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