Frehen R., Goetzmann W. and Rouwenhorst G. (2009) Why invest in the bubbles?

Frehen, Rik, William Goetzmann and Geert Rouwenhorst (2009) “New Evidence on the First Financial Bubbles”, Yale international Center for Finance, Working Paper 04, 24p.

This article is available online.

Why did investors decide to bet on the various companies that would form the three 1720 bubbles in France, England and the Netherlands? (p.1). How did these bubbles affect companies which unlike the Compagnie des Indes and the South Sea Company were neither involved in the Atlantic trade nor in public finance?

Velde F. (2009) Eighteenth-century France’s one-man-bubble

Velde, François R. (2009) “Was John Law’s System a bubble? The Mississipi Bubble revisited” in The Origin and Development of Financial Markets and Institutions. From the Seventeenth Century to the Present, eds. Jeremy Atack and Larry Neal, Cambridge: Cambridge University Press, 99-120.

A slightly different version of this paper is available online.

The shares of the Compagnie des Indes created by John Law to manage the colonization of Louisiana, public finances and monopolies went from 250 Livres in July 1718 when the initial offering closed to just under 10,000 L days before Christmas 1719 and finally to 50 L in March 1721 (p.108). Can this jump followed by an even more impressive collapse in under 3 years be described as a bubble? (p.109)

Garber P. (2001) Crisis? What crisis?

Garber, Peter M. (2001) Famous First Bubbles. The Fundamentals of Early Manias, Cambridge, MA and London: The MIT Press, 163p.

This book can be found on Amazon

Intro: The ‘traditional’ Tulipmania

The 1636-7 Tulipmania is generally described as a frenzy that led a number of Dutch investors to liquidate other assets to participate in a market for rare flowers whose price was abnormally pushed up by an influx of foreign capital. The investors suddenly realized the irrationality of their position and started selling their bulb whose price collapsed over night (p.27).

Hoppit J. (1986) Financial crises in 18th-century England

Hoppit, Julian (1986) “Financial Crises in Eighteenth-Century England”, The Economic History Review, 39/1, 39-58.

Introduction

“Because the financial system in the 18th century was evolving and becoming more sophisticated, […] the nature of crises developed and changed”. Historians have long disagreed on the very definition of what constituted a crisis in early modern England (p.40). The author defines a crisis as a moment when expectations change leading owners of wealth to abandon a type of asset for another leading to the falls in prices of the former. The more widely available the newly-sought asset is, the lesser the crisis.

Church R.(2008) Historical Selling Transformations in Britain and the United States and the World’s Current Economic Crisis

…for a salesman, there is no rock bottom in life……he’s a man out there in the blue riding on a smile and a shoeshine…..
Willy Loman in Arthur Miller’s, Death of a salesman (1948).

The article written by Roy Church entitled “Salesmen and the transformation of selling in Britain and the US in the nineteenth and early twentieth centuries” (Economic History Review, 61, 3 (2008), pp. 695-725) unintentionally provides a partial explanation for the world economic problems of today. In this paper, my focus will be restricted to the US and Britain.