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10 things I learned from Devil Take the Hindmost: A History of Financial Speculation by Edward Chancellor

This is a great read and a reminder that the four most expensive words in the English language are “ this time it’s different”. (attributed to John Rothschild).

This book was published in 1999 during the Dot Com era. It could have been written during the more recent Crypto and AI manias. History does not always repeat itself, but it rhymes.

10 things I learned from Devil Take the Hindmost: A History of Financial Speculation 
by Edward Chancellor

    1. Speculation is active and investment is passive, but...

    there is a running joke that a speculation is a failed investment and an investment is a failed speculation.

    2. Fiat currency was invented in the 3rd century BC

    This is where the currency is created by decree by a government. I did not realize that it had been around that long. This is how the world currencies work today.

    3. In the infamous tulip craze of the 17th century, there was a futures market

    People would buy and sell tulip bulbs that were still in the ground that would be delivered at a future date . A house could be purchased for 400 Gilders, but at the height of the mania tulips were selling for 5000 Gilders apiece!

    The collapse was due partially to the insane prices, but people were selling tulips that they did not own to people who were using borrowed money.

    4. The current stock market atmosphere has its roots in the carnivals of the Middle Ages. Everybody is the same (wealthy people and the not-so-wealthy stand side by side), and you can bark crude orders to people.

    5. The features of the stock market of the 17 century would be familiar to a modern day stock trader. There were options, futures, hot technology stocks, and bubbles in speculation.

    Steam engines were the AI of the 17th century! People were listing companies on the stock market before they even had products developed: just like today. This was the beginning of global exploration (by the Europeans) and the industrial age. There was a lot of hype and speculation.

    6. The English financial system set up in the late 17 century allowed them to finance wars and the global exploration and colonization to come in the next century.

    Merchants could create currencies, the gold dealers had their own currencies. The ability to transfer debt from one person to another was an important financial innovation.

    Politicians were being bribed at the end of the 17th century with shares in stock in the Dutch East India Trading Company and similar ventures. Everything old is new again!

    7. The South Sea Bubble

    "The South Sea Bubble has been called: the world’s first financial crash, the world’s first Ponzi scheme, speculation mania and a disastrous example of what can happen when people fall prey to ‘group think’... (Issac) Newton reportedly lost as much as £40 million of today’s money in the scheme."

    ", King George himself then took governorship of the company in 1718...soon afterwards stocks were returning one hundred percent interest."

    People were buying stocks on credit: margin trading. The price of a share of South Sea stock was over 1000 pounds, but then began to fall precipitously in 1720 as margin calls were made.

    8. Emerging markets of the 1820s

    The Americas were the new frontier.

    Options trading became very common at this time. There were no laws regulating it.

    Mines in South America were speculated on.

    Canals were high-tech in 1790.

    Steam engine railroads were introduced in 1820.

    9. Railway fever 1836

    In the United States in the 19th century, the primary vehicle of speculation was land. The railroads stocks were used to speculate on land value because so much land was owned by the railroads.

    The railroads controlled tens of millions of acres of land. The speculation was that the land would be increasingly valuable as track was laid. There was a frenzy of laying track in the mid-19th century, fueled by speculative bond and stock sales. Much of it was done on margin.

    10. In the 1960s the computerization of finance started

    This, combined with the US going off the gold standard in 1971 set the stage for extraordinary financial advancement in the last 5 decades.

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