Isaac Newton's Time To Lost His Money In The South Sea Bubble Crisis

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South sea bubble
After Isaac Newton lost his money in the south sea bubble Crisis, he quoted, “"I can calculate the motions of heavenly bodies, but not the madness of people." The two crisis were important events in the history of Economics, which did only leave economists and investors with a lesson but also affected a common man. Bubbles are more far reaching than the two pages of the Economics textbook as they affect the lives of everyone directly or indirectly involved. That said, Bubbles are evidently an outcome of ‘Economic’ speculation, but also of sophisticated institutions, corruption, political greed, irrationality, unleashed capitalism; like every other bubble recorded in the history these two did too.
THE BACKGROUND
The setting in which both the crisis occurred greatly differed, mainly because of the time in which they occurred. The 1720 bubble happened before the industrial revolution, so the political institutions were not as established as they were in 1929. Certainly, the
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John blunt decided to loan money to buy south sea shares but they were in debt and making insignificant profits it deteriorated the condition of the company. Paradoxically, as the share prices went up, the initial investors sold the stock they had bought at a low price at the “current” price.
2. Blunt increased the dividend share of shareholders and a further increase of this share in the following years. Unrealistic to the population, because the company would have to make gigantic profits.
3. The bubble act- ironically raised the prices of the stocks.(The South Sea Bubble: An Economic History of its Origins and Consequences. By Helen Paul)
4. Reserve too low and share price too high.

As for Mississippi the over minting of the currency to increase the amount of money, which led to inflation, in circulation to buy more shares was an important factor. The value of shares and the currency went down and the profits of the company were slow to materialize.

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