| 1-4-1988 | 1-11-1988 | 1-18-1988 | 1-25-1988 |
| 2-1-1988 | 2-8-1988 | 2-15-1988 | 2-22-1988 |
| 2-29-1988 | 3-7-1988 | 3-14-1988 | 3-21-1988 |
| 3-28-1988 | * | * | * |
I get so sick of the way that people talk about Japanese wrestling. There’s no question it should be covered extensively in the Observer because it is a significant part of the wrestling world. However, when you start printing letters that criticize the American society and the jazz scene, then you are going way too far.
Anyone who thinks the Japanese never forsake quality for showmanship is full of it. The rock group KISS has enjoyed phenomenal success there because of their wild appearence [sic] and stage show. In fact, when they stopped wearing their makeup in the United States, they waited almost two years to do the same in Japan because they knew they wouldn’t be accepted there without it. And what about the movie industry? Do you think Godzilla movies are popular because of great acting?
As a student, I find teachers constantly comparing the American intelligence with that of the Japanese. I’m sure that the wrestlers love being compared to Japanese wrestlers as much as I love being compared to Japanese students. The Japanese do well at everything because they become obsessed with it. For them, it’s a matter of pride. If they screw up, it’s not only a mark on themselves but also on their entire family. You may think that’s great, but it puts a lot of pressure on everyone. They spend hours studying and I’m certain spend hours learning wrestling skills and have no time for themselves. Cut the North American wrestlers some slack. They’re just trying to make a living and preserve their bodies in the process. Look at what trying to wrestle like the Japanese did to Tommy Billington. Everyone would love matches filled with nothing but high spots, but working them is a great way to destroy yourself in a hurry. Now there is no excuse for total duds like Hulk Hogan and Andre the Giant either, but there are many non-Japanese who can hold their own without going crazy about it. I wonder how many Observer readers can honestly say that they work as hard at their own jobs as the Japanese in the same profession do. If they do, then I think they would quality [sic] as workaholics.
If there is anything wrong with our society, it’s the lack of national pride, which is so evident in the pages of the Observer. You seem to hate everything that wasn’t imported from the other side of the world. I have absolutely nothing against the country of Japan or Japanese wrestling, but I don’t think it’s up to a bunch of wrestling fans to dictate what’s wrong with our country just because they prefer the Oriental style of wrestling. I think the Observer is great, but I’d like to see you stick to writing about wrestling instead of how rotten our way of life is. I’m sure that’s what a Japanese journalist would do.
DM: Have I ever written about how rotten our quality of life is or done any cultural comparisons between the U.S. and Japan except to where it pertains to the wrestling business? If I lived in Japan and made a comparison of the quality of the football product and wrote the U.S. product was superior, I hope people wouldn’t take it as an indictment against an entire society.
Thanks to everyone for your questions, I've had a great time chatting with everyone. It's getting late so I'm going to get to bed, but I'll check in again in the morning and answer a few more.
