IDEAS home Printed from https://ideas.repec.org/p/lev/wrkpap/wp_987.html
   My bibliography  Save this paper

The Souk Al-Manakh: The Anatomy of a Pure Price-Chasing Bubble

Author

Listed:
  • Frank Veneroso
  • Mark Pasquali

Abstract

It is widely agreed that the Nasdaq during the dot-com era 20 years ago was a full-fledged stock market bubble. Recently, the US stock market according to many metrics has become significantly more speculative and overvalued than it was at the dot-com peak 20 years ago. In both instances, a very broad subset of stocks became so highly valued that speculation in them had to be untethered from all fundamentals: the essence of what we call a "pure price-chasing bubble." This paper, drawn from a book in progress, examines the history of stock markets for comparable pure price-chasing bubbles, finding nine or so which have ever reached such a speculative extreme, with an over-the-counter market in Kuwait in the early 1980s called the "Souk al-Manakh" representing the most extreme example. Based on personal exposure to this Souk al-Manakh almost 40 years ago, we describe this anatomy and thereby make transparent the recurrent dynamics--on the way up and on the way down--of these greatest asset bubbles in human history. When one applies this framework to the current US stock market, one sees that the stock market in the US today will likely follow the disastrous path of the dot-com market.

Suggested Citation

  • Frank Veneroso & Mark Pasquali, 2021. "The Souk Al-Manakh: The Anatomy of a Pure Price-Chasing Bubble," Economics Working Paper Archive wp_987, Levy Economics Institute.
    • Handle: RePEc:lev:wrkpap:wp_987
    as

