In his budget yesterday (FT's coverage is below), the Chancellor of the Exchequer (click here for the etymology of this title) announced a £12 billion mortgage guarantee scheme. Why is the UK government so keen to stimulate the UK housing market? After all, it was the exuberance in housing markets which was largely to blame for the financial crisis. The mortgage guarantee scheme is aimed at helping borrowers who don't have enough money to put down a deposit on a house. Are these not going to be subprime borrowers of various shade? Click here to read Robert Peston's view on this scheme.
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.