When I think about the present market difficulties, I think about both the situation as a whole, and the personalities involved. We might look at Bernie Madoff as a poster child for the current distress, but back during the Great Depression. we might have considered Richard Whitney.
Though the conditions are different, when conditions move from boom to bust, cheaters get revealed — those who were relying on good times in order to make good on promises gone wrong. Both Madoff and Whitney had sterling reputations as well, and they both played a significant role in the trading of the market.
Perhaps big frauds require seemingly upright men who command trust from their peers. Practices that can be gooten away with during a bull phase of the market will fall flat during the bear phase.
Aside from the Whitney story, Once in Golconda tells the story of boom and bust for the financial economy as a whole. Taking chances ramped up, supported by a too-easy monetary policy. After the peak, opportunities were few, and few had the spare capital to invest in ventures that were seemingly rich, as measured against boom conditions. Such is the nature of scarce liquidity after a boom.
This is a fun book. You can see the gathering storm as liquidity grows, and markets boom. You can see the increasing furor nearing the peak. At the peak, you can’t hear much. During the fall you can hear investors go through the five stages of grieving as they watch their investments die.
This is a good book, well-written, and appropriate for our era. I recommend it.
If you want to, you can buy it here: Once in Golconda (Wiley Investment Classics)
PS — Remember, I don’t have a tip jar, but I do do book reviews. If you enter Amazon through a link on my site and buy things from them, I get a small commission, and you don’t pay anything extra. Such a deal if you wanted to get it anyway…