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외고2018-웹용.qxp_Layout 1 2018. 6. 23. 오후 3:06 페이지 75

Incheon
Zenith Foreign
the 8th Language
High School
Back in the late 1500s, Tulips started to be fervently loved Company which was later called “the Compagnie des
by the Dutch. They highly prized it upon its introduction to Indes”. The Mississippi Company held exclusive privileges
Europe and even classified tulips in terms of their varieties to develop France’s Mississippi Territory in North America.

and coloring, assigning values to various types of tulips. Dur- On top of that, Law’s company then broadened its influence

ing the 17th centuries, the bulbs were primarily of interest to on India and China, and was also granted monopoly over
the affluent, but by the mid-1630s the fad caught on with France’s entire colonial trade. Law also took over the col-
middle-class and poorer families. They increased demand lection of French taxes and the minting of money, controlling
and caused the price of bulbs to soar at an exponential rate. both the country’s foreign trades and its finances.
In the years between 1636 and 1637, the market reached Investors have found out that the Mississippi territory was
its peak after the bulbs had been planted to bloom the fol- rich in underground resources such as gold and silver. Given
lowing spring. People mortgaged their homes and industries the immense potential profits from the Mississippi territory
to buy the bulbs for future resale at much higher prices. development, public sharply demanded for shares, which
According to Charles Mackay’s “Extraordinary Popular in turn bid up to astronomical heights in a short period; send-
Delusions and the Madness of Crowds” (1841) which in- ing the price from 500 livres to 18,000. By 1719 Law had is-
cludes the history of early financial bubbles, enumerated a sued approximately 625,000 stock shares, and merged the
list of objects and their prices to exchange for one single two companies of Banque Generale and the Company des
bulb, especially one of the rare varieties called the Viceroy, Indes.
as the followings: two lasts of wheat (448 florins) / four lasts Law hoped to retire the vast public debt accumulated during
of rye (558 florins) / four fat oxen (480 florins) / eight fat swine the later year of Louis XIV’s reign by selling his company’s
(240 florins) / twelve fat sheep (120 florins) / two Hogsheads shares to the public in exchange for state-issued public se-
of wine (70 florins) / four tons of beer (32 florins) / two tons curities, which consequently also rose sharply in value. The
of butter (192 florins) / one thousands lbs. of cheese (120 French government took advantage of this situation by print-
florins) / a complete bed (100 florins) / a suit of clothes (80 ing increased amounts of notes *paper money, which was
florins) / a silver drinking-cup (60 florins) accepted by the state’s creditor because it could be used to
Unfortunately, the fad among tulips turned out to be in vain buy more shares of the Campagnie. This situation continued
when the tulip bulbs became so pricey that many people until the excessive issue of paper money stimulated gallop-
decided to sell them back to lock in their money. Soon, in ing inflation, and both the paper money and the billets d'etat
1637, sellers flooded the market and plummeted the value (security) began to lose their value.
of tulip bulbs. Speculators who were involved during this Meanwhile the expected profits from the company’s colonial
mania phase had to face the fact that they had invested their ventures were slow to materialize, and the intricate linking
whole fortune in a worthless item. The Dutch government of the company’s stock with the state’s finances ended in
tried to minimize financial losses of the speculators but made complete calamity in 1720, when the value of the shares
the situation even worse. Consequently, the Dutch under- plummeted, causing a general stock market crash in France
went a severe economic crisis and became wary of such and neighboring countries. The enormous debts of Law’s
investments for many years. company and bank were soon consolidated and taken over
by the state, which raised taxes in order to retire it. As a re-
2. Compagnie Du Mississippi (Early 18 C.) sult, the bubble has collapsed the shares, taking down
Mississippi Bubble took place in the 18th century of France, France’s stock market and public finances at the same time.
developing in parallel with the South Sea Bubble in Britain.
It has triggered a speculative frenzy and ended in a serious 3. The bull market of the roaring 20s from 1924-1929
financial collapse. It was engineered by John Law, a Back in the 1920s, U.S. economic fundamentalists believed
renowned economic theorist, as well as one of the French the raging U.S. stock markets were a decisive evidence of
government’s primary financial advisors. In 1716, Law used a “new era” in a good way. Proponents of this idea pointed
his power to establish the Banque Generale, a bank with to a concrete evidence, the establishment of the Federal
the authority to issue paper money, as well as the Mississippi

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