Review - “Extraordinary Popular Delusions and The Madness of Crowds” by Charles MacKay

137
Sun, Nov 3, 2013 - 12:06pm

I have a necessary library of trading and market related books, both in printed and electronic form. To do things I believe that you need to allocate resources. For investing, one resource is, obviously, money or capital to invest or trade with.

Other things can be equated with money, for they have difficulty in the getting. Power is one – it can be used to seize money from those who have it. Another is knowledge, for with knowledge money can be made or created. A third primary resource is time. It takes time for all things to happen, time to gain power, even a HFT algorithm requires a small amount of time to carry out it’s instructions, and it takes time to learn knowledge.

I’m talking of knowledge today. This is the first of a series of book reviews which more or less could be called my own Recommended Reading List for Traders and Investors. It’s personal and some famous works will be left out, and I assume some minor works will come as surprises, as the prioritization is my own and based on my personal experiences and thoughts.

I had an inner debate about whether the #1 slot should go to MacKay or Lefevre/Livermore, but MacKay wins out because his work transcends trading, or even markets. It is a study of humanity. I expect everyone would benefit to a certain degree from reading this.

Oh, I should mention – Charles MacKay wrote it in 1841. That’s 172 years ago, 50 years after the French revolution, and 20 years before the American Civil War was to be fought.

I add at this point that I have three volumes of this book in my personal collection: A 1980 facsimile of the original, 724 pages in length, an electronic one, and also a new compact (abridged) hardback edition from Harriman House of 2003, 115 pages, and reprinted several times since. So this is an investment classic and still in very high demand, hence the reprints. The main difference between my two paper editions, apart from weight, is that the recent compact volume contains the financial bubbles whereas the original full text describes these however it also recounts other historical manias not related to finance like Fortune-Telling, Duelling, Haunted House, Poisoning and other manias.

I’ll stay with the compact volume for this review seeing as it will be read by investors and traders in the main. The illustrations are representative of my quirky thought process and not intended to be manipulative or imposing a political view. They are merely chosen to transcend the time of writing of the excerpted texts visually.

So what book written back then could be so pertinent today? I must get out of the way and let Charles MacKay's words speak for themselves. Here are some quotes from the first section about John Law and the Mississippi Bubble. You can judge for yourself.

Early on his wisdom was noticed and discussed in the media:

All the small poets and litterateurs of the day poured floods of adulation upon him. According to them, he was the saviour of the country, the tutelary divinity of France; wit was in all his words, goodness in all his looks, and wisdom in all his actions.”

Real assets were sucked in while paper was issued to acquire these items of value:

... It was remarked at this time that Paris had never before been so full of objects of elegance and luxury. Statues, pictures, and tapestries were imported in great quantities from foreign countries, and found a ready market.

All those pretty trifles in the way of furniture and ornament which the French excel in manufacturing were no longer the exclusive playthings of the aristocracy, but were to be found in abundance in the houses of traders and the middle classes in general. Jewellery of the most costly description was brought to Paris as the most favourable mart;”...

The wealth effect is described so well, as is the link between the Sovereign Ruler and Financier:

“...Thus the system continued to flourish till the commencement of the year 1720. The warnings of the parliament, that too great a creation of paper money would, sooner or later, bring the country to bankruptcy, were disregarded. The regent, who knew nothing whatever of the philosophy of finance, thought that a system which had produced such good effects could never be carried to excess. If five hundred millions of paper had been of such advantage, five hundred millions additional would be of still greater advantage. This was the grand error of the regent, and which Law did not attempt to dispel. The extraordinary avidity of the people kept up the delusion; and the higher the price of Indian and Mississippi stock, the more billets de banque were issued to keep pace with it.

On astute individuals hedging to protect against the inflationary loss this next quote reads like it was written both next year and in the 1930s, some 92 years after Mackay published his book:

“ ... In February 1720 an edict was published,

which, instead of restoring the credit of the paper, as was intended, destroyed it irrecoverably, and drove the country to the very brink of revolution. By this famous edict it was forbidden to any person whatever to have more than five hundred livres (20l.) of coin in his possession, under pain of a heavy fine, and confiscation of the sums found. It was also forbidden to buy up jewellery, plate, and precious stones, and informers were encouraged to make search for offenders, by the promise of one-half the amount they might discover. The whole country sent up a cry of distress at this unheard-of tyranny. The most odious persecution daily took place. The privacy of families was violated by the intrusion of informers and their agents. The most virtuous and honest were denounced for the crime of having been seen with”

And that is just the section about John Law!

I do not wish to spoil with excessive quotation, only two more, but the sections about the South-Sea Bubble and the Tulipomania are just as archaic distant history, and at the same time they describe exactly what is going on around us today in our Central Bank- Politician-Banking controlled present day world.

