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Promenent Moments of Financial Speculation Explained in Devil that the Hindmost: A History of Financial Speculation”

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Edward Chancellor is an investment strategist, amongst many other things after graduation from Trinity College. While he currently is a columnist for Financial Times, Chancellor has also written many books, one of them being “Devil that the Hindmost: A History of Financial Speculation”. This book is an interesting look at events where economic speculation is in the forefront throughout history. The book starts out with one of the first accounts of speculative mania, the tulopomania during the Dutch Golden Age. Chancellor has the interesting idea that the impulses have in fact shaped speculations, and they are at odds with the orthodox theory of markets who act in an efficient manner. Chancellor goes on to the topics of emerging markets,…show more content…
After the Mississippi Companies success in France, British investors began pumping money into the South Sea Company. The others companies were started because of the investing craze, on the coattails of the South Sea Company, began taking in a lot of money. The demand for investments caused many IPOs to occur out of nowhere and form companies that did nothing. In early 1720, the South Sea Company stock was trading at around £128 a share. However, the exact details of the South Sea Company’s scheme were not simple. In the novel, it said:
The higher the South Sea Share price, the fewer shares were exchanged for annuities and the greater the profit to be divided between the company and the government. The higher the value of the South Sea shares, the greater the market value of the shares received by the annuitants upon conversion. All parties-annuitants, governments, existing and prospective shareholders-had an interest in an inflated share price. (63)
So in order for everyone involved to make money and the secondary goal of debt consolation to be taken care of, the directors of the company spread rumors of success and riches of the South Sea Company. As early as February, the price for stock rose to £187. This only helped to further people’s interest in the company and in March, the government endorsed a deal for the company to take on more of the national debt for more shares of South Sea. For this deal to be
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