PREVIEW

Early Speculative Bubbles & Increases in the Money Supply (Book/ Paperback)

Product Overview

The Housing Bubble was hardly the first in human history. What's eluded historians is the same issue that eludes commentators today: the underlying cause of bubbles.

This book is the first (and only) book to solve the mystery of the most famous bubble in world history: Tulipmania in 17th century Netherlands. It Is a legendary event but explanations have been lacking. People blame irrational exuberance, free markets, and an unleashed aristocracy.

Douglas French takes a different route: he follows the money to prove that the bubble resulted from a government intervention that dramatically exploded the money supply and fueled the tulip-price bubble – not altogether different from modern bubbles.

This book was French’s Master’s thesis written under the direction of Murray Rothbard and examining three of the most famous speculative bubble episodes in history through the lens of Austrian Business Cycle Theory.

Although each of these episodes is well documented, this book examines the monetary interventions that engendered each of these events showing that not only the Mississippi Bubble and the South Sea Bubble were caused by government meddling, but Tulipmania was as well.

Tulipmania was unique in that it was the sound money policy of the Dutch combined with free coinage laws that led to an acute increase in the supply of money and fostered an atmosphere that was ripe for speculation and malinvestment, manifesting itself in the intense trading of tulip bulbs.

The author examines not only the Mississippi Bubble but also the life and monetary theories of its architect, John Law. Professor Joe Salerno calls Law the world’s first macroeconomist who implemented a Keynesian monetary system in France nearly two hundred years before Keynes was born. At the same time across the English Channel, a nearly bankrupt British government looked on with envy at Law’s system, believing that he was working a financial miracle. It was anything but this and investors in both countries were devastated.

Although these episodes occurred centuries ago, readers will find the events eerily similar to today’s bubbles and busts: low interest rates, easy credit terms, widespread public participation, bankrupt governments, price inflation, frantic attempts by government to keep the booms going, and government bailouts of companies after the crash.

When will we learn? We first have to get cause and effect in history straight. This book is an excellent contribution to that effort.

Chapter 1: The Greater Fool Theory
Chapter 2: Tulipmania
Chapter 3: Free Coinage, the Bank of Amsterdam, and Tulipmania
Chapter 4: John Law, Genius or Swindler
Chapter 5: John Law's Monetary Theories
Chapter 6: The Mississippi Bubble
Chapter 7: The South Sea Bubble
Chapter 8: Increases in the Supply of Money, Speculative Bubbles, and the Austrian Malinvestment Theory
Bibliography
Index

About the Author(s)

Douglas E. French is president of the Ludwig von Mises Institute. He received his master's degree under the direction of Murray N. Rothbard at the University of Nevada, Las Vegas, after many years in the business of banking. He was a major supporter of the Mises Institute in the years leading up to assuming the position of president of the Mises Institute in 2009. His dramatic expansion priorities include development in every area of the Mises Institute's educational mission, online and at our physical location. He is the author of Early Speculative Bubbles, the first major empirical study of the relationship between early bubbles and the money supply.