So to finish this review, I excerpt two short and memorable pieces – first from Charles Mackay’s 1st 1841 edition and another from his preface to the edition of 1852, written 160 years ago: “... millions of people become simultaneously impressed with one delusion, and run after it, till their attention is caught by some new folly more captivating than the first. We see one nation suddenly seized, from its highest to its lowest members, with a fierce desire of military glory; another as suddenly becoming crazed upon a religious scruple; and neither of them recovering its senses until it has shed rivers of blood and sowed a harvest of groans and tears, to be reaped by its posterity.” .....

Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one.”

And that last passage, Dear Reader, is as up to date as they come. If there is a"required reading list" for investors and traders, this text which has endured nearly two hundred years and still remains so appropriate to modern life's financial intrigues surely deserves the number one position on that list.

Resources:

Publishers' Page for this book: https://www.harriman-house.com/book/view/556/investing/charles-mackay/extraordinary-popular-delusions-and-the-madness-of-crowds/

Available in printed, and electronic versions

Argentus Maximus

.

The author posts daily commentary on the gold and silver markets in the TFMR forum: The Setup For The Big Trade. More information about the author can be found here: RhythmNPrice.

About the Author

  137 Comments

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Orange
Nov 4, 2013 - 3:48pm

RFID chips in Passports

So I suppose they can now track people remotely if they are holding passports.

https://beforeitsnews.com/gold-and-precious-metals/

abguy4
Nov 4, 2013 - 3:44pm

and then this one; $100Trillion in Gold bars...............

Thank You so much. I will get to your other questions as soon as I can get my head around these numbers............ I followed the link to the Jim "Big Head" Willie excerpt from his Golden Jackass. He says that;

"the White Dragons have a $ Hundred Trillion in gold bars."

So, what does that look like in Tons? Someone check my math ---please~!

First We convert $100T into oz of Gold

$100 trillion/($1300/oz) = 77 Billion oz there are 14.6 troy oz /lbs, so

77B oz/(14.6 oz/lbs) = 5,274,000,000 lbs there are 2000 lbs/ton so

5.274 B lbs / (2000 lbs/ton) = 2,637,000 TONS of Gold or 2.6 MILLION TONS

15.5 times the total amount known to ever exist on Earth

Now, I have been reading Willie since 2007-8. He has made some wild claims but

this just makes my eyes glaze over. I'm dumb-founded.

With a Phd in Stats, I presume he has also done this calculation?

Anyone?

abguy4
Nov 4, 2013 - 3:38pm

Delusions and Madness - Bank of Hawaii

Meluaufeet, we have been discussing that in the DOTS forum, because as our ole buddy Slick Willie Clinton told us.............................."That dog don't hunt,"

Here's a couple postings on the subject

"Maybe the Atlanteans left 500,000 tons of Gold"

I am completely baffled by the total hysteria surrounding these mysterious hoards of gold. I have studied this topic since it appeared and I cannot substantiate one solitary bit of it. Follow me along. We need to do just a tiny bit of math, simply because nothing adds up in these mystery gold claims. OMG, where to start? I have posted extensively on this subject and I don’t want to simply repeat myself – but I must. Absolutely none of these claims of monstrous piles hold up to one iota of critical logical examination. I have followed Karen Hudes from her appearance on the scene, and I admit I was sorta taken with her, BUT, now she is totally discredited - to say the least. I now hold her in great suspicion. She either was; 1) psy-op'd, or 2) she is a purposeful agent of misinformation, cleverly planted. Look at the portion of her interview that you posted above. She was directly asked to provide specifics on the hordes she alleges exist.

She immediately launches into a 350 word babbling dump of big titles, laws, organizations and committees. I have read that six times and I cannot make one bit of sense of it - an i bin to colluge. There’s no beginning, end, or moral, and has not a thing to do with gold. It reminds me of asking Tricky Dick a direct question. By the end of the ‘answer’ you ask yourself, “What the hell was my question?” So, then she ends it by saying; ’Some guy told me and he’s a lawyer’. Well, Seriously Karen? That’s it? Lawyers are known for their honest demeanor so that settles that, huh? Then I followed the link to her complete interview and checked the two listed videos where she says 'the gold is mentioned.' IT IS NOT.

In the first video, David Miller (oh my geesus xrist!), mentions the alleged 3000 tons that went missing on 911, from the vault under the towers. In the second video the guy from the House of Lords, mentions a fraudulent 750K tons from Indochina which he testifies in the same breathe is a complete fabrication that exceeds all known estimates of all existing gold by a factor of ten. And OBTW, House of Lords? Really? Lords? Says who? By birthright? Sorry, I’m getting off topic.

If we go to GATA, and Wikileaks, and Eric Sprott, and FORBES, we get pretty much the same estimates for how much gold has ever existed above ground in the History of the known world, since the time of ancient Egypt. About 170,000 tons. That’s ALL of it. Bullion, scrap, and jewelry.

Karen claims 550K tons sitting secretly (get real), in vaults that no one knows about. 170K tons in Hawaii alone, above and beyond everything in the bullion Banks and the Vatican, etc. Let’s compare that to FORBES Research. They also say 170K Ton is all that EVER existed, and that 66% of that has been mined since 1950. So only about 58K ton existed above ground before WWII. So no way in hell could Matsushita’s Gold – allegedly stolen from the Chinese in the 1940’s - have been more than 58K ton – even if it comprised all the gold in the world at that time~! And it certainly wasn’t, as we know the English and USA, Indians, Europe and others were sitting on their little own piles – whatever they consisted of, OK?

So where are we now?
1) Maybe Eric Sprott can’t count?

2) and additionally he can’t afford to hire an MBA that can count or do research?

3) Maybe FORBES and GATA and everyone else are all getting their data from the same faulty source(s)?

4) Maybe the Atlanteans left 500,000 tons of Gold and no one has ever pillaged it in the last 23,000 years. The Bankers found it and thru their never ending benevolence are holding it in trust for us all for when we reach the age of reason. The “People’s Gold” as Karen named it. See, I’m open to new ideas here.

OK. Let’s get back to Karen baby. I am stuck with the math. Karen’s totally unsubstantiated claims do not wash. I believe in UFO’s. I believe in NWO conspiracies, HAARP and a whole bunch more. BUT, nothing about these “Mysterious Hysteria Hordes, ( MHH ), stands up to the slightest examination.

tyberious
Nov 4, 2013 - 2:42pm

Rand Paul

Has signed on to that bill also. It passed the House last year.

Bongo Jim
Nov 4, 2013 - 2:40pm

@ AlienEyes

That teacher wasn't Mr. Weber at Cypress JC, was it? He also said to use the 3 C's - Clear, Concise and Concrete.

ag1969
Nov 4, 2013 - 2:28pm

Presented without comment

November 4, 2013

Dear Mr. Ag1969:

Thank you for taking the time to share your comments with me about the Federal Reserve. I appreciate hearing from you.

As you may know, on January 3, 2013, Representative Steve Stockman (R-TX) introduced H.R. 33, the Audit the Fed Act of 2013, which was referred to the House Committee on Oversight and Government Reform. If enacted, H.R. 33 would require a full audit of the Federal Reserve.

You may be pleased to know that I support auditing the Federal Reserve. I am an original cosponsor of a Senate bill to require a full audit of the Federal Reserve System (S. 209). Please be assured that I will work with my colleagues to ensure the Federal Reserve remains accountable to the American people for its transactions and policies.

Again, thank you for taking the time to contact me regarding this issue. As your Senator, it is important for me to hear from those I represent regarding the current issues affecting our state and country. Please do not hesitate to be in touch again if I can be of any further assistance.

Sincerely,

Kelly A. Ayotte
U. S. Senator

ag1969
Nov 4, 2013 - 2:04pm

I Love Provident

It is a very nice feeling when you order the shiney on Thursday and receive it on Monday. There is nothing like a canoe trip in NH in November. I love the Maples with the horse privy. Something about those RCM coins that just exudes quality.

I also think that the decline of our nation was due to the silver being removed from the coinage. There is such a nice feeling I get when I hold silver in my mitts. I think all Americans would be in a much better mood if they had a few pieces of silver in their pocket.

Rock on Everyone! And I hope everyone feels as good as I do right now when their Halloween packages arrive!

tyberious
Nov 4, 2013 - 2:00pm

The War Criminal Speaks

Dick Cheney: “Canada is Too Dangerous”

by Luis Miranda, Real Agenda:

“Dick Cheney cancels Toronto trip, says Canada is too dangerous”.

Too dangerous for what and for whom? Lest you be confused, that was back in April of 2012, when he decided to cancel his trip to Toronto.

Cheney was indicted for war crimes by the Kuala Lumpur War Crimes Tribunal in a historic judgment in May 2012: Chief Prosecutor of the Kuala Lumpur War Crimes Commission v. George Walker Bush et al

According to a March 2012 report: Former U.S. vice-president Dick Cheney has cancelled an April [2012] appearance in Toronto citing concerns Canada is too dangerous.

Read More @ real-agenda.com

ancientmoney
Nov 4, 2013 - 1:56pm
meluaufeet
Nov 4, 2013 - 1:49pm

Bank of Hawaii

I'm at a loss regarding the gold hoard vaulted at Bank of Hawaii. A long time ago I worked for a subsidiary of Bank of Hawaii. Did a month training in Honolulu. They sent me around to every department... even saw the vault. Never once heard a whisper of such a stash.

Of course I was just a branch manager so I understand my knowledge of such was unnecessary at best. I don't think the vault could hold that amount... honestly.

We do have a various military bases in the State. Maybe its there???

I can't wrap my mind around this. I'd rather forget it, but can't.

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