Stock Market Bubble

1950 Words 8 Pages
The shareholders were eagerly awaiting the arrival of ships loaded with gold, silver, and other valuable products from the Spanish colonies, which would multiply the return on their investment in the South Sea Company. The problem was that the boats and wealth had only been in the minds of the promoters who, counting on the monopoly to negotiate with the Spanish colonies, were dedicated to spreading rumors about the immense wealth that were waiting for their shareholders in the new world. To expand their business to people who did not have enough money to buy the shares in cash, the company's directors entered into agreements with banks to finance the acquisition of the shares with payment facilities and a commitment to return a larger annuity …show more content…
Consequences of the South Sea crisis:
The crisis left thousands of broken families and bankrupt banks, not only in England but also across Europe.
History repeats itself once again:
The stock market bubble (1929)
Somewhere in the United States (in the
…show more content…
Consequently, the norm was excessive incentive with low interest rate mortgage loans and extensive facilities. In some cases, they went so far as to sell real estate financing up to 100% of the price (without down payment). People began buying houses and apartments not only to live in, but also to do business with them, either by selling or renting them. The builders were fascinated: with the credit facilities offered by the banks the demand was overwhelming, so they sold their projects only on paper, with the promise of future delivery. The demand was so high that the buyers themselves resold the purchased assets before they were built, making fabulous profits. Everyone was happy: buyers, builders and bankers, until the market saturated and prices began to fall. Consequently, from then on, history repeated itself: bankruptcies, unemployment, tears and

Related Documents