How is it that, with all the financial know-how and experience of the wizards on Wall Street and elsewhere, the market still goes boom and bust? How come people are so willing to get caught up in the mania of speculation when history tells us that a collapse is almost sure to follow?
In A Short History of Financial Euphoria, renowned economist John Kenneth Galbraith reviews, with insight and wit, the common features of the great speculative episodes of the last three centuries - the seventeenth-century craze in Western Europe for investing in an unusual commodity: the tulip; Britain's South Sea Bubble and the eighteenth century's fascination with the joint-stock company, now called the corporation; and, more recently, the discovery of leverage in the form of junk bonds. Along the way, Galbraith explains the newfangled types of debt that different generations have dreamt up, and he entertains with anecdotes about the ingenuity with which some of the more notorious charlatans have convinced people to invest in financial ciphers.
Galbraith calls this book "a hymn of caution" for good reason. He warns that the time will come when the public hails yet another financial wizard. In that case, the reader will do well to remember the Galbraithian adage: "Financial genius is before the fall." The appearance of the next John Law, Robert Campeau, or Michael Milken may well be, after all, a harbinger of disaster.