My Roget’s Thesaurus notes that the book’s title goes back to the 17th century and

My Roget’s Thesaurus notes that the book’s title goes back to the 17th century and Samuel Butler of Hudibras. The Nine Years’ War cut off imports of claret and port, leaving merchants who had sold off their stock with the money to subscribe to the shares of the Bank of England, which had been founded to reorganise government debt in what became the financial revolution.Booms have had their start in various ways: the refunding of British debt from the Napoleonic wars at low rates of interest, stimulating those who lost income to seek higher returns in insurance shares and foreign bonds; in innovations such as canals and railroads, the shares of which were often bought with small down-payments leaving some investors unable to meet calls for later instalments; sharp declines in foreign lending because of changes in domestic conditions, such as when Berlin and Vienna in 1873 suddenly stopped lending to the financier Jay Cooke’s need for capital to build the Northern Pacific railroad in the United States; or the hectic share trading on Wall Street in March 1928, which diverted capital away from long-term lending for Germany, Argentina, Australia and Uruguay.Mr Chancellor’s rhetoric adds to the sharp taste of the juicy details. Mr Chancellor devotes attention to the complex character of Daniel Defoe, whom children read for that remarkable economic tract, Robinson Crusoe, and bankers enjoy for his novels where financial detail is interspersed among lurid characters such as Roxana, the Fortunate Mistress and Moll Flanders.Defoe was also a journalist with strong interests in his debts, in morality and in Exchange Alley, where speculation ran riot and in his judgement was doomed The times were tempestuous and complex. In between came financial revolution, the establishment of the Bank of England, and the Nine Years’ War. But one should rejoice in what Mr Chancellor has provided in such detail and depth, with more light and colour than one normally receives.Of particular interest to me is Chapter 2 on the 1690s in England after the Glorious Revolution of 1688, and preceding the South Sea Bubble of 1713-20.

An epilogue adds from America the debacle of Long-Term Capital Management of September 1998.Some of the cognoscenti might have wished for a few other old and new favourites such as the Mississippi Bubble, which burst in 1720 a few months ahead of the South Sea Bubble, the Mexican troubles of 1982 and 1994-95, the East Asian Tigers from 1997, and on-going Russian economic collapse that threatened world finance last summer. But there are two items from further afield, the classic 250-year-old Tulip Bubble of the Dutch Republic, and the Japanese implosion of a decade ago, which resulted in a recession or depression that is only now beginning to show signs of recovery but still has distance to go. Edward Chancellor’s has better timing than those who have long been welcoming a crash still in prospect. It is brilliantly written, with a good understanding of finance derived from his days as a banker with Lazard Brothers, and a historian’s felicitous prose style that carries the reader along.The episodes in financial speculation are limited to 10, mostly English and American. But the band of worriers is declining who cannot understand price/earnings ratios of 30, 50, 80, even infinity (when the price is divided by zero earnings), or negative (when the anticipation of future earnings is accompanied by current losses).It is a mistake to be right too early, as Roger Babson, a financial analyst, learnt in 1928 when he predicted the crash of 18 months later and lost his clients. When Internet stocks decline (though other equities continue their upward climb), we think “at last”.

We look back to the remark of the distinguished American economist, Irving Fisher, in 1929, ahead of the crash of October, that the American economy had reached a “New Era”. We took comfort in the remark of Alan Greenspan in December 1996 that he was concerned over “irrational exuberance” in Wall Street. Once you have decided that, and once the learning curve starts to flatten, that’s the time to move.. Devil Take the Hindmost

By Edward Chancellor
(Macmillan pounds 25)SOME STUDENTS of financial booms and busts are becoming nervous as the crashes in stock markets that we have been forecasting for a time – long in my case – fail to materialise. I would be doing the same – working silly hours but not getting an awful lot of satisfaction, then spending two hours in the pub moaning about it.I see people now who are four or five years younger than me, and it makes me think those last three years as an accountant were wasted.You ought to know fairly early in your profession whether you are going to be a profession-person – otherwise you have to look elsewhere. John and I met, and after that it was a question of doing the right deals.Now, when I have a drink with my former accounting colleagues, they drive me mad They say the same things they said six years ago.

It was a question of taking the opportunity that was offered me.After I said I was leaving Binder Hamlyn, one or two of the partners were keen to keep me, but they said: “We’re surprised you didn’t do it ages ago.” Since then, I have never questioned that I had made the right decision.Having got a taste of a smaller company at IES, I left there and started to build my own concept. I wanted to make my mark on the other side.The move I made to IES didn’t turn out to be the right one but, even then, I never thought I would go back to the profession. The prospect of being a career senior manager, albeit well paid, didn’t appeal. I enjoyed my job and it was a challenge, but it wasn’t going to satisfy me from a personal point of view.I was waiting for the right opportunity. A number presented themselves, but how hard was I looking? I had to decide: was I going to commit myself to the profession for the rest of my life? There was no guarantee of partnership, and I’d be striving to achieve that. I didn’t really quite know how, or have the balls to go out and do it.I think I knew, as soon as I got back from the States, that the politicking of the accounting partnership was not something that appealed to me. I passed my professional exams easily, but in terms of broadening my horizons, it closed an awful lot of doors.
I moved into corporate finance quickly.