Alan Greenspan may say it is “very difficult to definitively identify a bubble until after the fact” but the study of bubbles is far older than he is. This year is the 150th anniversary of the classic text on manias, financial or otherwise: Charles Mackay’s Extraordinary Popular Delusions and the Madness of Crowds.
Mackay’s study of the South Sea Bubble of 1720 is particularly relevant to central bankers. During that mania, Mackay writes, “visions of boundless wealth floated before the eyes of the people”, and half the nation turned stockjobbers.
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