| Questions | Answers |
|---|---|
| Hi! Thanks for coming on. "the British bicycle mania of the 1890s" Please tell me more. Was this just a matter of speculation, or was there genuine mass use of bicycles as well as purchases? | This was the subject of my PhD! |
| It happened just after the invention of the modern bicycle - check out the difference between 1880 bikes and 1886 bikes: http://www.kristinholt.com/wp-content/uploads/2017/02/L-Hochrad-768x380.png. | |
| Understandably, bicycles became much more popular, and by 1896 they were a genuine craze. | |
| The price of bicycles themselves didn't have a bubble - they were already at a very high level - but they did crash after the boom. The bubble was in the shares of bicycle companies. A small number of existing bicycle companies suddenly reaped enormous profits, and their shares suddenly rose, sometimes by a factor of 10, making some investors rich overnight. | |
| As Charles Kindleberger said, "There is nothing so disturbing to one's well-being and judgement as to see a friend get rich." So a few investors getting rich attracted what we'd describe as 'speculative' investors to the bicycle share market - people who buy things because they think the price will go up, rather than because they think it's a good company. Speculation is self-fulfilling - people buy because they think the price will rise, but people buying causes the price to rise. By the spring of 1897, bicycle companies were trading at a far higher price than their profits could justify, especially since the fashion for cycling was starting to fade. There was no "crash" as such - we describe it as a slow puncture - but by 1900 cycle shares had fallen by about 80%, and the vast majority of companies were bankrupt. | |
| The survivors went on to become household names, though. Dunlop, Raleigh, and Rover were all bicycle bubble companies. | |
| This might remind you of the dot-com bubble - the general story is pretty similar! | |
| If anyone's interested in more detail, early versions of my papers on the bicycles are on our website: http://www.quceh.org.uk/uploads/1/0/5/5/10558478/wp16-06.pdf | |
| the below is a reply to the above | |
| Didn't the Wright Brothers build bikes? Did they already have the bike shop in 1896? Did they get into airplanes because the bike market crashed? This may be a modern question: Can you compare the bike bubble to electric car bubble? | I've heard that they did. Quite possibly they got into airplanes because the bicycle boom crash - that's how Riley and Rover got into cars. I don't know, though. The American bicycle boom around the same time wasn't part of the project - that's another PhD for someone else to do! |
| Thank you Dr. Quinn for taking the time. From all the historical bubbles you’ve studied, what were some qualitative and quantitative commonalities in most (if not all) of them? Do you see the same symptoms in today’s world? | Great question! I wrote a blog post about our theory of bubbles, which we set out in the introduction: https://www.boomandbust.co.uk/blog/blog-post-title-one-zatwb . It's based on the commonalities between them, which are: |
| 1. Abundant money and/or debt - people have lots of money to invest with. Bonus points if it's someone else's money. Usually this means low interest rates, but it can also mean banks have eased lending standards. | |
| 2. Marketability - assets are easy to buy and sell. Most bubbles are preceded by sudden increases in marketability, such as the conversion of untradeable debt into tradeable equity in 1720, or the use of mortgage-backed securities in the 2000s. | |
| 3. Speculation - people buy assets for no other reason than because they think the price will go up. | |
| 4. A "spark" - something that creates an initial price rise, attracting the speculative investors. We divide these into technological sparks e.g. the dot-com bubble, and political sparks e.g. ~all housing bubbles, the 1720 bubbles. | |
| Do I see the same symptoms in today's world? YES. Interest rates are low, economies are loaded up with debt, and the internet makes everything much easier to buy, sell, and speculate in. | |
| This is why we think bubbles are so much more common than they used to be. Between 1929 and the 1980s there were pretty much no major bubbles - a lot of financial economists started to think they were a myth. Since then we've had the Japanese stock and housing bubbles, the dot-com, housing bubbles all over the place, Chinese stock market bubbles in 2007 and 2015, the crypto bubble in 2017. So I expect we'll keep seeing bubbles happen pretty frequently, though it's very hard to say what they'll be in. | |
| the below is a reply to the above | |
| Thanks for this answer Dr. Quinn. A follow up question to your response on historically common characteristics between bubbles. Are there common actions that economies have historically taken to correct course and turn a potentially malignant bubble to something more benign? | The record of governments during bubbles is... not great. Some would argue that the Australian government did a good job of keeping house prices under control during the 2000s. But the German and US governments tried to tackle bubbles in the 1920s by raising interest rates, and in both cases this made things far, far worse. |
