Why are the events surrounding the South Sea Company often described Essay

Why are the events surrounding the South Sea Company often described as a financial bubble Identify at least one other famous bubble and discuss what feat - Essay Example With desires to get rich quickly, ambitious investors hurriedly and haphazardly invested on stocks of a particular company without first assessing its real situation. The result is the vital drop not only of a single firm but also of the entire national economy. This is the predicament that the South Sea Company in England in the 18th century experienced. Considered as one of the worst financial disasters in a capitalistic society, the South Sea Bubble is a proof that avarice can lead a single person, firm or even an entire nation’s economy to collapse. In those days, the British Empire reigned over the entire world. It was a time of affluence and prosperity for British people enabling them to invest. The exuberance of investors to gain more out of the company’s monopoly of the South Seas compelled the company issued more stocks that were also sold out by greedy investors. The lavish and generously enamored company office ostentatiously displayed the opulence and success of Britain on its industrial revolution. With the notion spread by speculators that this company â€Å"could never fail,† its share price skyrocketed tenfold from its original value, making its investors rich overnight. It was at this point that the reality set in, bursting the bubble of the company’s overpriced share prices. South Sea Company’s heyday ended when its management realised that they failed to manage and operate the company properly. They realized that the company was not generating profit at all. The funds came basically from selling stocks and not from actual commerce. News that the company was actually profitless instigated panic stocks selling. Useless stocks were sold frantically leading to a stock market crash. Many British people lost their fortune because of this. From 950 pounds per 100 pound par value it slid down to 290 pounds in less than 4 months. The invention of the personal computer