    Download full text from publisher

    File URL: http://www.levyinstitute.org/pubs/wp_987.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Pablo Gabriel Bortz, 2017. "The road they share: the social conflict element in Marx, Keynes and Kalecki," Review of Keynesian Economics, Edward Elgar Publishing, vol. 5(4), pages 563–575-5, October.
    2. Michael S. Lawlor, 2006. "The Economics of Keynes in Historical Context," Palgrave Macmillan Books, Palgrave Macmillan, number 978-0-230-28877-5.
    3. Robert W. Dimand & Mary Ann Dimand, 1990. "J. M. Keynes on Buffer Stocks and Commodity Price Stabilization," History of Political Economy, Duke University Press, vol. 22(1), pages 113-123, Spring.
    4. Bridel, Pascal & Presley, John, 1997. "John Maynard Keynes and the French Connection," The Manchester School of Economic & Social Studies, University of Manchester, vol. 65(4), pages 452-465, September.
    5. Kregel, J A, 1977. "On the Existence of Expectations in English Neoclassical Economics," Journal of Economic Literature, American Economic Association, vol. 15(2), pages 495-500, June.
    6. Mikkelsen, Anders L., 2014. "Dealing with risk: Underwriting sovereign bond issues in London 1870-1914," eabh Papers 14-06, The European Association for Banking and Financial History (EABH).
    7. Hayek, F. A., . "Money, Capital, and Fluctuations," University of Chicago Press Economics Books, University of Chicago Press, number 9780226321271 edited by McCloughry, R. K., June.
    8. Richard J. Kent, 2004. "Keynes's Lectures at the New School for Social Research," History of Political Economy, Duke University Press, vol. 36(1), pages 195-206, Spring.
    9. Luca Fantacci & Maria Cristina Marcuzzo & Annalisa Rosselli & Eleonora Sanfilippo, 2012. "Speculation and buffer stocks: The legacy of Keynes and Kahn," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 19(3), pages 453-473, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Pablo G Bortz, 2023. "Keynes’s theories of the business cycle: evolution and contemporary relevance," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 47(4), pages 835-852.
    2. Jean-Sébastien Lenfant, 2020. "Great Expectations. Hicks on Expectations from Theory of Wages (1932) to Value and Capital (1939)," Working Papers hal-03183464, HAL.
    3. Jean-Sébastien Lenfant, 2020. "Great Expectations. Hicks on expectations from Theory of Wages (1932) to Value and Capital (1939) (long version)," GREDEG Working Papers 2020-37, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France.
    4. Eric Tymoigne, 2006. "The Minskyan System, Part III: System Dynamics Modeling of a Stock Flow-Consistent Minskyan Model," Economics Working Paper Archive wp_455, Levy Economics Institute.
    5. Agnès Festré, 2002. "Money, Banking and Dynamics: Schumpeter vs. Hayek," Post-Print halshs-00271359, HAL.
    6. Tito Belchior Silva Moreira & Benjamin Miranda Tabak & Mario Jorge Mendonça & Adolfo Sachsida, 2016. "An Evaluation of the Non-Neutrality of Money," PLOS ONE, Public Library of Science, vol. 11(3), pages 1-20, March.
    7. Harald Hagemann & Hans-Michael Trautwein, 1998. "Cantillon and Ricardo effects: Hayek's contributions to business cycle theory," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 5(2), pages 292-316.
    8. Laidler, David, 2010. "Lucas, Keynes, And The Crisis," Journal of the History of Economic Thought, Cambridge University Press, vol. 32(1), pages 39-62, March.
    9. Aliyu, Shehu Usman Rano, 2020. "What have we learnt from modelling stock returns in Nigeria: Higgledy-piggledy?," MPRA Paper 110382, University Library of Munich, Germany, revised 06 Jun 2021.
    10. Roger E. Backhouse, 2014. "Hayek and Keynes," Chapters, in: Roger W. Garrison & Norman Barry (ed.), Elgar Companion to Hayekian Economics, chapter 5, pages 94-115, Edward Elgar Publishing.
    11. Finn Olesen, 2007. "Betydningen af Keynes’ metodologi for aktuel makroøkonomisk forskning - en Ph.D. forelæsning," Working Papers 77/07, University of Southern Denmark, Department of Sociology, Environmental and Business Economics.
    12. Thierry Aimar & Francis Bismans & Claude Diebolt, 2012. "Economic Cycles: A Synthesis," Working Papers 12-11, Association Française de Cliométrie (AFC).
    13. Lawrence H. White, 2008. "Did Hayek and Robbins Deepen the Great Depression?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(4), pages 751-768, June.
    14. Centi Jean-Pierre, 1999. "Money And Credit In An Openended Universe," Journal des Economistes et des Etudes Humaines, De Gruyter, vol. 9(2-3), pages 293-320, June.
    15. Ferdinando Meacci, 2012. "The disappointment of expectations and the theory of fluctuations," History of Economic Ideas, Fabrizio Serra Editore, Pisa - Roma, vol. 20(2), pages 157-184.
    16. Fabio Masini, 2012. "Designing the institutions of international liberalism: some contributions from the interwar period," Constitutional Political Economy, Springer, vol. 23(1), pages 45-65, March.
    17. Mario Tonveronachi, 2020. "Ages of Financial Instability," Economics Working Paper Archive wp_947, Levy Economics Institute.
    18. Thierry Aimar & Francis Bismans & Claude Diebolt, 2010. "Le cycle économique : une synthèse," Revue Française d'Économie, Programme National Persée, vol. 24(4), pages 3-65.
    19. Michael S. Lawlor, 2012. "John Maynard Keynes," Chapters, in: Jan Toporowski & Jo Michell (ed.), Handbook of Critical Issues in Finance, chapter 26, pages i-ii, Edward Elgar Publishing.
    20. Carabelli, Anna & Cedrini, Mario, 2014. "Not Beautiful, not Just, not Virtuous; 'And It Doesn't Deliver the Goods'. Capitalism and “Fear of Goods” in Keynes's Thought," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201438, University of Turin.

    More about this item

    Keywords

    John Maynard Keynes; Business Cycle; Fiscal Policy; Monetary Policy; Financial System; Uncertainty;
    All these keywords.

    JEL classification:

    • B31 - Schools of Economic Thought and Methodology - - History of Economic Thought: Individuals - - - Individuals
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:lev:wrkpap:wp_987. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Elizabeth Dunn The email address of this maintainer does not seem to be valid anymore. Please ask Elizabeth Dunn to update the entry or send us the correct address (email available below). General contact details of provider: http://www.levyinstitute.org .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.