| We've definitely got better at managing the immediate aftermath of bubbles, largely by protecting financial institutions and credit channels. OTOH, the bursting of a bubble often reveals systemic problems that need to be reformed in the medium or long term, and we might even have got worse at fixing those. | |
| the below is another reply to the original answer | |
| What would you say are good examples (if any exist) of bubbles which didn't burst - situations where everything you outline above was true, but in the end nothing much happened and the market just continued rising steadily or stayed leveled? In other words, if what you describe above is a "bubble test", what are some famous false positives? | So say we divide bubbles into political and technological. A political bubble might never burst because the government finds a way to sustain high prices indefinitely. London after 2008 might fit this description. |
| I don't know of any technological bubbles that didn't burst, but a lot of them burst much later than people expected them to. Over the course of the 1990s, for example, internet stocks were a good investment for much longer than they were a bad one. | |
| the below is another reply to the original answer | |
| Did the crypto bubble really have enough of an impact on the economy to classify it as a proper bubble, as opposed to a twenty first century tulip mania? | You might be right - the crypto bubble had very little economic impact. It did involve financial assets though, rather than commodities. I think it has more in common with stock market bubbles than with the tulip mania, but it could be argued either way. |
| the below is another reply to the original answer | |
| Wouldn’t the progressive income tax rates in this time period also account for the lack of bubble bursting? | There was an active effort by governments to restrain capital at that time, which kept money, debt, and marketability at low levels. Progressive income tax rates were a part of that wider effort, but I don't think they were the most important part - these were the days of capital controls and strict regulation on how much risk banks could take. |
| Hi! Thanks for doing this. My personal interests lie in history much more ancient than 1720s, so I tend to pay attention more to things like Mansa Musa's trip to Cairo and the inflation that occurred as a result of his largess, and the impact of Spanish gold on the Imperialist-era economy of Europe, but you're saying that the large fall in price comes with no "obvious cause" for it to count as a proper boom-and-bust cycle. Given my shaky understanding of the American housing crisis and my even looser understanding of how Roman apartments worked during the Republic (and how many records the Romans left), I'm a little surprised that there isn't more evidence of ancient boom-and-bust cycles. Do you have any speculation for why this is apparently a modern phenomena? | It's a great question. The Mansa Musa trip was one of my favourite things I learned in my very first course in economic history. |
| I do think there were bubbles before 1720, but there really isn't much direct evidence of them. Partly this is because direct evidence is hard to find, and there aren't too many ancient financial historians around to do the work. But it's also probably fair to say that bubbles were much, much rarer pre-1720 than they are today. | |
| We think this is because most assets weren't marketable enough. The appeal of investing in a bubble is getting rich quick - you buy it today, the price goes up 200% tomorrow, then you sell it and profit. But this only works if the law lets you do it, it's very easy to find a buyer and seller, and the whole process isn't too much hassle. So, for example, if there's no secondary market for government debt, you can't really get a bubble in government debt. And before 1720, that's how things were. | |
| But 1720 marked the widespread adoption of financial assets that could easily be bought and sold. It could have marked the start of a new era of semi-frequent bubbles... except that after the Mississippi and South Sea Bubbles, governments quickly decided these assets were a terrible idea and most of them were banned. So we didn't see another bubble until 1825 (or arguably the Canal Mania of the 1790s, but the government really kept a lid on that one). | |
| Thank you for stopping by AH, Dr Quinn. I am curious as to why you feel that the Dutch tulip mania "doesn't count" as a bubble. Other authors, such as Kindleberger, consider that it was, and I've always found the efforts made by writers such as Garber to suggest that the pricing of bulbs in the 1630s was fundamentally rational to be less than convincing. Can you elaborate on your thinking in this regard? | Ha, I knew I'd get pulled up on that! |
| Tulips are consumption goods, so we can't really say whether their price is rational or not, just like we can't make that kind of call about, say, fine art. | |
