South Sea Bubble
Our recent economic turmoil has put me in mind of prior economic woes in history. One of the worst occurences was the South Sea Bubble of 1720 in England. It has many disturbing analogies to what is happening today. The South Sea Company was founded in 1711 and was granted exclusive trading rights in Spanish South America. Ostensibly a trading company its real main purpose was the funding of the English government debt. The company's stock price took off in a trading frenzy. The price went in the course of one year from 100 pounds to 1,000 pounds and people from all walks of life were frantic to buy the shares. In August of 1720 the price started to fall which created bankruptcies and increased short selling-selling borrowed shares in the hope of buying them back at a profit if the price fell. There were bank failures and thousands of individuals were ruined and there was a parliamentary investigation into government fraud and corruption in the Cabinet. Among the individuals who lost a fortune was Sir Isaac Newton who lost 20,000 pounds which was an enormous sum for that time.