Odd Lots Brad DeLong on the FTX Collapse and the South Sea Bubble
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Dec 5, 2022 In this engaging discussion, Brad DeLong, a Professor of Economics at UC Berkeley and author of "Slouching Towards Utopia," explores the shocking connections between the FTX collapse and the historic South Sea Bubble. He delves into the psychology of financial bubbles, revealing how greed and speculation fuel modern markets. DeLong also examines the moral dilemmas behind key figures in FTX and the lessons we can learn from past manias to navigate today's volatile crypto landscape, emphasizing the cyclical nature of economic bubbles.
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FTX and the South Sea Bubble
- FTX's collapse draws parallels to the South Sea Bubble of the 1700s, where a company proposed consolidating British national debt.
- This involved creating a new form of tradable money, mirroring some crypto narratives.
Political Influence and Copycats
- Both FTX and the South Sea Company leveraged political influence, promising financial transformation.
- They attracted numerous copycats with varying levels of legitimacy, some with long-term potential.
The Narrative of Transformation
- Most bubbles are rooted in a transformative technology story, like railroads or the internet.
- However, crypto's value proposition remains unclear, unlike historical precedents with tangible benefits.
