Thursday, March 12, 2009

Some things never change – Excellent piece on boom and bust from 1897

Panics and Booms, a lesson from 1897

He even explains leverage, housing booms and hpc. "during the prosperous times the demand for goods and property increases and soon the demand exceeds supply, and then prices advance....When prices of property and goods during a period of business depression are falling, the loss does not come on the entire property, but only on that portion of it represented by the cash capital the man has invested in it. The debt never shrinks until the real investment is all gone."

Posted by mountain goat @ 12:42 PM (804 views)
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5 thoughts on “Some things never change – Excellent piece on boom and bust from 1897

  • Nice to see history repeats itself.

    But will it ever pick up again this time ?

    How can it with the sheer level of debt behind the scenes ?

    We didn’t manage to clear down debt in the last boom, we now require even more debt just to keep going, never mind have another boom.

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  • bidin'matime says:

    A very worthwhile read. We tend to think back only to the 1930’s, but it is clear that the cycle of boom and bust has always been the same. How did Crash Gordon get away with saying ‘No return to boom and bust’ so many times?? Either he knew it was a lie, or he’s a complete fool – someone needs to put that point to him – sadly our best interviewers are not to bright themselves…

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  • mountain goat says:

    Str 2007 – “we now require even more debt just to keep going” – but is this really necessary? Sure it would be a big bust especially because there has been this steady increase in debt for decades, but in the end the writer is arguing that paying off debt is what sows the seeds of prosperity in the future. The longer this is delayed the longer the cycle of depressed economic growth.

    Bidin’matime – yes it really would help if people in charge could accept that boom and bust just happen, accept it. But they have got used to making promises that can’t be fulfilled. Therein lies the flaw in democracy perhaps. People vote for the guy who promises the biggest handouts.

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  • mark wadsworth says:

    Land Value Taxers saw prevention of asset price bubbles as an argument for LVT a century ago (Henry George, Winston Churchill etc). It was a valid argument then and still is one today.

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  • Congratulations on such a good finding. As you say, it summarises what many of us think. My father (dead many years ago) had original copies of what he said was the definitive work (pre-WW11 Schumpeters Business Cycles, sorry probable misspelling). My friends on the West Coast worry that their children will be speaking Chinese soon. Doomed we are All Doomed !!! AAAARGH ! but keep cheerful

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