Saturday, November 1, 2008
What caused the great financial scandals of the 1720s?
We all know of the Bubbles in England and France, and how it started out 1714-15. This great Bubble scandal started out as a few companies established by Scottish man named John Law. He personally financed the South Sea Company for England, and the Mississippi Company for France. While they created the monopoly over all other companies, he also established the national Bank of France and assumed all government debt through it. Many people invested in these seemingly profitable companies, and they were doing good for a few years. The companies were buying selling and trading the stock with good margins that kept increasing. Then John Law's credit and financing failed with such collassal stock prices, and while he fled, people lost entire life savings in failed companies. After this incident, the French company and all French assests in the company such as the Orleans company which was absorbed by it, and the French Bank were ruined and the country never recovered their credit. The French people refused to help the government and for another century the French people remained wary of government credit. In England however, the scandal played out and was fixed, Under teh direction of Robert Walpole the English people accepted the responsibility of bailing the gvernment out and several large independent corporations gave loans and bought bonds from the government and recovered and saved the bank of England and the credit of the government.