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Robbrent

A Short History Of Financial Euphoria

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In A Short History of Financial Euphoria Galbraith traced financial bubbles through several centuries, and cautions that what currently seems to be "the next great thing" may not be that great and may have quite irrational factors promoting it. A common factor in financial bubbles is easy access to borrowed money for speculation.

I saw this and thought about today's house prices :o

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Devil Take the Hindmost: A History of Financial Speculation by Edward Chancellor:

http://www.amazon.com/gp/product/045228180...9448604-0167011

Chancellor shows how true is the adage about those who do not understand history being doomed to repeat it. He takes us on a tour of financial madness throughout the centuries, from the Dutch tulip mania, to the infamous South Sea Bubble of 1720, to the 1980s Japanese real estate bubble, with many stops in between. What emerges is a consistent pattern: easy credit providing fuel for speculation, in combination with some new technology or management system, creating a "bubble", which inflates beyond all reason. But eventually, no greater fool with deep pockets exists, and the entire structure comes crashing down, leaving ruin behind.

The strange thing is, the participants in the madness often seem very aware that something is wrong, that it cannot last. But they ignore the evidence that ruin is on its way, right up until the end, when it is too late. They then learn their lesson. But the lessons don't seem to get passed down, for bubbles repeat themselves, generation after generation.

Just as today, where the news has been full of stories of the real-estate bubble for months, yet the trend continues, with people flipping properties, hoping they won't be the last one holding the bag.

You cannot understand economics and finance without understanding history, and I can think of no better place to start than Devil Take The Hindmost. It certainly beats the much more expensive education one could get when the next bubble bursts.

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Galbraith's account of the 1929 crash is one of the seminal works on the subject, and quite easy to read by non-economists.

http://www.amazon.co.uk/exec/obidos/ASIN/0...7471427-4778318

But sadly it all comes back down to the same issues, greed, stupidity, borrowed money and leverage.

Sound familiar?

What surprises me, is why does it keep happening, because I know one thing it will happen again!

Lets hope there is a decent pause in between this one and the next one, say 30 to 40 years.

The last 3 have been far to close together,

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What surprises me, is why does it keep happening, because I know one thing it will happen again!

Lets hope there is a decent pause in between this one and the next one, say 30 to 40 years.

The last 3 have been far to close together,

As Galbraith said, you can't legislate or regulate against this kind of thing happening over and over.

It's only the memories of how bad things become that prevents them happening again.

That's why he talks so much about remembering the mistakes of the past, so we don't repeat them.

If you look at the housing cycle it lasts somewhere between 15 and 20 years, just long enough for a generation to get burnt, grow up, and another generation to follow.

Sadly few people in the UK remember the last housing crash, and the current generation are just cannon fodder for the banks and media desperate to sell mortgages and any other related financial products.

It's all quite sad, but people are just going to have to learn the hard way, again.

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Guest Bart of Darkness
What surprises me, is why does it keep happening, because I know one thing it will happen again!

It's ALWAYS different "this time".

Except of course, it isn't. ;)

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The thing about bubbles, you can do well out of them if you get in (and out) in time.

So the lesson people learn is not that they should be extra cautious, but that they must jump in faster next time. Of course it all depends on the timing. By the time Joe Bloggs notices that there's easy money to be made, it's usually too late.

Having said that, the amnesia of the British public is quite astounding. The last property crash wasn't long ago.

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  • 301 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%



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