Table of Contents
Preface v
Introduction: The Holland Tulip Mania of 1636-1637 xv
Chapter 1 The Nature of Manias, Bubbles, and Crashes 1
Introduction 1
The Human Element 4
The Rise of Manias and Bubbles 9
Fueling the Boom 14
Wealth and Inflation 15
Asset Growth vs. Wealth: Cause and Effect? 15
Inflation 17
Speculations, Bootstraps and Swindles 23
The Rationality of Investors? 24
The Rationality of Bankers and Experts? 27
Rationality of Bankers? 27
Rationality of Experts? 33
Monetary Policy and the Federal Reserve System 39
Fiscal Policy and Taxes 47
Tax Policies 47
Income Tax 47
Estate Tax 51
The Alternative Minimum Tax 54
Income Tax Brackets and Budget Deficits 56
Capital Gains 59
Social Security and Medicare 62
Inequality 65
Why Inequality Persists and Expands 65
Inequality of Wealth in the United States 68
Debt 71
US Federal Debt 72
State and Municipal Debt 77
Household and Mortgage Debt 78
The Dollar 83
Bankruptcies 85
World Debt 87
Deposit Insurance 88
Regulation, Deregulation and no Regulation 91
Pension Plans 94
Corporate Pensions 94
Defined Benefit Plans 94
Defined Contribution Plans 96
The Public Sector 99
The Valuation of Common Stocks 101
Internal Feedback and Endogenous Risk 107
When the Bubble Pops 109
Notes 111
Chapter 2 A Short History of Booms, Bubbles, and Busts 117
The New World 118
South Seas Bubble 118
John Law's Mississippi Company 120
Florida Land Boom of the 1920s 121
The Rise 121
The Fall 122
Underlying Causes 123
The Roaring 20s Stock Market 124
The Real Economic Boom of the 1920s 124
The Stock Market of the 1920s 127
The Crash of 1929 129
The Great Depressionof the 1930s 131
The Savings and Loan Scandal of the 1980s 135
The Original Problem 135
Deregulation and no Regulation 141
How Mr. Reagan Made a Bad Problem Worse 143
The False Spring of 1983 146
The "Go-Go" Period 148
Fraud and Misconduct 150
The Aftermath 158
The Bull Market of 1982-1995 161
The Crash of 1987 168
The dot.com Mania 174
Boom and Euphoria 174
Greenspan and the Role of the Federal Reserve 176
Bursting of the Bubble 182
Merrill-lynch is Bullish on America 183
Other Bubbles and Swindles of the Late 1990s and 2000s 185
Adelphia 186
Rogue Traders at Banks 187
Barings Bank 188
Allied Irish Banks 188
Societe Generale 189
Enron 189
Long-Term Capital Management 195
Albania's Ponzi Schemes 204
Corporate and Accounting Scandals 205
The Sub-prime Real Estate Boom 2001-2007 219
Origin of the Boom 219
Expansion of the Boom 221
Residences as ATMs 224
The Punctured Bubble 228
Mortgage-Backed Securities 232
Government Response to the Punctured Bubble 236
International Mortgage Debt 237
The Hidden Time Bomb 239
Japan and East Asia 240
Japan 1970-2007 240
Background 240
The Japanese Boom and Bubble 241
Collapse of the Japanese Bubble 244
East Asia 245
The Oil Bubble 248
The Next Bubble 254
Notes 258
Abbreviations 267
Index 271
