The South Sea Bubble
Having lived through the Internet Bubble, I read this particular case with interest. Again, we have a story about greed but in this case it isn’t inside information but mass greed. The South Sea Bubble deals with a scheme to pay off debt by granting a monopoly to a single company working the import business of the South Sea. Most bubble start this way, some company or another will claim to have sole possession of a new market or service. The public, by sheer determination to ignore the impossibility in the service of greed, will begin to invest in this bubble. Shares rise at astronomical rates thus fueling more insane growth. Then, at some point, investors begin to pull out taking their cash with them. The market falls, perhaps slowly at first, but then with increasing speed, cutting the legs out from underneath the poor fools who stayed in too long.
Obviously, I’m simplifying here, but those are the basic mechanics. Mackay has a nice list of bubbles of the day. Reading through them one is sure to find that nearly all of them are in existence today. It seems to me that more than a fair number of these bubbles deal with mining or other natural resources, things people generally view as scarce commodities but find that the worm turns quickly when a new source is found (or the original source was overstated, overvalued, or both).
I’m not sure though that there is enough tension in a story like this to keep a reader’s attention. They might be willing to read about real-life losses, but developing a fictional view on a crash is likely to inspire more depression than concern. However, a fanatic struggle to keep a bubble afloat might produce more than its fair share of murders and mayhem.
