The South Sea & Mississippi Bubbles

1720 CE — Western Europe, Britain & France

Today: London and Paris

In London and Paris almost simultaneously, elaborate schemes to convert crushing government debt into company stock ignited twin speculative frenzies — and both burst within months, ruining thousands, including some of the era's cleverest people. In France, the collapse of John Law's paper-money scheme set back central banking for a century. It was mania fused with debt and freshly printed money: a 300-year-old template for the modern financial crisis.

Worth knowing: The physicist Isaac Newton lost a fortune in the South Sea Bubble and reportedly sighed that he 'could calculate the motions of the heavenly bodies, but not the madness of people.'

Pattern: Mania & panic — A speculative belief detaches asset prices from fundamentals; the belief breaks and prices collapse.

Entry 173 of 240 in Precedent, a walk through the whole human story in order.