| That said, Garber denies that they became objects of speculation, which I find completely implausible. So even though it's untestable, I do think it was probably a bubble. | |
| It definitely wasn't a major bubble though, because it was so completely economically inconsequential. We don't see anything happening in economic or price data, we don't see any bank failures. We don't even see a blip in the number of recorded bankruptcies, which suggests that participation in the market must have been extremely small (which makes sense, since the prices of the bulbs were prohibitive for all but the very rich). | |
| So it's really just a bit of a curiosity, similar to the bubbles in beanie babies or baseball cards during the 20th century. It's just not in the same category as era-defining events like the 2000s housing bubble or the Wall Street Crash. | |
| Hi Doctor Quinn, thank you for doing this AMA! During the earliest bubbles, did anyone recognise that the price increases were unsustainable? Did people predict the bubble bursting? | Yes, lots. Daniel Defoe and Jonathan Swift were two notable bubble-sceptics during the South Sea Bubble. Lord Hutcheson, an MP, wrote an excellent financial analysis of the South Sea scheme explaining why it was a terrible investment. |
| I think the majority of people are usually sceptics during a bubble. But if you think there's a bubble in something, what can you do beyond not investing in it? Short-selling in a bubble is usually a terrible idea. It's like Keynes says, the market can stay irrational longer than you can stay solvent. | |
| the below is a reply to the above | |
| Interesting: so I'm guessing you don't think the ability to short a stock / a market (I don't know how long this ability has existed, whether or not it's a more recent phenomenon) has had a positive impact in tamping down or even preventing bubbles in more recent times? | I think it probably helps tamp down bubbles a bit. It's just that it's so much easier and less risky to buy a stock than it is to short it, and it always has been. |
| Maybe we wouldn't see many bubbles in a market where it was as easy to bet against a stock as it was to bet on it. There's a bit of experimental work on this, but history doesn't tell us an awful lot. | |
| the below is a reply to the above | |
| Interesting. This might be a little too in the weeds, but... Do you have ideas in mind of how to make short selling easier? Or, to put it more broadly, would such a task be on your list of 'initiatives to avoid future bubbles'? | I'm not sure if that would be a good thing. Easy short selling might make bubbles less likely. But it might also lower asset prices, making it expensive for companies to raise capital, which would be bad for the economy. There hasn't been a huge amount of research on the real economic effects of short selling and short sale constraints. |
| Hello Dr. Quinn, it's nice to see such a subject come up here. You are talking about some bubbles being fairly benign but in my mind, when a bubble explode, there is money technically disappearing "overnight" and it is bound to have some repercussions on the economy, even if it's indirectly - like a landowner having to increase its rents to make up for the lost money. How can a bubble not affect the overall economy or even have beneficial effects? | Thanks, it's nice to be here! |
| It's more accurate to say that there's a negligible effect on the overall economy - there is some effect, but it's so small it wouldn't show up in any economic data. This is the case when: | |
| 1. The people who lose money can afford to lose it, so the wealth effects you describe are minimal | |
| 2. The banks aren't exposed to the bubble | |
| Technology bubbles could have beneficial effects by encouraging massive flows of money into very innovative parts of the economy. Whereas in a fully rational market, R+D is underfunded. If you get a financial crisis or a severe recession afterwards then this is completely insignificant, but if not, it might be fair to say that a bubble was a good thing for society. | |
| What's common between different bubbles that have burst and what may be something that's unique about some (maybe the recent ones)? Also, have there been instances when a bubble was identified in hindsight but it never burst or rather just sizzled? Thank you! | I'll answer the second question first. Most bubbles just sizzle rather than bursting. There are two big exceptions - 1929 in the US, and China in 2015. This was because during those bubbles, so many stocks were held on margin (i.e. with borrowed money). When prices started to fall, the banks issued margin calls, forcing indebted shareholders to sell their shares. This caused prices to fall further, leading to more margin calls, and so on. |
| But usually, prices fall pretty gradually. | |
| I answered about commonalities earlier, so I'll talk about what was unique about the most recent bubbles in the book- the Chinese bubbles of 2007 and 2015. These were characterised by extensive state involvement in the market, culminating in a series of increasingly desperate (and unsuccessful) attempts to stop the crash. At one point, students at Tsinghua University were instructed to chant "Revive the A shares, benefit the people; Revive the A shares, benefit the people" at their graduation. All markets have some government involvement, but this was a new level. | |
