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Chancellor repeats throughout the book, speculation always emanates from greed and is abetted by an extension of credit, i.e., leverage. Written in late 1998, this book gives detailed, well researched historical examples of financial speculation eerily similar to what followed in the dot com boom/bust and the real estate, commodity and equity bubble and collapse now in effect. As Mr. Then when the de-leveraging phase begins, fear rules and the bubbles burst. This proves that although history never exactly repeats itself, human natures doesn't change ,and over time, past mistakes are forgotten, allowing new speculative periods to arise.I highly recommend this work, particularly for those who enjoy history, finance, economics and psychology.
Great history but don't expect to find any clues about how deep and long our current recession will be. In relating this interesting history of numerous market collapses, recessions and depressions Edward Chancellor makes it clear that distinguished economists, even with the benefit of hindsight, are still divided about the cause and effect of these disastrous events and the government actions that were actually effective in bringing on recovery. The author's description of how, during long periods of prosperity, time and again, a belief in the end of the business cycle starts to take hold in society and that people as important as Alan Greenspan are subject to delusions (moving "beyond history") like that is disturbing.
Edward Chancellor is full of stories, stories of speculation, speculators and social conditions. It is astonishing how very different times are so similar to our time. A great and entertaining way to expand our view and intuition of the next bubble (in a few years time). I only would have liked to read about more examples outside the English speaking world.
For the author, speculative manias are the Carnivals of capitalism, a `Feast of Fools'. selling more paper or shares than effectively issued).E. E. New `investment opportunities' were tulip bulbs, newly discovered or explored continents, canals, railways, aircraft, media (radio, TV), computers and internet.The bubbles are also symptoms of hubris after the world balance of economic power shifted from one nation to another: the Seventeen Provinces (tulip bulbs), Great-Britain (the South Sea shares), the crash of 1929 after the US took Great-Britain's place as the world's superpower, the Japanese real estate bubble after this country surged to the economic forefront.Bubble formation needs also a certain particular environment. Its power undermined the Bretton-Woods system of fixed currencies. Their essence is a Utopian yearning for freedom and equality by the many in a world dominated by the wealthy few.He agrees with C. Other characteristics of bubbles are the phenomenal losses suffered by those who were holding the bag (after the tulip mania, investors recovered 3.5 % of their outlay), political corruption, market cornering and outright fraud (e.g.
He agrees with J.M. Chancellor's book doesn't cover the last two `bullae' (the dot.com and the real estate ones), but his analysis of former bubbles gives also a perfect insight into these. Chancellor makes a laughing stock of the Efficient Market Hypothesis. Kindleberger that the bubble process begins with a kind of displacement (a new or an increased profitability of a particular investment), of which the positive feedback results ultimately in euphoria, where all kinds of rationality are wiped from the table. Socially, self-interest must be the dominating force and, politically, there should be little or no governmental interference in the economic process (laissez-faire). Keynes that markets are fundamentally inefficient.But the anarchic force of speculation should be taken seriously (after the bubble of 1887 only one fifth of the US population kept a regular employment). Therefore, whatever free marketeers may continue to pretend, a State-managed form of capitalism is needed in order to prevent market meltdowns and their dramatic consequences (runs on and collapses of banks and of the banking system, consumer pessimism, recessions and ultimately severe depressions which hurt nearly all citizens).This book is a must read for all economists and `investors' and for all those interested in the history of mankind.
The customer, one of whom is reputed by P.T. Chancellor covers the psychology of speculative manias in a very informative and entertaining fashion. The puffing of tulips, railroads, gold mines, "new era" technology, new "fail-safe scientific" methods of investment, etc. Chancellor appears to put himself very much in the camp of Keynes in believing that there is a place for sane, well thought out, and sensible government regulation. Sometimes markets behave in thoroughly irrational and mad manners.
First, you have the smiling salesman with his most appealing script crafted to the product. Time and time again, reasonably intelligent and some less than intelligent investors get roped into these money making and bankrupting schemes. The product is perhaps less relevant. The downside can be delayed or even moderated by intelligent regulation and fiscal/monetary policy--but never fully ended. If the product is illegitimate, such as salted gold mines, it will be sold as being legitimate. Rather, the best that can be hoped for is to curb the worst abuses by creating lawful financial markets with appropriate consequences for those who perpetuate such frauds.Hopefully, this book has found its way into some college courses. It says something for the timelessness of human nature and our complete inability to remember anything that history has taught us. all appear to have similar story lines.
This is a very impressive book. Gailbraith used to make the observation that recessions and depressions were necessary to remind people that there is a downside to the business cycle--lest we forget. Now, almost 10 years and two burst bubbles later--tech stocks and housing--I thought I would take a 2nd read of it. John K.
If the product is legitimate, such as railroads, it will be oversold to the point of illegitimacy. The result is usually disaster for the poor customer--especially if he or she is on the hindmost end of these typically Ponzi style schemes.Chancellor seems to have a rather wryly ironic, yet gentle, take on the victims of these schemes. Greed, fear, naivete, the psychology of the crowd, etc. I first read "Devil Take the Hindmost" a year or so after it came out and enjoyed it at the time. The author takes exception to the rational markets school of economics. The line of thought that markets are "all knowing" in terms of including the exact and correct pricing of financial instruments. Very much like people for some inexplicable reason. Also, sometimes markets are cornered or gamed by powerful players.
Highly recommended for any investor. It is true that you need to know some economic theory and stock finance parlance to wade through the book, but the reward is well worth the effort.What's telling about all of the manias that the author describes is how similar they are to each other. It may save you a great deal of money and grief. Barnum to be born every minute, is the ever present object of the stockjobber's attention. all conspire to make the greatest fool out of the investor. However, he doesn't appear to think that wild and excessive speculation can ever be fully suppressed and controlled. At the very least, it will give a very entertaining and informative view of past financial follies and a warning about the inevitable ones that will come.
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