This
is a fascinating 15-minute video, where George Selgin criticises the operation
of U.S. monetary policy. In particular,
he criticises the Fed for only engaging in open market operations with primary
dealers (i.e., large stable (?) financial institutions) and only buying and
selling government securities. He
recommends that both these policies be ended and that the Fed stops lending
directly to individual institutions i.e., that it closes its discount window.
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.