| Are bubbles black swan events that can't be predicted? Or can they be predicted? If they can be predicted, what are some indicators that you can look for? (Sorry if it's a dumb question, my only knowledge of financial bubbles comes from the movie The Big Short which is about a few individuals who saw the 2008 crash coming). | The Big Short is a great movie, love it. |
| It depends what you mean by predicted. I think it's hard to tell when a bubble is coming in advance, but not impossible. To make it sound much easier than it is: if the government is pushing policies that will cause house prices to rise, then house prices will probably rise. | |
| I think it's possible to tell when you're in a bubble. I wouldn't say it's easy. With the dot-com bubble, a lot of people who were praised afterwards for being the voice of reason were actually saying we were in a bubble long before we were. But there were also plenty of people who called it correctly. | |
| I think it's almost impossible to tell when a bubble is going to burst. That's why I wouldn't recommend shorting one! | |
| Hi thanks for doing this. Who generally suffers the most from these bubbles? Is there a general trend in the solutions that have been used to recover from the crisis after a bubble has burst? | Strangely, we don't really see a common trend in the distributional effects of the bubbles themselves. It's not really the case that the rich are systematically better at riding the bubble and getting out at the right time. |
| But bubbles can lead to recessions, and in a recession it's always the poorest who are hit hardest. | |
| Cleaning up the aftermath is much like managing any other recession. I'm more or less on board the very broad consensus in economics that governments should loosen monetary and fiscal policy while protecting the financial sector. | |
| Hi, from my understanding the South Sea bubble had key figures responsible for the mayhem (it was Walpole). Are there any other bubbles that had mischievous actors significantly responsible for what happened? | Yes! In the same year as the South Sea Bubble, the Mississippi Bubble was 100% John Law's baby. The Bicycle Mania was driven by a couple of very dodgy "promoters", most notably Ernest Terah Hooley, who engineered the flotation of the Dunlop Company. |
| At other times we push back against the role of the individual. The US media in the 1920s were obsessed with what powerful men were doing during the bubble, but we think its causes were much more structural. | |
| What is your background Dr. Quinn? Economist or Historian? What fascinated you so much about the topic that made you dedicate so much time to writing a book about Financial Bubbles. I've tried to read a lot of economics focused literature in the past and I've always been a little disappointed in the lack of macro economic theory/metrics being referenced. (I also love graphs.. Haha) Thank you in advance if you do respond. | Haha great question. Economists think I'm a historian and historians think I'm an economist. |
| My interest in bubbles would explain my choice of PhD - I think finance only gets really interesting when things go horribly wrong. As I was finishing up, the opportunity came up to spend three years writing this book with John, and I didn't have to think twice about it. Writing is hard and painful, but I couldn't do any other job. | |
| I have a more general question: are all developed economies damned to be cyclical? There's so much discussion in politics about economic policy but in the end it seems like there's recession every 5-10 years brought on by one thing or another. | It's a good question. I would say the answer depends on what you mean by cyclical. Does it require the economic cycles to be of a relatively fixed length? |
| If yes, then non-cyclical economies do exist. Booms can last anywhere from a few months to several decades, and recessions the same. | |
| If no, then saying "economies are cyclical" is the same as saying "booms happen sometimes and recessions happen sometimes". And I do think recessions will always happen sometimes. | |
| Dr. Quinn, how would you compare the parts malfeasance and greed/stupidity play during a boom? For example, I am incredibly frustrated by downplaying things like obfuscation of risk and sidelining the risk management units during the 2000s housing boom. But should I be? | Oh you're completely right to be angry. |
| Malfeasance and fraud are often a part of bubbles, but what really stands out about the 2000s housing bubble is the total lack of consequences for those responsible. Those involved in other bubbles were dragged over the coals whether they deserved it or not. The Financial Times keeps a list of all the bankers who go to jail for their role in the 2000s crash: https://ig.ft.com/jailed-bankers/. The U.K., where I live, has none; the U.S. has one. | |
