Financial story（one）

Crazy Tulips

The first famous speculative mania in history took place in 17th century Holland. It wasn't stocks, real estate, or Dutch paintings, but a flower, the tulip. When the first carload of tulips arrived in Antwerp from Constantinople, the broad-leaved perennial bulbous herb was considered important for "spreading knowledge and viewing art". The appreciation and cultivation of tulips soon became fashionable and became speculative. The price of rare varieties rose endlessly, and the more exotic the bulbs, the more valuable they became.

Nobles, townspeople, farmers, merchants, seamen, maids, and even old chimney sweepers and tailors were all caught up in the speculative craze. Everyone thought that the mania for tulips would last forever and that speculators from all over the world would come to Holland to buy tulips at whatever price the Dutch offered.

Those who at first thought prices would not rise were frustrated when their relatives and friends returned with their bags full of money. Few Dutch people can resist the temptation. People would trade furniture, jewelry, land and other things for these little tulip bulbs because they were worth more. The farce continued until early 1637, when prices finally rose to incredible levels and began to fall sharply: tulip bulb prices, which had risen twentyfold in January 1637, fell more than twentyfold in February. Government bail-outs didn't help either, as flower prices plunged off a cliff and ended up costing more than an ordinary onion. Ninety-nine percent of the population escaped, and the Dutch economy sank into a prolonged depression.

Spring came, and tulips were still in full bloom.

Mississippi con

In 1716, when France was in economic chaos, heavily in debt and on the verge of financial collapse, from Scotland came a "god of wealth" and "financial wizard" -- John. Mr Lowe. The French royal family was so impressed with his plan to supplement metal money with paper money that they agreed to give him some capital to set up a bank called Lloyd's. Notes issued by the bank to pay national debt can be purchased and exchanged at will under special privileges, and their value remains the same after issuance. This made lowe's notes considered a better store of value than gold and silver, which were often devalued by government intervention. In 1717 Mr. Law acquired monopoly development privileges in the Mississippi River valley and Louisiana in North America because paper money was to be backed by hard currency. He claimed it was "full of gold" and sold the Mississippi company's ever-increasing stock offerings.

However, the money raised from the sale of the shares was not used to mine "gold everywhere", but was used by the royal family to pay debts.

The public was seduced by Mississippi's promise of fat profits, and people queued around the clock, sometimes for weeks. The price of the company's stock skyrocketed, sometimes rising 20 percent in a matter of hours. The government bond money flowed into the stock market, and soaring share prices spurred the issuance of new shares. As the snowflakes grew, France was in a frenzy to get rich, and the economy seemed to be booming.

In early 1720, prince Conti, in a fit of rage after failing to buy new shares at a satisfactory price, took three wagons full of notes to Lowe's bank to exchange them for coins. More people began to think that gold might be better than paper money and joined the exchange. Because banks lacked enough coins, Lowe's notes were declared inconvertible during a run on the bank, and Mississippi company shares plummeted in panic selling. Countless people lost their homes and were left destitute.

Foam on the South Sea

1711 the South Sea Company was founded by Earl Harry of Oxford, England. In return for taking on British government debt, the company won a trading monopoly in the South China Sea and gold and silver mining rights in South America, in addition to the government's "safe interest rate" of 6 per cent. But this grand plan seems to have wilfully ignored the important fact that Spain, then still dominant at sea, claimed a monopoly over these areas. In the frenzied atmosphere of people eager to get rich, the fact that the South Sea Company's monopoly trade was a sham was ignored. The price of the company's shares rose from 128 pounds in January 1720 to 330 pounds in March, 890 pounds in June, and 1,000 pounds in July. Never have so many people become so rich in so short a time! Inspired by the "South Sea Effect," companies have come up with "new inventions" that they claim will bring in a lot of money, such as perpetual motion machines, new types of soap, extracting sunlight from cucumbers and "a project with huge advantages that no one can yet explain"...... All stocks are bought, all stocks are worth hundreds of times more.

Eventually, nanhai's senior management felt the gap between the company's stock price and operating performance was so wide that they decided to sell all of the company's shares short.

Share prices fell as soon as the news was leaked. Before long, the market was in a panic as share prices plunged. Efforts by government officials to restore confidence in investment have also failed. Public confidence in the markets has completely and irretrievably collapsed. The stock of countless companies has become a pile of paper.

Among the big losers from the "South Sea bubble" crisis was the famously gifted scientist Isaac Newton. "I can calculate the motions of the heavenly bodies," he lamented afterwards, "but not the madness of crowds."

Lessons for America

Because of the greed and fear that freedom and prosperity led to, Americans presided over two of the most spectacular speculative booms and the most disastrous crashes in the history of civilization.

In the 1920s, there was a lot of confidence in the American economy. It is this optimism that has fuelled a speculative boom in real estate and stocks across the country. One of the biggest centres of the speculative frenzy was Florida. The climate is good and the population is growing so fast that housing is in short supply and land prices are skyrocketing. Investment speculators from all over the country are coming in search of good returns. Easy bank lending conditions added fuel to the fire, and house prices could double in a matter of weeks. People are convinced that there is absolutely no possibility of a fall in the real estate market. Hundreds of years later, the argument is almost the same as when the Dutch were mad about tulips.

Like all speculative manias, this one inevitably came to an end. By 1926, the market was oversupplied and real estate prices were falling, forcing speculators to cut out and triggering a market crash.

In 1928, the speculative battleground moved from Florida to Manhattan. This time, Wall Street is singing the lead. Speculation in the stock market has almost become a national hobby, millions of people have no day job, stock trading has become the center of people's life. Big money, stockbrokers, consultancies and public companies work together to manipulate share prices and lure the public into fraud. On October 28, 1929, the Famous "Black Tuesday" broke out in The New York stock market. The stock index recorded a 12.82% drop on that day, opening the prelude to the great economic crisis.

"Share prices do not reflect their true value and should go higher," said the world's leading economists and professors. The stock market responded by falling. President Hoover stood up and said, "The country's economic fundamentals are sound and prosperous." Stocks still responded with declines.

From September 1929 to January 1933, The Dow. The average price of 30 industrial stocks fell 82.8% to $62.70 from $364.90. During the crisis, thousands of banks failed, tens of thousands of businesses closed their doors, and billions of dollars' worth of stocks and millions of people's dreams went up in smoke.