Jump to content
House Price Crash Forum

Recommended Posts

What Government intervention caused the Tulip Mania and the South Sea Bubble?

I think that the madness of men needs little encouragement from the Government. The Government might join in, but we are quite capable of insanity if left to our own devices.

Share this post


Link to post
Share on other sites

What Government intervention caused the Tulip Mania and the South Sea Bubble?

I think that the madness of men needs little encouragement from the Government. The Government might join in, but we are quite capable of insanity if left to our own devices.

Perhaps he watched Pirates of the Caribbean 3 and believed it?

Share this post


Link to post
Share on other sites

What Government intervention caused the Tulip Mania and the South Sea Bubble?

I think that the madness of men needs little encouragement from the Government. The Government might join in, but we are quite capable of insanity if left to our own devices.

link

You know you have crossed into the Austrian light when you wake up one morning and everything has become clear. From that point forward, for the rest of your life, you realize that almost every societal problem you encounter, no matter how simple nor how complex, is usually something to do with involuntary coercion, threatened violence, or some other failure of state interference in the free market.

No matter how well the dead hand of government has camouflaged itself, the underlying coercive cause of the problem usually presents itself in short order, whether to explain a failing health system, a rogue schools system, or even a perennial shortage of your favorite vitamin in a local health-food store.

However, Austrian bubbles need some sort of expansion in the money supply, by definition. To provide this, French works through several threads in far more detail than this review provides, to gear the underpinnings of a necessary money supply growth:

*

Following the regular gold debasements of the previous century instigated by Charles V, the Holy Roman Emperor who ruled over the Netherlands, the Dutch revolt of the late 1560s instituted a policy of "free coinage", whereby any amount of precious metal brought to the Dutch republican state would be minted "free" of charge and returned as the same weight of precious metal in the form of coins. (This "free coinage" policy came to the Netherlands by way of the Dutch East Indies, via the Portuguese and the Moslem governments of India.)

*

This anti-imperial policy encouraged a rising flow of specie to the port of Amsterdam, especially from the Spanish silver mines in South America and from as far afield as Japan. This was especially true after the mercury amalgamation process was invented in the middle of the 16th century, which boosted the production of silver, particularly with the opening of the Peruvian Huancavelica mercury mine in 1572 and the discovery of the Potosi silver mine in Bolivia, a single source which produced 45,000 tons of pure silver between 1556 to 1783.

*

Due to various complications of Dutch legal-tender laws, the Bank of Amsterdam was founded in 1609 and given a state monopoly on the trading of all specie.

Thus, we see already that three government interventions were settled into place before Tulipmania began; "free coinage" of money (i.e., Dutch taxpayers forced to subsidize minting, thereby sucking in specie from all over Europe), legal-tender laws (ripped apart by Gresham's law, which created a flood of debased and clipped overvalued money to push out newly minted undervalued money), and an imposed monopoly via the Bank of Amsterdam to counteract the two previous interventions (as often happens with government interventions in the free market, where one wrong-headed intervention generates a chain-reaction of further wrong-headed interventions).

So much for a "free market" then. But French has more to add before he is finished; his colorful brushstrokes lay down two more Vermeerian layers of light and shade before the ultimate dénouement:

*

The city of Amsterdam, released from the strictures of the Holy Roman Empire, became a center for world free trade, thus sucking in even more specie. (Hurrah!)

*

The Dutch state naval fleet, one of the most effective in the world at the time, often seized huge volumes of gold bullion from the Portuguese eastern empire and silver bullion from the Spanish western empire. (Boo!)

Thus we have a fourth violent state intervention, though tempered by the more noble causative factor of free trade, boosting the supply of currency to the Dutch homeland. And so the varnished picture is ready for a gilt frame:

*

Kings around Europe regularly debased and clipped their nation's coins, thus many people sent their bullion to the Netherlands, which practiced a republican policy of "honest" money, to protect their wealth from royal avarice.

*

The Dutch state policy of providing "free coinage" meant that more bullion was turned into coin than a free market would otherwise have produced.

Thus, the scene was pregnantly ripe for speculation and malinvestment in the usual bubble pattern of a typical boom and bust, which manifested itself in something quaintly Dutch; the buying and selling of tulip bulb futures.

Share this post


Link to post
Share on other sites

this has been answered before on here

Has it? Do you mind answering it again?

Because for three reasons I doubt your statement:

1. There are good a priori reasons why rational agents in an entirely free market would create bubbles. To elaborate slightly, the rewards for being richer than others may be out of proportion to the degree of wealth (a "winner takes all" setup which is quite plausible in evolutionary terms and in the terms of some societies). Given this motivation it is therefore rational to take big risks for a small chance of great wealth. This means it may be rational to try to speculate on small swings in market price. This amplifies such swings. It doesn't matter if everyone knows it is a bubble, it may still be rational to try to ride it and get out in time because this gives you a chance of great reward.

