Marc Faber has published three interesting pieces on historical asset bubbles — the South Sea Bubble and the Mississippi scheme. Faber is one of the more interesting heterodox economists writing today. I believe that he is aware of the Austrian school and has been influenced by Mises and Hayek. The theme of credit expansion, either through central banking or other forms of paper claims, runs through all of these pieces:
“...History reveals a financial system based on paper money depends almost entirely on the confidence of the public in the currency that is issued by the monetary authorities, and that once confidence in a currency is badly shaken, painful consequences are inevitable. The reader should ask himself the question: for how much longer will foreign investors, which are financing the US trade and current account deficit, be willing buyers and holders of American stocks, bonds, and the dollar? Surely, there will be a time when, as was the case at the time of the Mississippi Scheme and the South Sea Bubble, the present ‘chain letter’ type of fiat money operation practised by the US Federal Reserve Board will no longer work and lead to a sharp depreciation of the US dollar...”
- Lessons of History (scroll half way down the page)
- History Repeating (scroll half way down the page)
- The South Sea Bubble and Law’s Mississippi Scheme
Also of interest is frequent Mises.org contributor Chris Mayer’s Panics and Profits. Mayer gives an Austrian take on the US canal-building boom in the 1830s. -rb
