It'll end in tears

Niall Ferguson knows a thing or two about bubbles, having examined at least eight in The Ascent of Money, his thorough analysis of the financial world.

From cotton-backed confederate bonds in America’s Civil War to dotcom shares in the 1990s, each bubble has five stages, he says. Economic developments create profitable circumstances for some companies; euphoria boosts prices; novices pile in; the experienced take profits; then first-timers rush to the exit. Onlookers identifying today’s bubbles name emerging market debt and equity, G3 sovereigns and precious metals, chiefly gold. Ferguson disagrees, on numerical grounds at least: “For a bubble, an asset rises five to 10 times in 12 to 24 months. People need to use the term with ca...