A Short History of Financial Euphoria by John Kenneth Galbraith

Author:John Kenneth Galbraith [Galbraith, John Kenneth]
Language: eng
Format: epub
ISBN: 9781101650806
Publisher: Whittle Books
Published: 1994-06-30T16:00:00+00:00

Nor in the aftermath of modern speculation are they ever mentioned, as will amply be evident.

C H A P T E R 5

THE AMERICAN

TRADITION

The financial memory is brief, but subjective public attitudes can be more durable. As John Law created a suspicion of banks in France that endured for a century or longer, so the South Sea Bubble warned Britain against joint-stock companies. The Bubble Act restricted for many succeeding decades the formation of limited companies, what we now denote corporations. However, by 1824, these enterprises had once again gained sufficient respectability to allow another wave of London stock promotions. The latter were also inspired in part by prospects in South America, but they extended in an ecumenical way to the Red Sea. One promotion that was especially distinguished involved a company committed to the draining of that body of water “with a view to recovering the treasure abandoned by the Egyptians after the crossing of the Jews.” Later in the century there were further speculative episodes in response to opportunities in the New World, with South America once again serving as a special magnet for the imagination. In 1890, the Bank of England had to pull the great house of Baring Brothers back from bankruptcy caused by its perilous involvement in Argentine loans. No one should suppose that the modern misadventures in Third World loans are at all new.

Whatever the London excesses, there can, however, be no trace of chauvinism in saying that in the last century the speculative imagination was at work in its most ardent form in the United States. This was because of a special American commitment to the seeming magic of money creation and its presumptively wondrous economic effects.

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