Arianna Huffington: The Extreme Brevity of Financial Memory!

Financial crises are a lot like childbirth, they both involve a lot of pain, and end up costing you a lot of money, but after a while, you forget about all the negatives and are ready to do it again. Of course, with childbirth you at least get something positive out of it. In my own case, I'd forgotten enough about the downside of having a baby to do it again two years later, without an epidural. This propensity to forget, so useful when it comes to having babies, is incredibly destructive when it comes to our economy. So why do it? In 1990, John Kenneth Galbraith tried to answer this vexing question in his book: A Short History of Financial Euphoria. Using the 1987 market crash as his launching pad, Galbraith looks at the history of financial bubbles, and the subsequent and inevitable crashes, and why the lessons that would would prevent boom and bust cycles from happening with devastating regularity are never learned. To Galbraith it's a combination of "the extreme brevity of the financial memory" and a general ignorance of history. "There can be few fields of human endeavor in which history counts for so little as in the world of finance," he writes. "Past experience, to the extent that it is part of memory at all, is dismissed as the primitive refuge of those who do not have the insight to appreciate the incredible wonders of the present." Not only is the boom and bust cycle repeated endlessly, so is the response. See if this sounds familiar: When the initial wave of public anger at a financial bubble bursting is at its highest, there are pledges from politicians to get tough, and "never let this happen again." Some reforms are proposed but, as the public's anger and memory weakens, so does the "reform."