Money Mania: Booms, Panics, and Busts from Ancient Rome to the Great Meltdown by Bob Swarup, discusses difficulties parallels between cosmology and financial bubbles which Capital Ideas Online posted. First a little on the book and then an excerpt from Capital Ideas Online…
Money Mania – Description
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Money Mania is a sweeping account of financial speculation and its consequences, from ancient Rome to the Meltdown of 2008. Acclaimed journalist and investor Bob Swarup tracks the history of speculative fevers caused by the appearance of new profitable investment opportunities; the new assets created and the increasing self-congratulatory euphoria that drives them to unsustainable highs, all fed by an illusion of insight and newly minted experts; the unexpected catalysts that eventually lead to panic; the inevitable crash as investors scramble to withdraw their funds from the original market and any other that might resemble it; and finally, the brevity of financial memory that allows us to repeat the cycle without ever critically evaluating the drivers of this endless cycle.
In short, it is the story of what makes us human.
Full article at Capital Ideas Online – Below is a short description of the book
Money Mania: Review From Booklist
Swarup, commentator and financier, discusses the recent financial debacle of 2008, noting that “as defaults soared and subprime contagion gave way to sovereign panic, the finger-pointing began.” The biggest surprise is why this crisis was a surprise at all, given recent credit crunches, including the dot-com crash of 2000 and the Long-Term Capital Management fiasco of 1998, and he reaches back through the centuries, here and around the world, to report that banking bailouts even occurred in ancient Greece and Rome. The author states that all you need are people and a medium—money by any other name. “The roots to all our crises past, present and future are to be found in the clash between our simple human nature and the complex societies and economies we create.” We learn that “human behavior trumps analysis at every point,” and his final commentary includes “No One Is Too Big to Fail,” “We Need to Restore Failure as an Option at All Levels,” and “We Need to Create the Right Incentives.“ An enlightening book. –Mary Whaley
[An] excellent new book, which looks at booms, panics and busts down the ages. … [The] message is that nothing is really new. Put together people, credit and structural fragility and you create the perfect conditions for a crisis. …Swarup’s book comes out at an opportune moment. …As [he] notes, humans don’t like to stand still.
– Larry Elliott, The Guardian
[Swarup] traces the same foibles of human nature that caused financial disaster in the Roman Empire to those that contributed to the most recent global economic woes. …[His] analysis of the human elements make his work compelling and comprehensible, as he expertly surfs the crests and troughs of the economy and examines the behavior that contributes to the bumpy ride. …If Swarup’s analysis didn’t hit so close to home, this title would be a cozier read…well worth reading for its engaging and long-reaching investigation of what fuels money mania and why it matters. – Library Journal
Swarup discusses the recent financial debacle of 2008, noting that “as defaults soared …the finger-pointing began.” The biggest surprise is why this crisis was a surprise at all, given recent credit crunches, and he reaches back through the centuries to report that banking bailouts even occurred in ancient Greece and Rome. … [His] final commentary includes “No One Is Too Big to Fail,” “We Need to Restore Failure as an Option at All Levels,” and “We Need to Create the Right Incentives.” An enlightening book. – Booklist
“Swarup’s book is a rich, anecdote-driven account … It’s a much needed dose of common sense and old-school philosophy… a great romp through the history of financial crises…a strikingly original writer.” –Bookforum
“Money Mania presents a rigorously researched history packed with great stories and insights. Swarup takes the reader through a fascinating and thought provoking analysis of emotional biases, money, credit and social complexity.? Financial manias and panics are a rhythmic feature of the collective human experience, with societal consequences correlated to the degree of economic integration and financialization. The vexing question for every serious investor today is whether our uniquely complex modern society is at risk of another systemic crisis. Money Mania is a timely, well written reminder that this question should be given renewed priority.” –Paul Tudor Jones, founder of the Tudor Investment Corporation and the Robin Hood Foundation
Money Mania: Cosmology and Bubbles
In a wonderful book, “Money Mania”, the author, Bob Swarup draws parallels between cosmology and financial bubbles.
1. The Absence Of Action Does Not Mean Nothing Is Happening
We often talk of the vacuum or emptiness of space. But the term is disingenuous, implying an absence of everything. Today, we know that empty space is not really empty. Instead, it is a invisible reservoir of unimaginable energy, far fuller than any overstuffed closet that we could imagine, where invisible subatomic particles playa constant frenzied game of creation and annihilation. However, all this action lies hidden beneath the surface, masquerading as emptiness. But it is from these infinitesimally small quantum fluctuations that our universe and the structure within was born.
Even in the absence of great booms and busts, our human emotions always lie beneath the surface, sweeping through the palette of extra-ordinary emotions from hope to fear to greed to envy. The dullness of the commuter train, with every actor steadfastly avoiding all human interaction, masks a roiling sea of emotions, no less powerful when muted as when they find expression and come to the fore. Under that placid exterior, we are always speculating, always running, always reaching.
2. Equilibrium And Its Associated Stability Are An Illusion; Change Is The Norm
Rewinding the cosmological clock, the very early universe in the moments after the Big Bang was an unimaginably hot place. It was also uniform as matter and energy interchanged at will and flew about in all directions. Physicists cling dearly to a principle called symmetry – the belief that a system at some level is uniform and agnostic about changes in its environment. For example, it could be symmetrical with regard to time. Thus, you could run the system forward in time and expect the same pattern of behavior if you were to run it backward. In the immediate aftermath of the Big Bang, everything was perfectly symmetrical – the cosmologist’s way of saying that the behavior and evolution of the universe could be described by one simple theory.