exuberance, free markets, and an unleashed aristocracy.
Douglas French takes a different route: he follows the money, to prove that the bubble resulted from a government intervention that dramatically exploded the money supply and fueled the tulip-price bubble – not altogether different from modern bubbles.
This book was French’s master’s thesis written under the direction of Murray Rothbard examining three of the most famous speculative bubble episodes in history through the lens of Austrian Business Cycle Theory.
Although each of these episodes is well documented, this book examines the monetary interventions that engendered each of these events showing that not only the Mississippi Bubble and the South Sea Bubble were caused by government meddling, but Tulipmania as well.
Tulipmania was unique in that it was the sound money policy of the Dutch combined with free coinage laws that led to an acute increase in the supply of money fostering an atmosphere that was ripe for speculation and malinvestment, manifesting itself in the intense trading of tulip bulbs.
The author also examines not only the Mississippi Bubble but the life and monetary theories of its architect, John Law. Professor Joe Salerno calls Law the world’s first macroeconomist who implemented a Keynesian monetary system in France nearly two hundred years before Keynes was born. At the same time across the English Channel, a nearly bankrupt British government looked on with envy at Law’s system, believing that he was working a financial miracle. It was anything but and investors in both countries were devastated.
Although these episodes occurred centuries ago, readers will find the events eerily similar to today’s bubbles and busts: low interest rates, easy credit terms, widespread public participation, bankrupt governments, price inflation, frantic attempts by government to keep the booms going, and government bailouts of companies after the crash.
When we will learn? We first have to get the cause and effect in the history straight. This book is an excellent contribution to that effort.
* Chapter 1: The Greater Fool Theory
* Chapter 2: Tulipmania
* Chapter 3: Free Coinage, the Bank of Amsterdam, and Tulipmania
* Chapter 4: John Law, Genius or Swindler
* Chapter 5: John Law’s Monetary Theories
* Chapter 6: The Mississippi Bubble
* Chapter 7: The South Sea Bubble
* Chapter 8: Increases in the Supply of Money, Speculative Bubbles, and the Austrian Malinvestment Theory
* Bibliography
* Index
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Saturday, April 04, 2009
Productive Speculation Is Attacked By Socialism.
If and when you listen to the half-truths in the media you are constantly being told by the propagandists that capitalism is evil and that speculators are vile. Here is why these are half-truths.
First of all the word ‘capitalism’ is supposed to be describing a free market economy but there is and has not been a free market economy anywhere, anytime. In that regard what is being practiced that is evil is interventionism which is nothing but the political corruption of the economy.
Second, speculation is absolutely necessary for any production to occur. Nobody knows what will be the outcome in the market; some products fail and some succeed, and some products people want more of and some products people want less of. The market conveys that information but only after production is finished and reaches the market. Before production occurs the market response is just a speculation. With no speculation there is no production! In that regard the attack by the socialists on speculation is an attack on production which explains one of the reasons why very few goods and services are available in socialist ‘economies’.
In addition to arousing your curiosity about the greatness of free market economics and about the value of speculation, this information helps you to quickly identify those whose voices are the voices of socialism. If a person attacks the free market or if they attack speculation they are either in need of education or they are socialists trying to spread lies and half-truths.
Bruce Koerber,
How true are your WORDS!
Part of the Overall PLAN as written :
“This hatred will be still further magnified by the effects of an economic crisis, which will stop dealings on the exchanges and bring industry to a standstill. We shall create by all in our hands, a universal economic crisis whereby we shall throw upon the streets whole mobs of workers simultaneously in all the countries of Europe. These mobs will rush delightedly to shed the blood of those whom, in the simplicity of their ignorance, they have envied from the cradles, and whose property they will then be able to loot”.
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