September 09, 2007

Since the Late Great Housing Bubble will be the biggest mania of all time, it's time to read up on the South Sea Bubble for a chuckle

Unfortunately the people who got screwed the most during the Great Housing Bubble were the ones who had no knowledge of historic manias and bubbles. "It's a new paradigm!". "If we don't buy now we'll be priced out forever!". "Everyone's getting rich!". And on and on.

Well, we all know now how that turned out.

Here's a primer on another classic bubble - the South Sea Bubble of 1720. Man, we still laugh and laugh about that one. Love the tulips too. But now, before our own eyes, we've seen the biggest financial bubble and mania in the history of humanity.

Here's to you world. You did it. You are officially more financially stupid and greedy than any other generation that ever came before you!

The South Sea Company (1711 – c1850s) was an English company granted a monopoly to trade with South America under a treaty with Spain. Following the South Sea Company Act of 1720, it became better known for the "South Sea Bubble", an economic bubble that occurred through overheated speculation in the company shares. The stock price collapsed after reaching a peak in September 1720.


hendry said...

The massive number of 2/28's resetting this fall will take us over the cliff. Lenders will have so many REO's on their hands that next spring will be like shooting fish in a barrel for the first wave of bargain hunters. I think you will see 20% price cuts by next summer. Then it will be flat until the next wave of foreclosures hits and and the second round of bargain hunters come in for another 20% discount. from there it will be pretty flat for years before a housing starts to keep up with inflation. The next RE bubble starts in 20 years when everyone forgets about this one.

Bubble areas will see up to 60% price cuts on auctions and REO's.

Less bubble areas will see up to 30% price cuts.

Non-bubble areas will see 10% cuts due to collateral damage.

Bystander said...

Check out the deck of cards printed in the 1720s that carry cartoons from the time. These could have been written yesterday.

The queen of spades reads:
A certain director whose fortune was to lose,
Pulled a ----- director by the nose,
Sir, quoth honor, thus I lug your snout,
Because you made me buy when you sold out.

Two of spades reads:
A set of jobbers rather knaves than fools,
meet and contrive to cheat their principal,
Says one, in every trade there's some deceit,
To bite the biter is not fraud but wit.

Also, look at:

Anonymous said...

For a great read on the subject, see

Balen, M., The Secret history of the South Sea Bubble, Fourth Estate, London, 2002

And they say that Man is a learning animal.


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