The etymology of a bubble reveals its true nature as fraud
In short: We often treat financial bubbles and scandals as separate phenomena—one an accident of market psychology, the other a deliberate crime. However, linguistic history suggests they were never meant to be distinct. To understand why markets collapse, we must look at how the very language of finance was forged in deception.
In modern discourse, a 'bubble' often refers to an asset class experiencing rapid price inflation followed by a crash. In contrast, a 'scandal' implies a specific act of fraud or corruption. Yet, Edward Chancellor argues that these two are intricately linked and essentially one and the same cycle. This is evidenced by the etymology of the word itself: the Oxford English Dictionary defines a bubble as "anything fragile, unsubstantial, empty or worthless, a deceptive show."
The history of the term provides a clear window into this perspective. In the early eighteenth century, the verb "bubbling" described the actions of a "bubbler"—a swindler or cheat who created fraudulent companies to deceive others. Those who fell victim were known as the "bubbled," defined as those who were befooled and cheated. This suggests that from its inception, the concept of a bubble was synonymous with fraud rather than mere market volatility.
This perspective reframes historical events like the South Sea Bubble. While many focus on the stock price inflating from one hundred to a thousand, Chancellor notes that the name actually refers specifically to the fraud involved. By studying these recurring cycles—from Dickensian scandals to modern collapses like Lehman Brothers—we can see that the mechanisms of deception remain remarkably unchanged across centuries.
The symposium at Gresham College aims to use these "ghosts" of past scandals to identify future risks. If bubbles are, by definition, deceptive shows, then identifying a bubble is not just about watching prices rise; it is about recognizing the recurring patterns of swindlers and the structural vulnerabilities that allow them to operate.
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Sources
- Summary by Intellect · source: Ghost of Scandals Past: A Short History of Financial Scandals - Edward Chancellor
- Also: Ghost of Scandals Past: A Short History of Financial Scandals
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