The Ascent of Money: Blowing Bubbles

THE ASCENT OF MONEY: BLOWING BUBBLES

1 ANALYSIS FROM THE DOCUMENTARY AND DIFFERENT RESOURCES

AVAILABLE ONLINE

“Blowing Bubble” This documentary started with the reference of Joint stock Company in

the ascent of money. Corporation-it is an entity that allows multiple parties to pool their

resources in the pursuit of long term and sometimes risky ventures. Originally those that

operated the company were supposed to be held accountable by the owners (shareholders). In

practise, however, it is the stock market itself –the arena where small slices of companies are

sold as shares –that exerts discipline on businesses. “In effect, stock markets hold hourly

referendums on the companies whose shares are traded there. Depends on quality of their

management, appeal of their products, and the prospectus of their principal markets.

Stocks have traded roughly 400 years. Since that time many cycles of booms and bust have

been occurred .frequently unscrupulous insiders and traders have taken advantages of

credulous investors. The pattern behind financial bubbles has proven so durable that it can

easily be broken down into five stages:

1.

2.

3.

4.

5.

Displacement, where a shift in the economic environment creates profitable opportunities.

Euphoria: a feedback loop of buyer creates ‘overtrading’

Mania: the bubble is created by buyers not having a clue

Distress: the exorbitance becomes clear to the well-informed

Revulsion: the bubble bursts and especially the uninformed sell off in large quantities

A number of factors will typically facilitate this process, such as information asymmetry

towards insiders, easy credit and the free flow of capital. What is also very common is the

short duration of the investors’ memory, helping to create the next bubble rapidly. Some

significant features of financial bubbles worth mentioning

 Insiders always have asymmetric information, which they can exploit.

 Bubbles occur more frequently when capital flows are...