Book about the 1929 crash
I found a link to a book called "The Bubble that broke the World" about the 1929 crash while reading the comments to Roubini's latest missive. Some passages from the book are strikingly relevant:
"Second, a social and political doctrine, now widely accepted,
beginning with the premise that people are entitled
to certain betterments of life. If they cannot immediately
afford them, that is, if out of their own resources
these betterments cannot be provided, nevertheless people
are entitled to them, and credit must provide them. And
lest it should sound unreasonable, the conclusion is annexed
that if the standard of living be raised by credit,
as of course it may be for a while, then people will be
better creditors, better customers, better to live with and
able at last to pay their debts willingly."
Thought readers here would find it useful:
http://www.mises.org/books/bubbleworld.pdf
"Second, a social and political doctrine, now widely accepted,
beginning with the premise that people are entitled
to certain betterments of life. If they cannot immediately
afford them, that is, if out of their own resources
these betterments cannot be provided, nevertheless people
are entitled to them, and credit must provide them. And
lest it should sound unreasonable, the conclusion is annexed
that if the standard of living be raised by credit,
as of course it may be for a while, then people will be
better creditors, better customers, better to live with and
able at last to pay their debts willingly."
Thought readers here would find it useful:
http://www.mises.org/books/bubbleworld.pdf
Comments
"Since John Law and his Mississippi Bubble, individuals have been continually appearing with the same scheme in new disguise. The principle is very simple. You have only to find a way to multiply your creditors by the cube and pay them by the square, out of their own money. Then for a while you are Nabob. One fish cut up for bait brings three. Two of these cut up for bait bring eight, the cube of two. Four of these cut up for bait bring sixty-four, the cube of four. Sixteen of these for bait bring 4,096, and 256 of these, which is the square of sixteen, will bring 16,777,216, which is the cube of 256.
The fatal weakness of the scheme is that you cannot stop. When new creditors fail to present themselves faster than the old creditors demand to be paid off, the bubble bursts/Then you go to jail, like Ponzi, or commit suicide, like Ivar Kreuger.
There is nothing new in the scheme. What is new is that for the first time the whole world tried it. The whole world cannot put itself in jail, nor can it escape the consequences by suicide. When the delusion breaks, people all with one impulse hoard their money, banks all with one impulse hoard
credit, and debt becomes debt again, as it always was.
Credit is ruined. Suddenly there is not enough for everyday purposes. Yet only a little while before we had been saying and thinking there was a great surplus of American credit and the only thing we could do with it was to export it.
How absurd it sounds in echo. It was absurd at the time. "
Evidently history is about to repeat itself.
Thanx for the great link!!!!
I find it interesting that author doesn't believe there is anything that can be done to prevent the kind of financial crisis that happened in 1929: