The Iron Law of Financial Markets: Self-fulfilling Prophecies and Speculative Booms and Busts
This paper discusses the factors which, in the absence of strong financial regulation, sustain the Iron Law of the Financial Markets asserting that speculative booms and busts occur more or less regularly from 17 century to the present. The first factor is that financial markets are self-fulfilling...
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| Format: | Article |
| Language: | English |
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University of Belgrade
2016-02-01
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| Series: | Etnoantropološki Problemi |
| Subjects: | |
| Online Access: | https://eap-iea.org/index.php/eap/article/view/219 |
| _version_ | 1818693726816436224 |
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| author | Ognjen Radonjić |
| author_facet | Ognjen Radonjić |
| author_sort | Ognjen Radonjić |
| collection | DOAJ |
| description | This paper discusses the factors which, in the absence of strong financial regulation, sustain the Iron Law of the Financial Markets asserting that speculative booms and busts occur more or less regularly from 17 century to the present. The first factor is that financial markets are self-fulfilling system. The second is that human nature does not change and is based on egoism, materialism, loss aversion, exaggerated hopes and fears, emulation, propensity to gamble, herd behavior and so on. Lastly, there is the extreme brevity of the financial memory. In order to enable economic authorities and/or individuals to detect timely that the unsustainable boom is under the way, we have identified the common features of historically recorded speculative episodes. Stages through which the system passes on its way from unsustainable rise to inevitable fall are: displacement, boom, overtrading, financial distress and discredit or revulsion. |
| first_indexed | 2024-12-17T13:18:16Z |
| format | Article |
| id | doaj.art-b7fdff0a8a00466394b45136e760aa88 |
| institution | Directory Open Access Journal |
| issn | 0353-1589 2334-8801 |
| language | English |
| last_indexed | 2024-12-17T13:18:16Z |
| publishDate | 2016-02-01 |
| publisher | University of Belgrade |
| record_format | Article |
| series | Etnoantropološki Problemi |
| spelling | doaj.art-b7fdff0a8a00466394b45136e760aa882022-12-21T21:46:56ZengUniversity of BelgradeEtnoantropološki Problemi0353-15892334-88012016-02-018410.21301/eap.v8i4.11The Iron Law of Financial Markets: Self-fulfilling Prophecies and Speculative Booms and BustsOgnjen Radonjić0Department of Sociology Faculty of Philosophy University of BelgradeThis paper discusses the factors which, in the absence of strong financial regulation, sustain the Iron Law of the Financial Markets asserting that speculative booms and busts occur more or less regularly from 17 century to the present. The first factor is that financial markets are self-fulfilling system. The second is that human nature does not change and is based on egoism, materialism, loss aversion, exaggerated hopes and fears, emulation, propensity to gamble, herd behavior and so on. Lastly, there is the extreme brevity of the financial memory. In order to enable economic authorities and/or individuals to detect timely that the unsustainable boom is under the way, we have identified the common features of historically recorded speculative episodes. Stages through which the system passes on its way from unsustainable rise to inevitable fall are: displacement, boom, overtrading, financial distress and discredit or revulsion.https://eap-iea.org/index.php/eap/article/view/219speculationspeculative bubbleself-fulfilling propheciesinsidersoutsidersmass psychology |
| spellingShingle | Ognjen Radonjić The Iron Law of Financial Markets: Self-fulfilling Prophecies and Speculative Booms and Busts Etnoantropološki Problemi speculation speculative bubble self-fulfilling prophecies insiders outsiders mass psychology |
| title | The Iron Law of Financial Markets: Self-fulfilling Prophecies and Speculative Booms and Busts |
| title_full | The Iron Law of Financial Markets: Self-fulfilling Prophecies and Speculative Booms and Busts |
| title_fullStr | The Iron Law of Financial Markets: Self-fulfilling Prophecies and Speculative Booms and Busts |
| title_full_unstemmed | The Iron Law of Financial Markets: Self-fulfilling Prophecies and Speculative Booms and Busts |
| title_short | The Iron Law of Financial Markets: Self-fulfilling Prophecies and Speculative Booms and Busts |
| title_sort | iron law of financial markets self fulfilling prophecies and speculative booms and busts |
| topic | speculation speculative bubble self-fulfilling prophecies insiders outsiders mass psychology |
| url | https://eap-iea.org/index.php/eap/article/view/219 |
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