2. I remember a psychological study where all participants were given all information about a model market and bubbles still occurred. Sadly don't have time to track this down at the moment.

3. People are not perfectly rational relative to their underlying motivations and really do decide that tulip bulbs are "the future" or whatever.

Share this post


Link to post
Share on other sites

Further note: it is not obvious to me that an increased money supply is a prerequisite for a bubble to form. In fact it is obviously not a prerequisite. All you need is a bid bubble in one market sector, and that can occur with a fixed money supply.

Bubbles may create an expansion of credit, however, if everyone is writing IOUs in return for the bubble asset, or debt with the bubble asset as collateral.

A prior expansion of money supply will encourage the formation of asset bubbles, sure.

Share this post


Link to post
Share on other sites

If you allow FRB, along with deposit guarantees, limited liability, central planning and other special rules, you will have credit fuelled* booms and busts. The governments are too keen to keep the boom going to nip it in the bud. Then the inevitable collapse comes, after the bankers have feasted on the boom, and we get the bill.

I'm sure free banking would work, but there would still be bank runs. FRB is inherently unstable and you either live with the consequences (no bailouts) or you don't allow them to legally operate in the first place. As the former seems to be politically impossible with paper fiat (especially with a debt house of cards to maintain), it only leaves full reserve banking of some sort.

Let individuals decide where their money is invested, at what price and at what risk - a free market - and we would have risk correctly appropriated and we would never have to bail out the banks again. With today's technology, there really is no reason why this can't be pursued. Why not have a sort of mutual fund eBay for connecting investors to borrowers? Why should banks be any more than advisers for where to put your money these days?

*Booms/busts will always occur, but when credit fuelled, they can grow to epic proportions.

EDIT: reworded

Edited by Traktion

Share this post


Link to post
Share on other sites

Has it? Do you mind answering it again?

Because for three reasons I doubt your statement:

1. There are good a priori reasons why rational agents in an entirely free market would create bubbles. To elaborate slightly, the rewards for being richer than others may be out of proportion to the degree of wealth (a "winner takes all" setup which is quite plausible in evolutionary terms and in the terms of some societies). Given this motivation it is therefore rational to take big risks for a small chance of great wealth. This means it may be rational to try to speculate on small swings in market price. This amplifies such swings. It doesn't matter if everyone knows it is a bubble, it may still be rational to try to ride it and get out in time because this gives you a chance of great reward.

2. I remember a psychological study where all participants were given all information about a model market and bubbles still occurred. Sadly don't have time to track this down at the moment.

3. People are not perfectly rational relative to their underlying motivations and really do decide that tulip bulbs are "the future" or whatever.

keep up - see above

Share this post


Link to post
Share on other sites

keep up - see above

None of that addresses my points as far as I can see. Can you spell it out for me?

Edit to add, in the same way as betting on a bubble may be rational, so may purchasing a lottery ticket.

Edited by mirage

Share this post


Link to post
Share on other sites

None of that addresses my points as far as I can see. Can you spell it out for me?

Edit to add, in the same way as betting on a bubble may be rational, so may purchasing a lottery ticket.

yes crowds are mad

the free market would take care of the bubble long before it would be looked upon as a bubble though

Share this post


Link to post
Share on other sites

None of that addresses my points as far as I can see. Can you spell it out for me?

Edit to add, in the same way as betting on a bubble may be rational, so may purchasing a lottery ticket.

If it's only you paying for the ticket, win or lose, what's the problem?

If you had state backed 'lottery ticket insurance', it's a different matter though. If you won, you would get to live the lavish life style, but if you lost, then the taxpayer would pay for your ticket for you. Win, win for the chosen ones! <_<

Edited by Traktion

Share this post


Link to post
Share on other sites

What Government intervention caused the Tulip Mania and the South Sea Bubble?

I think that the madness of men needs little encouragement from the Government. The Government might join in, but we are quite capable of insanity if left to our own devices.

:lol:

You may want to read up on the South Sea Bubble, the government had rather a lot to do with it...

Share this post


Link to post
Share on other sites

yes crowds are mad

the free market would take care of the bubble long before it would be looked upon as a bubble though

It might do. What is the evidence it will every time? Is the free market not a crowd?

What about the large number of informed market participants that can get rich from a bubble skimming the naive investors?

What about the points that it may be rational to participate in a bubble?

Share this post


Link to post
Share on other sites

It might do. What is the evidence it will every time? Is the free market not a crowd?

What about the large number of informed market participants that can get rich from a bubble skimming the naive investors?

What about the points that it may be rational to participate in a bubble?

If you knowingly participate in a bubble, trying to make a buck on the latest and greatest 'prices only go up' fad, then you run the risk of getting burned. If you want to play it safe, keep your money out of it. If you want to speculate, put your money in it.

The only thing I ask, is that we aren't all expected to suffer and pay for it when it goes wrong. Risk needs to be appropriated correctly and individuals need to take responsibility for their actions.

