David Cameron's withdrawal from an EU-wide treaty to deal with the debt crisis was the right thing to do as the treaty on the table won't fix the crisis and threatened the position of the City as the world's premier financial market. However, it not leaves Britain as potentially the only member of the EU not to sign up to the deal. Consequently, Britain may be marginalised and full withdrawal (or ejection) from the EU may be just around the corner unless the Euro collapses first, which is becoming more likely every day. The treaty needed two things to save the euro - (a) the ability to have fiscal transfers to economies hit by demand shocks (e.g., the PIIGS) and (b) a change in the ECB's mandate, which would enable it to monetise the debt of EU sovereign states.
My colleague and former PhD student Gareth Campbell has created a website about the British Railway Mania - click here . This episode has been described by the Economist as probably the greatest bubble in human history. Gareth's website provides background on the Mania and posits some explanations for the 'bubble'. In his explanation of why the bubble happened, Gareth places a lot of emphasis on investor myopia regarding future dividends and uncalled capital. His study of investors during the episode does not support the view that this episode was fuelled by naive and irrational investors.