| The Western coverage of Japan in the 1990s was fascinating to look back on while researching the book. The bubble and subsequent crisis were attributed to an unhealthily close relationship between politicians and businessmen, which shielded both from any consequences. But in comparison to the aftermath of the 2000s bubble, a lot of very powerful Japanese people went to jail for their activities during the bubble. | |
| When did we come up with the idea of "bubbles"? How has our understanding/response changed from before/after we slapped a label on it? | In the 1700s, "to bubble" meant "to deceive or defraud", and bubble was then used as a noun to describe the deceptive and fraudulent companies that sprung up when the South Sea scheme was taking place. This led to the Bubble Act of 1720, which outlawed almost all such companies. Over time, the meaning sort of morphed to describe a boom and bust in prices. |
| I would trace the concept back to Charles Mackay's Extraordinary Popular Delusions and the Madness of Crowds of 1841. It's a very unreliable source, but it also probably marks the first attempt to place these boom-bust episodes into one category to be analysed as a distinct phenomenon. | |
| The Australian land boom you mention coincides with the process of federation of the Australian colonies. Did the bubble or its effects play a particular role in shaping federation? | Good question! I really don't know. It was one of the most economically destructive bubbles ever, so it must have had some knock-on political effects, but I don't know what those effects were. |
| Hello! Thanks for stopping by to talk today about your work. Always great to hear from another scholar! 😁 Although I don’t have a question about financial bubbles in particular, I was hoping you’d be willing to talk about your and your co-author’s process while writing this comprehensive of a work. What made you decide to cover so many different types of bubbles across different continents of multiple centuries? Were there any particular difficulties with working with such disparate material? Did the material lend itself to universalist discoveries, or were different socio-cultural factors affect each bubble differently? Hopefully these questions can provide some interesting discussion, and congratulations on the publishing! Thanks! | Had to think about this one! |
| We thought it was time someone did it - Kindleberger first came out almost 50 years ago, and so many bubbles have happened since, so much work on bubbles has been done. | |
| There are language barriers for sure. An ongoing theme in the book is the role of the press, but we couldn't really cover that for the Japanese or (to a lesser extent) the Chinese bubble - we'd be relying on secondary sources too much. | |
| We came up with a general theory of bubbles - the bubble triangle - which I posted above. It's not perfect, no theory is, but we think it fits the data very well. Personally I don't think history is at its most useful when it refuses completely to deal in generalities. | |
| Have you identified any historical occasions where people thought there was a bubble, but the asset was actually not as overpriced as people thought and it did not crash? | The early parts of the dot-com boom were like this, especially the Netscape IPO, which turned out to be an excellent investment. By the bubble's peak in 2000, one of the reasons people weren't listening to pessimists was because they'd been wrong so many times before. |
| What is the most common mistake people have made throughout history during bubble bursts? | Probably overreacting. Historically the best times to buy stocks or houses have been in the aftermaths of busts. |
| That's tautological, but it still needs to be said, because overly optimistic investors get all kinds of mockery after a bubble, whereas overly pessimistic investors always seem to get away with bad predictions. | |
| Hi Dr. Quinn, What are your thoughts on this this article? Their conclusion is the Japanese Asset Bubble and subsequent “lost decade” is the worst bubble of all time - I’ve noticed that this bubble hasn’t been mentioned elsewhere in the thread. | I like it! I messaged the writer on Twitter when it came out. |
| The Japanese Bubble is a great choice for the greatest bubble of all time. The other candidates are the 2000s, for the global impact, and the Mississippi Bubble, which ate the entire French economy and set their financial development back a century. | |
| Thank you for doing this! What economic tools/methods/techniques did the pre 20th century economists have at their disposal to identify with substantial evidence (relevant to their times) any potential bubble? Are there instances in that period when a potential bubble was identified and downsized before its repercussions hit the market? How did they achieve that? | Very similar methods to the ones we'd use today, surprisingly! Lord Hutcheson used discounted cash flow analysis to argue that there was a bubble in South Sea stock in 1720, which is still the most theoretically sound way to value a stock. |
| how did people not catch on to the shenanigans keeping the south sea company afloat? pun intended | Because it was so complicated! |
| Try to explain the scheme to someone today, with 300 years of research to draw upon. They'll look at you like you've tried to explain a collateralized debt obligation to them in 2005. | |