Share this post


Link to post
Share on other sites

Thread title: "Evil man".

What?

Soros sees opportunities to concentrate wealth in his hands as opposed to Governments and big financial institutions. He then does his philanthropic works with the vast bulk of his accumulated capital.

So WTF are you on about, with your "evil" slander?

Share this post


Link to post
Share on other sites

It might do. What is the evidence it will every time? Is the free market not a crowd?

What about the large number of informed market participants that can get rich from a bubble skimming the naive investors?

What about the points that it may be rational to participate in a bubble?

Don't go disillusioning the poor old Austrians. In their dream world everything is perfect.

Noticed he's run away from your posts.

Share this post


Link to post
Share on other sites

What Government intervention caused the Tulip Mania and the South Sea Bubble?

http://en.wikipedia.org/wiki/South_Sea_Company

The South Sea Company was a British joint stock company that traded in South America during the 18th century. Founded in 1711, the company was granted a monopoly to trade in Spain's South American colonies as part of a treaty during the War of Spanish Succession. In return, the company assumed the national debt England had incurred during the war.

...

Harley needed to provide a mechanism for funding government debt incurred in the course of that war. However, he could not establish a bank, because the charter of the Bank of England made it the only joint stock bank. He therefore established what, on its face, was a trading company, though its main activity was in fact the funding of government debt.

Edited by InternationalRockSuperstar

Share this post


Link to post
Share on other sites

Thread title: "Evil man".

What?

Soros sees opportunities to concentrate wealth in his hands as opposed to Governments and big financial institutions. He then does his philanthropic works with the vast bulk of his accumulated capital.

So WTF are you on about, with your "evil" slander?

how does he get the capital

does he favour control or freedom

and i think he is ok helping evict people

Share this post


Link to post
Share on other sites

Thread title: "Evil man".

What?

Soros sees opportunities to concentrate wealth in his hands as opposed to Governments and big financial institutions. He then does his philanthropic works with the vast bulk of his accumulated capital.

So WTF are you on about, with your "evil" slander?

loads of stuff out there

link

What we have in Soros, is a multi-billionaire atheist, with skewed moral values, and a sociopath’s lack of conscience. He considers himself to be a world class philosopher, despises capitalism, and just loves social engineering.

Uh oh. Can you say “trouble,” boys and girls?

Soros is a real life version of Dr. Evil—with Obama in the role of Mini-Me. Which is not as humorous as it might at first sound. In fact, it’s bone-deep chilling.

György Schwartz, better known to the world as George Soros, was born August 12, 1930 in Hungary. Soros’ father, Tivadar, was a fervent practitioner of Esperanto—a language invented in 1887, and designed to be the first global language, free of any national identity.

The Schwartz’s, who were non-practicing Jews, changed the family name to Soros, in order to facilitate assimilation into the gentile population, as the Nazis spread into Hungary during the 1930s. Soros is an Esperanto word meaning “to soar.”

In 1944 Hitler’s henchman Adolf Eichmann arrived in Hungary, to oversee the murder of that country’s Jews. The Soros children were all given fake identity papers, and were shipped out to various Christian families. George Soros ended up with a man whose job was confiscating property from the Jewish population. Soros went with him on his rounds.

Soros has repeatedly called 1944 “the best year of his life.”

In an article in the Wall Street Journal, Joshua Muravchik notes that, “70% of Mr. Soros’s fellow Jews in Hungary, nearly a half-million human beings, were annihilated in that year. They were dying and disappearing all around him, and their numbers no doubt included many whom he knew personally. Yet he gives no sign that this put any damper on his elation, either at the time or indeed in retrospect.”

During an interview with “Sixty Minute’s” Steve Kroft, Soros was asked about his “best year:”

Sweetness & Light

KROFT: My understanding is that you went out with this protector of yours who

swore that you were his adopted godson.

SOROS: Yes. Yes.

KROFT: Went out, in fact, and helped in the confiscation of property from the Jews.

SOROS: Yes. That’s right. Yes.

KROFT: I mean, that sounds like an experience that would send lots of people to the

psychiatric couch for many, many years. Was it difficult?

SOROS: Not, not at all. Not at all.

KROFT: No feeling of guilt?

SOROS: No.

Of course he didn’t feel guilty. Soros has the moral depth of a clam. Nonetheless, he has said, “my goal is to become the conscience of the world.”

In his article, Muravchik describes how Soros has admitted to having “carried some rather potent messianic fantasies with me from childhood, which I felt I had to control, otherwise they might get me in trouble.”

Can you imagine the results of this messianic sociopath being “the conscience of the world?” Ye gods.

Be that as it may. After WWII, Soros attended the London School of Economics, where he fell under the thrall of fellow atheist and Hungarian, Karl Popper, one of his professors. Popper was a mentor to Soros until Popper’s death in 1994.

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 259 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.