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I'm not sure anything is broken, we just had plain old regulatory capture. Greenspan himself admitted he thought that people would protect their own self inter
by asdlfj2sd33 17y ago
I'm not sure anything is broken, we just had plain old regulatory capture.
Greenspan himself admitted he thought that people would protect their own self interest. But those people get bonuses if their risks pay off and have no real downside if they lose. They are gambling with other people's money, not their own money.
And it's not as if self interest and lack of government bailouts prevent the Dutch tulip bubble, or any other speculative bubble.
- tc 17y ago... but it did prevent the speculative losses from being socialized while keeping gains private. Only people who bought tulips lost money. It's also widely thought today that the tulip mania was brought on in part by a parliamentary decree that weakened contractual protections on tulip contracts -- making it easy to speculate on inflated tulip prices without a correspondingly strong fear of loss. There is also a strong case to be made that, similar to the current situation, the tulip mania was prompted or sustained by a sudden increase in the monetary base. Apparently the balance sheet of the Bank of Amsterdam was surging during this period.