| What do you think about the Austrian model of the business cycle from Mises and Hayek and how artificial low interest rates and government stimulus cause large booms, creating malinvestments that make busts harder and longer? | The funny thing about the Mises/Hayek hypothesis is that they wrote it after the 1929 crash, for which it doesn't add up at all, because most of the bubble took place when interest rates were quite high. For other bubbles it fits much better. |
| I would agree with them that a lot of market movements are driven by political economy, often in the ways they describe. But the Austrian school seem to think that underneath all the political interference there's a market mechanism that would produce excellent outcomes, if we could only get rid of the politics stinking it up. I think politics is an imperfect solution to the existence of power in the world, and without politics, this power would manifest itself in violence more often, making markets even less efficient. But that's just how it looks to me. | |
| the below is a reply to the above | |
| Comment deleted by user | I don't think bubbles, in the way we define them, are 'inherent' to capitalism, because a lot of capitalist economies have existed for a very long time without experiencing any bubbles. |
| But clearly they're a capitalist phenomena. One of the sides of the bubble triangle is marketability, which is the essence of capitalism. And as we see in China, as countries become more capitalist, they experience more bubbles. | |
| Hello Dr. Quinn! Very cool AMA so far, and I'm excited to read this book when it comes out. I'm not an Economics Major, but I do love reading and listening to materials on this topic, especially "The Big Short". Also, congratulations on getting this published in Cambridge University Press, I've heard that's no easy feat! First question: Due to the interconnection of a lot of the world markets, especially with instant electronic trading and massive amount of global trading, are bubbles and busts more frequent? Does the interconnectedness of world markets encourage overweighing the value of particular assets? Second question: In your research, did the asset bubbles typically require government action or intervention like the 2008 mortgage crisis? Thanks for taking your time for this AMA! | Thanks! The answer to the first question is yes. Increased capital mobility is one of the main reasons for the increased frequency of bubbles and crises after 1980. |
| Interconnectedness tends to lead to the overvaluation of particular assets at particular times, because when one country or sector is exciting, the whole world can mobilise its money towards it. This money can then leave countries just as quickly, which often causes a financial crisis. | |
| Did the government need to react to the consequences of asset bubbles? For the bigger ones, yes, to protect the financial sector. At other times they would have been better off reacting less. The stock market bubble of the 1920s theoretically shouldn't have damaged the US economy very much. But the Federal Reserve raised interest rates because it was worried about it, and this caused big problems elsewhere in the economy, especially for banks. | |
| Hope you enjoy the book! | |
| Is there a comparable setting in history regarding the disconnection of ownership and allocation of financial assets that we can see these days and, if yes, what could we learn from it? (For example, my pension savings are managed by my employer who gives them to Allianz who invests it wherever, even in hedge funds that by far don't follow any of my moral standards.) | As far as I know, institutional investment on this scale is completely unprecedented. It doesn't seem healthy to me - so many incentives are messed up in so many ways. But unfortunately it's an area where the economic historians haven't been able to add much. |
| Great AMA, thanks! Looking forward reading your book, wonder if you see any trends in history of bubbles, how they change in their nature? What do people and governments learn from them and how (if at all) this correlate with development of economic science? | They're becoming more common and, like everything else, more global. |
| Economics has learned too much to mention from the 2000s housing bubble. Maybe the one big lesson is that modern economies are deeply interconnected and absolutely dependent on a handful of multinational financial corporations. That leads to very different policy advice than you would give when it was possible to analyse nation states as individual economic units. | |
| I look forward to reading about the Australian land boom, as it's a very important part of my period that I've never truly gotten my head around. I was wondering how the international nature of some of these bubbles affects how you study them. So to take Australia as an example: how do you follow chains of causality when you have a crisis that hits six autonomous economies but where so much of the disaster takes place in the City of London? How do you begin to identify what matters when you have so many different sources- dozens or hundreds of banks and finance houses, seven legislatures, probably thousands of newspapers and so on. | The short answer is that it just takes THAT much work. Both of us worked non-stop on it, full time, for 3 years. The bibliography has over 700 sources in it, and that's after we trimmed it - it could easily be over 1,000. Then there was a lot of manual data entry, research that ended up going nowhere, and so on. |
