The Secret of Foam -- The Basic Principles of Early Financial Fervor

Author: Peter Garber
Publisher:
Publish Date: 2003-08-01
Features: In the terminology of economics and finance, many terms used to describe asset market prices are inconsistent with any rational economic explanation. For example, "bubble," "Tulip Mania," "chain letter," "Ponzi Scheme," "panic," "crash," "herd behavior," and "irrational exuberance." Although these terms suggest that an event is driven by the masses due to an inexplicable reason, Professor Garber emphasizes that from these terms, we get almost empty explanations rather than a deeper understanding of the event. In this book, Professor Garber proposes fundamental market explanations for three famous bubbles—the Tulip Mania (1634–1637), the South Sea Bubble (1720), and the Mississippi Bubble (1719–1720). He focuses on the Tulip Mania because most modern observers regard it as a crazy event. After comparing the price decline trends of rare bulbs in the early 18th century with those in the 17th century, he concludes that the sky-high prices and rapid decline of rare bulbs reflected normal pricing behavior. In the Mississippi Bubble and the South Sea Bubble, he explains the asset market and financial manipulation involved in these events, viewing them as the fundamental market conditions of the time. Author Peter Garber is a global strategist for global markets research at Deutsche Bank and a professor in the Department of Economics at Brown University. Regarding the study of stocks in the capital market, the author provides a detailed fundamental market explanation for three famous bubbles—the Tulip Mania, the South Sea Bubble, and the Mississippi Bubble.