Speculative bubbles before "regulation"?

[MrNick]

Are you seriously suggesting that there were no speculative bubbles before market regulation? ROFL

http://en.wikipedia.org/wiki/Tulip_mania
http://en.wikipedia.org/wiki/The_South_Sea_Company
http://en.wikipedia.org/wiki/Mississippi_Company

Someone just made a good point to me on another forums. I'm trying to research these bubbles before "regulation", to see if there was truly no regulation. Also I'm trying to find out if their was a central bank involved or credit expansion.

 

[krazy kaju]

Lots and lots of credit expansion.

Let me teach you how to use google to your advantage. If you want an entire phrase searched, you have to put it in quotations. For example, search "tulip mania" in order to find results with the full phrase "tulip mania." You can enter a + between phrases in order to search websites that contain more than one phrase. For example, search "tulip mania" + "credit expansion" to find results that have both tulip mania and credit expansion in their text. Lastly, to search a site, you simply have to type in site:[enter website here]. So, in order to find accounts of credit expansion that created tulip mania, go to google and search this:

"tulip mania" + "credit expansion" site:mises.org

You will search only mises.org and only pages on mises.org that contain the phrases "credit expansion" and "tulip mania."

 

[Brian4Liberty]

Someone just made a good point to me on another forums. I'm trying to research these bubbles before "regulation", to see if there was truly no regulation. Also I'm trying to find out if their was a central bank involved or credit expansion.

Regulation and speculation are as old as humanity. They usually coincide, as they are both signs of a certain level of economic "civilization".

 

[MrNick]

Lots and lots of credit expansion.

Let me teach you how to use google to your advantage. If you want an entire phrase searched, you have to put it in quotations. For example, search "tulip mania" in order to find results with the full phrase "tulip mania." You can enter a + between phrases in order to search websites that contain more than one phrase. For example, search "tulip mania" + "credit expansion" to find results that have both tulip mania and credit expansion in their text. Lastly, to search a site, you simply have to type in site:[enter website here]. So, in order to find accounts of credit expansion that created tulip mania, go to google and search this:

"tulip mania" + "credit expansion" site:mises.org

You will search only mises.org and only pages on mises.org that contain the phrases "credit expansion" and "tulip mania."

Thank you, I didn't know how to do that.

 

[revolutionary8]

Someone just made a good point to me on another forums. I'm trying to research these bubbles before "regulation", to see if there was truly no regulation. Also I'm trying to find out if their was a central bank involved or credit expansion.

From your links:

A factor in the history of French trade, the Mississippi Company was a chartered company first established in 1684. It was founded at the request of René-Robert Cavelier, Sieur de La Salle.

La Salle was born on November 21, 1643, in Rouen, Normandy,[1] and was briefly a member of the Jesuit religious order, taking his vows in 1660. On March 27, 1667, he was released from the Society of Jesus after citing "moral weaknesses" in his request.[2

Addt'l info:

The first permanent settlement was made in Louisiana, after the discovery of La Salle became known in France. The Jesuit priests established missions at various points on the Mississippi, and traders began to know the region.

....

To secure to himself the business advantages which would accrue from success in this proposed undertaking, he went to France in the summer of 1677, and obtained an enlargement of his trade monopoly to the extreme limits of the territory as he might by discovery add to the domain of France, with other favorable grants, and returned accompanied by Tonty, a party of mechanics, and others whom he had interested in the voyage. It is not within the scope of this history to detail his labors and disappointments before his efforts were crowned with success. After three unsuccessful attempts, and as many returns to Canada, on February 6, 1682, he embarked on the Illinois River, in three barges, with his Lieutenants, Tonty and Dantray, and Father Zenobias Membre as chaplain of the expedition.

...

In August 1717, M. Crozat retroceded this grant and privilege to the crown, and on the 23rd of the same month letters patent were granted in Paris by the Council of the Regency (Louis XV being still in his minority) investing "The Company of the West" with all the privileges previously granted to M. Crozat, to continue for a period of twenty-five years, and in addition stipulating that the mines opened or discovered should belong to the company incommutably, no rents or proceeds being required; the rights to sell land being also granted, at whatever the company should fix, and, in addition, the grant provided that if, at the expiration of twenty-five years, the King should not see proper to continue the privilege of the Company of exclusive commerce, all the islands, mines and mining grounds which the Company of the West should have inhabited, worked, improved or disposed of on rent, should remain to it in simple fee, on the sole condition that the company should sell such lands only to the subjects of France

http://www.kancoll.org/books/cutler/deschist/earlyexp-p2.html

Tulip Mania:

Clusius and friends: Cultures of exchange in
the circles of European naturalists
http://www.knaw.nl/publicaties/pdf/20061066_Clusius_02.pdf

 

[tmosley]

In the absence of regulation and bailouts, those who foolishly invest in the last stages of speculative mania are bankrupted, and the economy by an large is not affected. Regulations, such as deposit insurance, encourage risky behavior well in excess of what would be considered prudent, and lead to systemic collapses on a far greater scale than is possible in a free market.

For an example, see the Depression of 1920, which had worse indicators initially than the Great Depression, but due to a lack of intervention, it was over very quickly.

 

[nandnor]

http://mises.org/Books/bubbles.pdf

All you need to know

 

[krazy kaju]

Thank you, I didn't know how to do that.

No problem. Now, to answer your question specifically:

The Mississippi Company

• It was a state-granted monopoly
• It came to own the Banque Generale, which was effectively the central bank of France.
• It was used by the French government to essentially monetize its enormous debt.
• It issued paper money.

Tulip Mania

• The Bank of Amsterdam practiced free coinage. Free coinage is when anyone who wants to get some gold or silver coined into money may do so very easily. Many went to the Bank of Amsterdam to coin their precious metals and then left their deposits there. This effectively meant that most new money created was created in the form of credit (hint: credit expansion).
• The Bank of Amsterdam was private, but it had special state grants and acted effectively as the central bank of the Netherlands.

South Sea Bubble

• The South Sea Company had a British-granted monopoly over trade in Spain's South American colonies.
• The South Sea Company was used a vehicle to repay British national debt.
• The South Sea Company effectively issued new stock in order to buy more British government debt.
• The South Sea Company received a subsidy of credit from the Parliament and the King in order to buy more government debt.