| With Australia, we ended up following the money. House prices were driven up by a lot of first-time buyers - where did they get the money from? Mostly they borrowed it from land-boom companies - a bit like shadow banks. What were these land-boom companies? Where did they get their money from? And so on. | |
| Hope you enjoy the book! | |
| Would you find the causes associated with the 2000s housing bubble and the English South Sea Bubble comparable? | Only in the sense that they were both driven by government policy. The motivations involved were very different. The South Sea Bubble was an elaborate scheme to reduce the government debt. The 2000s housing bubble arose from the political desire to expand homeownership without making houses more affordable. |
| I once heard someone claim that all major financial crises were in some way caused by the government. Do you know of a good counter-example? | The government makes the rules for the financial sector, and any financial crisis could have been prevented by different/better rules. So in that sense it's true. |
| But if the intention of the claim was to argue that government intervention in the economy is inherently bad, the Australian financial crisis of the 1890s is a good counter-example, because it happened in a minimal-government-intervention, ultra-low-regulation environment. | |
| Do you consider the “market cap to gdp” ratio a good indicator for a forming stock market bubble? I’ve been following the trend in the last 3-4 years and I noticed that it spiked to highs we haven’t seen in forty years. Everybody’s talking about investing but I’m just sitting in the sidelines thinking : “is everyone crazy? Everything points to a bubble about to burst.” I would love to hear your opinion.. and thanks for the AMA! | Right now, stock prices are high by traditional measures because the government won't allow them to fall. Whether now is a good time to invest largely depends on whether you think this is sustainable or not. Maybe it is and maybe it isn't, but I wouldn't call it a bubble about to burst. |
| It's also hard to find an alternative. All investment assets are expensive at the moment. | |
| Was the decline of Egypt in the Bronze Age not accompanied by a bubble? | I've not heard this before! Do you have a good source on it? |
| Thank you Dr. Quinn. I was wondering what your opinion is of the effect of an increased pool of investors in a market in which they make uninformed investments because "everyone else is doing it and making so much money." A couple of examples come to mind like the dot com bubble and the subprime mortgage crisis, where large swathes of the public speculated in certain investments, internet stocks and mortgages respectively. Do you think an essential part of mania and bubbles is an increase of involvement of the general public? | Definitely, the entry of new investors into the market comes up again and again. Very notable in light of the recent day trading boom! |
| what period or periods of history are ignored by schools or whatnot | All of economic history is ignored by schools! |
| Does your book include The Mississippi Bubble and John Law/Louisiana? | Yep! |
Japan Baseball Team News - by JapanBall Tours, offering Japan Baseball Travel Adventures since 1999. Compare betting odds on games played in all baseball leagues in Japan. View the latest odds on Japanese Baseball Matches & Bet with Sportsbet. Join Australia's Favourite Online Betting and Entertainment Website. Find the best NPB Odds - Compare dropping and betting odds changes for NPB, live Baseball matches updates from over 80 worldwide bookmakers & bookies offers, matches will be held in Japan. Nippon Professional Baseball Organization Official WebSite. 2020 Schedules [ Pre-Season Games ] Feb. 16 (sun) - Mar. 15 (sun) [ Regular Season ]
[index] [47342] [31979] [9953] [24622] [48063] [12349] [39206] [48876] [11605] [25260]
Richie Rich movie clips: http://j.mp/28JrToD BUY THE MOVIE: http://j.mp/28JwyeI Don't miss the HOTTEST NEW TRAILERS: http://bit.ly/1u2y6pr CLIP DESCRIPTION: ... These Japanese chefs know, how to handle a knife! Being restaurants customers we might not know how functional a knife can become in the hands of a professio... Creators: Matt and Zach Japanese baseball is truly awesome. The exciting baseball culture in Japan has raised some of Major League Baseball's best over the y... WagerTalk TV is a daily sports betting channel on YouTube that prepares our audience to make the most educated bets possible with free sports picks, includin... Sports fans finally get their turn to shine! from fantastically funny fails to some incredible life-changing moments. So grab your popcorn sit back and enjoy...