A Short History of Financial Euphoria -John Kenneth Galbraith

[caprivenky]

[amazonsearch]A Short History of Financial Euphoria[/amazonsearch]

 

[pre][/pre]just finished reading this .

This is more of a large essay/monograph. Written in simple language Galbraith explains why speculative bubbles occur and will continue to happen..

The first edition was written in 1990 and predicts that future speculative episodes will recur.

 

 

"But one thing is certain : there will be another of these episodes and yet more beyond .fools,as it has been long said,are indeed separated ,soon or eventually,from their money."

 

Since this we had two speculative more bubbles in 1999-2000 and 2007-2008.

 

In chapter2 - the common denominators Galbraith talks specific features of the speculative episode .

 

All speculative events start from a "a new financial instruments or innovation or investment opportunity"-this always is some of debt or leverage creation against limited assets".

 

Some of the financial innovation from previous episodes.

 

1 1920- great holding companies

2 1980- mergers and acquisitions

3 share buy backs

4 junk bonds

5 printing money

 

The questions is "there a speculative bubble happening in the current market with high equity prices ".

 

Is quantitative easing , low interest rates creating debt and excess leverage in the market -is this money Been used  for stock buy backs , merger and acquisitions  and boosting corporate profits to inflate equities  .

 

Is QE the new financial innovation(debt).

 

Amazing book -every investor should read it

 

 

 

 

[Guest JoelS]

Yes - great book. Galbraith also talked about what sort of things associate with speculative excess… things like people attributing intelligence to those with money.. regardless of how they made it.

 

One thing stuck with me from that book. Galbraith said something along the lines of "the financial memory only lasts so long, at its most 20 years"