Where has all the money gone!
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doctorwes
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Where has all the money gone!
The bursting of the tulip bubble did not have any negative macroeconomic consequences for Holland. The market was quite separate from the rest of the economy. In fact, since most of the speculation occurred in futures markets and contracts ended up being cancelled before settlement, there was not even much redistribution of wealth.
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pj
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Where has all the money gone!
>The bursting of the tulip bubble did not have any negative macroeconomic consequences for Holland
"...but the commerce of the country
suffered a severe shock, from which it was many years ere it
recovered."
Extraordinary Popular Delusions
by Charles Mackay
"...but the commerce of the country
suffered a severe shock, from which it was many years ere it
recovered."
Extraordinary Popular Delusions
by Charles Mackay
«Да чего там описывать, планировать! Жизнь всё равно богаче». (Саня Радченко about specification writing)
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HLCYG
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Where has all the money gone!
to all / and re: "were the Dutch getting richer when they were bidding up each other's tulip bulbs to ever-fancier prices?" - could we please use the term 'marginal player / agent / buyer or seller' in this discussion?
Yes, we - the Dutch - were getting richer. If we got marked to market by our prime brokers in our tulip positions... but we didn't when all of us were offloading positions. (btw - this is v. funny if you know a bit of current affairs in Holland - Boonstra (ex-CEO of Philips) was involved in the last tulip scandal, only 2yrs ago if my memory is alright);
As I see it the underlying reason for the question in the subject is: how can so much bad things happen to the majority of stakeholders? (qui bono? no-one, so...) - problem is: if you have too big a position, and no room to mark it everyday (only on, say, qrtr-end) the animal spirits will do the job for you. Lastly: search on this forum on the difference between price (can go up/down to zero) and value: the money isn't gone, it's only hiding in someone elses p&l. (whaddoIknow - RM accounts I've talked to recently aren't worried at all about where the money has gone to, but - where to put their money to get the highest return in foreseeable future)
Yes, we - the Dutch - were getting richer. If we got marked to market by our prime brokers in our tulip positions... but we didn't when all of us were offloading positions. (btw - this is v. funny if you know a bit of current affairs in Holland - Boonstra (ex-CEO of Philips) was involved in the last tulip scandal, only 2yrs ago if my memory is alright);
As I see it the underlying reason for the question in the subject is: how can so much bad things happen to the majority of stakeholders? (qui bono? no-one, so...) - problem is: if you have too big a position, and no room to mark it everyday (only on, say, qrtr-end) the animal spirits will do the job for you. Lastly: search on this forum on the difference between price (can go up/down to zero) and value: the money isn't gone, it's only hiding in someone elses p&l. (whaddoIknow - RM accounts I've talked to recently aren't worried at all about where the money has gone to, but - where to put their money to get the highest return in foreseeable future)
WILLARD: "Don't you think it's a little risky for R&R ?" KILGORE: "If I say it's safe to surf this beach, captain - it's safe to surf this beach. I'm not afraid to surf this place, I'm not afraid to surf this fucking place."
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tristanreid
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Where has all the money gone!
PJ, I think there's some evidence that Mackay may have exaggerated a little bit: http://www.ft.com/cms/s/0/50e2255e-0025-11dc-8c98-000b5df10621.html?nclick_check=1
http://www.dklevine.com/archive/thompson-tulips.pdf
Regardless, AndyM I think there's just as much chance that the rampant speculation and wild swings in resource allocation could add a dynamicism to the market that might be healthy in the long term.
[edit: I hope I'm not being argumentative, or sound like I think I know what I'm talking about. I'm no economist, just interested]
-t.
http://www.dklevine.com/archive/thompson-tulips.pdf
Regardless, AndyM I think there's just as much chance that the rampant speculation and wild swings in resource allocation could add a dynamicism to the market that might be healthy in the long term.
[edit: I hope I'm not being argumentative, or sound like I think I know what I'm talking about. I'm no economist, just interested]
-t.
If you can make computers as smart as humans you will have invented a machine that can sing the words to the Flintstones tune but will forget to pay the phone bill.
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RFMontraz
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Where has all the money gone!
Let’s see if now arguing the other side I can get it wrong again.
Leaving aside Rothkos and tulips for a sec, even the appreciation of something that has an industrial use like oil is zero sum.
I’d say it boils down to this: something gets bid. The owner of that asset (be that an individual, a group of individuals, a nation, etc…) gets richer but as a consequence the rest of the world does get poorer (that’s the part I didn’t realize earlier), at least in terms of purchasing power relative to that asset (whether they would be interested in buying/owning it or not in the first place is beside the point).
When the bubble bursts, the reverse is true.
What if tulip prices had reached a permanently high plateau?
It wouldn't have changed what said above. What if you die before the bubble bursts? Still zero sum, no matter how long the bubble lasts.
RFM, one could even go further and argue that speculative booms and busts are negative sum, since they tend to lead to gross misallocations of resources.
I think this is a very valid point as well. Honestly Tristan I think it's pretty difficult to argue that the benefit of a new "dynamism" would outweight the cost of the misallocation of resources.
Leaving aside Rothkos and tulips for a sec, even the appreciation of something that has an industrial use like oil is zero sum.
I’d say it boils down to this: something gets bid. The owner of that asset (be that an individual, a group of individuals, a nation, etc…) gets richer but as a consequence the rest of the world does get poorer (that’s the part I didn’t realize earlier), at least in terms of purchasing power relative to that asset (whether they would be interested in buying/owning it or not in the first place is beside the point).
When the bubble bursts, the reverse is true.
What if tulip prices had reached a permanently high plateau?
It wouldn't have changed what said above. What if you die before the bubble bursts? Still zero sum, no matter how long the bubble lasts.
RFM, one could even go further and argue that speculative booms and busts are negative sum, since they tend to lead to gross misallocations of resources.
I think this is a very valid point as well. Honestly Tristan I think it's pretty difficult to argue that the benefit of a new "dynamism" would outweight the cost of the misallocation of resources.
Was it worth it?
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pj
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Where has all the money gone!
Thank You, tristanreid.
«Да чего там описывать, планировать! Жизнь всё равно богаче». (Саня Радченко about specification writing)
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AndyM
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Where has all the money gone!
To TR's point: bubbles can leave us with a legacy of strong infrastucture eg railroads, internet. In the misguided search for private profit, investors create public goods. I think that's the theme of a recent book; don't remember the details. I can see the argument, but I'm somewhat sceptical on balance.
Hell is other forums!
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pj
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Where has all the money gone!
Well, I have been in the middle of a bubble (caused by a classical
Ponzi scheme) back in Lithuania, and I would like to attest that
nothing good resulted.
BTW, ask any Russian about MMM
Ponzi scheme) back in Lithuania, and I would like to attest that
nothing good resulted.
BTW, ask any Russian about MMM
«Да чего там описывать, планировать! Жизнь всё равно богаче». (Саня Радченко about specification writing)
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Henrik
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Where has all the money gone!
Slight threadjack:
If you think the bubble PJ mentioned will burst you can short the Swedish banks Swedbank and/or SEB who run some of the biggest banking operations in the Baltics. This bubble is widely discussed in Sweden.
If you think the bubble PJ mentioned will burst you can short the Swedish banks Swedbank and/or SEB who run some of the biggest banking operations in the Baltics. This bubble is widely discussed in Sweden.
Friendly ghost
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AndyM
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Where has all the money gone!
nothing good resulted.
not even didactic or entertainment value?
not even didactic or entertainment value?
Hell is other forums!