Just before the ‘second industrial revolution’ created new industries and their accompanying fortunes in areas like electricity, steel, oil, and telephones, new investment in the United States was concentrated in railways. Railroad projects attracted huge amounts of private and public resources. It also attracted speculators and their machinations as well as the unscrupulous business…
Wars increase volatility in all sorts of markets by radically changing the circumstances of production and the final destination of the economy’s gross domestic product. New demand replaces old demand and the articles in shortest supply can quickly change. There is also considerable uncertainty in war; as the military theorist Carl von Clausewitz put…
Forms of market manipulation that have become rarer in the U.S. after the Securities Exchange Act of 1934 were once commonplace. One of these was the ‘bear raid’, when traders collaborate to drive the price of a security or commodity lower, often by short selling, in order to profit from those positions. Another was…
Ponzi schemes have their namesake, Charles Ponzi. He raised money from investors for a seemingly simple and profitable scheme that covered up what was actually happening, the payment of stunning returns to investors with the investments of others without any profitable investment activity taking place. Ponzi’s scheme shares many of the hallmarks of fraud,…
The 1920s saw the emergence of numerous shady characters in the history of finance, the product of a buoyant stock market amidst imbalances beneath the surface. These anti-heroes tended to have something in common, they were really good at raising lots of money. A Frenchman of the period, Albert Oustric, was able to put…
Like other economies transitioning out of socialism around the same time, Romania in the early 1990s was a fairly dismal place. Offering a bit of hope to many was a local ‘mutual-aid’ financial scheme called Caritas. While appealing to people’s desperation, apathy, and frustrations, Caritas was clearly not a normal financial institution. It promised…
Around 1970, a Switzerland-based asset management firm, Investors Overseas Services, had grown into one of the largest in the world in the span of just a few years, this despite a small initial target market of American soldiers deployed in Europe. Of course, the company had grown far beyond this limited market in the years…
What do matches and money have in common? Not much perhaps, except that one man seemed an especially powerful supplier of each. Ivar Kreuger is possibly the person whose fame has diminished the most in the last century of financial history. During the 1920s, he was one of the largest creditors, and borrowers, in the…
Globalization in finance has allowed the emergence of global banks, able to participate with ease in different markets around the world as barriers to the international flow of capital have been dismantled. However, global banks are not as easily regulated as those constrained to a single country, especially when closer international cooperation amongst regulatory and…
In 2006, authorities shut down the operations of two stamp dealing firms in Spain offering investment products that turned out to be fraudulent. The value of the products they sold to customers were overstated and the returns they offered could only be paid out of the investments made by new investors. This ponzi scheme was…
