Garet Garretts 'A bubble that broke the world'

Geschreven door Tuur Demeester

zondag, 22 maart 2009 10:12

In 1932 maakte Garet Garrett in zijn boek "A bubble that broke the world" een rigoureuze analyse van de toenmalige crisis. In onderstaande passage beschrijft hij hoe bij het moderne bankieren fondsen van kredietverstrekkers versneden worden om te worden gebruikt als aas waarmee veel grotere schuldenaren kunnen gevangen worden—waarmee een enorme schuldenzeepbel in het leven wordt geroepen. Garrets analyse is vandaag de dag opnieuw bijzonder actueel:

Mass delusions are not rare. They salt the human story. The hallucinatory types are well known; so also is the sudden variation called mania, generally localized, like the tulip mania in Holland many years ago or the common-stock mania of a recent time in Wall Street. But a delusion affecting the mentality of the entire world at one time was hitherto unknown. All our experience with it is original.

This is a delusion about credit. And whereas from the nature of credit it is to be expected that a certain line will divide the view between creditor and debtor, the irrational fact in this case is that for more than ten years debtors and creditors together have pursued the same deceptions. In many ways, as will appear, the folly of the lender has exceeded the extravagance of the borrower.

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That debt need never be paid, that it may be infinitely postponed, that a creditor nation may pay itself by progressively increasing the debts of its debtors—such was the logic of this credit delusion.

Since John Law and his Mississippi Bubble, individuals have been continually appearing with the same scheme in new disguise. The principle is very simple. You have only to find a way to multiply your creditors by the cube and pay them by the square, out of their own money. Then for a while you are Nabob. One fish cut up for bait brings three. Two of these cut up for bait bring eight, the cube of two. Four of these cut up for bait bring sixty-four, the cube of four. Sixteen of these for bait bring 4,096, and 256 of these, which is the square of sixteen, will bring 16,777,216, which is the cube of 256.

The fatal weakness of the scheme is that you cannot stop. When new creditors fail to present themselves faster than the old creditors demand to be paid off, the bubble bursts. Then you go to jail, like Ponzi, or commit suicide, like Ivar Kreuger.
There is nothing new in the scheme. What is new is that for the first time the whole world tried it. The whole world cannot put itself in jail, nor can it escape the consequences by suicide.

When the delusion breaks, people all with one impulse hoard their money, banks all with one impulse hoard credit, and debt becomes debt again, as it always was. Credit is ruined. Suddenly there is not enough for everyday purposes. Yet only a little while before we had been saying and thinking there was a great surplus of American credit and the only thing we could do with it was to export it. How absurd it sounds in echo. It was absurd at the time.

Financieel adviseur Steven De Klerck heeft mensen herhaaldelijk aangeraden dit boek te lezen. Hij geeft komende woensdag in Leuven een lezing met als titel "Een Oostenrijkse kijk op de efficiënte markt hypothese – Hoe centrale banken enorme investeringsvallen en kansen creëren voor investeerders”. (meer details hier)

> Lees Garet Garretts 'A bubble that broke the world'.