Famous First Bubbles: The Fundamentals of Early Manias
The jargon of economics and finance contains numerous colorful terms for market-asset prices at odds with any reasonable economic explanation. Examples include "bubble," "tulipmania," "chain letter," "Ponzi scheme," "panic," "crash," "herding," and "irrational exuberance." Although such a term suggests that an event is inexplicably crowd-driven, what it really means, claims Peter Garber, is that we have grasped a near-empty explanation rather than expend the effort to understand the event.
In this book Garber offers market-fundamental explanations for the three most famous bubbles: the Dutch Tulipmania (1634-1637), the Mississippi Bubble (1719-1720), and the closely connected South Sea Bubble (1720). He focuses most closely on the Tulipmania because it is the event that most modern observers view as clearly crazy. Comparing the pattern of price declines for initially rare eighteenth-century bulbs to that of seventeenth-century bulbs, he concludes that the extremely high prices for rare bulbs and their rapid decline reflects normal pricing behavior. In the cases of the Mississippi and South Sea Bubbles, he describes the asset markets and financial manipulations involved in these episodes and casts them as market fundamentals.
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The Bubble Interpretation
The Tulipmania Legend
A Political and Economic Background
The Traditional Image of Tulipmania
Where Does the Tulipmania Legend Come From?
Establishment Attitudes toward Futures Markets and Short Selling The Source of the Pamphlets
The Bubonic Plague
A Preliminary View The Mississippi and South Sea Bubbles
John Law and the Fundamentals of the Mississippi and South Sea Bubbles
A John Laws Finance Operations
A Rehash of Mississippi Market Fundamentals
Laws Shadow The South Sea Bubble
South Sea Finance Operations
Fundamentals of the South Sea Company
The Broken Tulip
The Bulb Market 16341637
Some Characterization of the Data
PostCollapse Tulip Prices
Bulb Prices in Later Centuries
Was This Episode a Tulipmania?
The Macro Bubbles