That was the answer to everything 200 years ago.
So says Charles Mackay in “Extraordinary Popular Delusions and the Madness of Crowds.” Mackay, whose excellent book was published in 1841, reviewed a litany of human idiocies – most of which are still with us today.
In his chapter, “Popular Follies of Great Cities,” Mackay wondered why it is that nonsensical sayings spring suddenly to everyone’s lips, remain there for months, then disappear until the next idiocy appears.
“Quoz” was an all-purpose term to express disbelief, challenge, ridicule, boredom, or just about anything, in London, in the early 1800s. It was replaced, in this order, by “What a shocking bad hat!”, “Walker!”, “There he goes with his eye out!”, “Has your mother sold her mangle?” and then the fabulously popular, “Flare up,” which could be used for almost anything.
Other follies Mackey decried, which remain with us, include “Popular Admiration of Great Thieves,” veneration of religious relics, fortune telling, haunted houses, and the “Influence of Politics and Religion on the Hair and Beard.”
In this sprightly chapter, Mackay informs us that for hundreds of years the Catholic Church threatened eternal hellfire to anyone, including kings and nobles, if they wore beards and long hair. (Saint Paul wrote that “long hair was a shame unto man.”)
Hell didn’t scare folks into getting haircuts, but when Peter the Great ordered that beards be taxed, beards disappeared just like that all over Russia.
Which shows that even in 1705, despite all the yammering about God, people worry more about taxes than about the eternal flames of hell. Which should make Peter the Great, rather than Abraham Lincoln, the Republican Party’s first hero.
Even more interesting to us today are Mackay’s first two chapters, on the world’s first great credit disasters, the Mississippi stock scheme in France, and England’s South Sea Bubble. Both blew up in 1720.
Both schemes were intended to bail the governments out of debt through easy credit. Both made fortunes for a few people who got out in time, before casting thousands more into debt and ruination.
Both left the government to pay for the disaster it had allowed private operators to wreak.
Both credit disasters were caused by frenzied speculation on shares in companies whose assets were questionable or nonexistent: the “gold mines of New Orleans” in the Mississippi scheme, and revenue from Spanish gold in South America in the South Sea Bubble.
People bought shares like crazy though there were no gold mines in New Orleans, and the King of Spain had said that the South Sea Company would never be allowed to operate in South America.
In England, the South Sea Bubble gave birth to more than 100 other bubbles, which were called just that – bubbles – even as people threw away their money on them. Parliament barred more than 100 other bubbles by name – also called joint stock companies – when the bubble burst.
Among the bubbles barred by “the Lords Justices in Council” were a bubble “for a wheel of perpetual motion” (capital 1 million pounds); a company “for improving of gardens;” a company “for lending money on stock” (which, no doubt, was used to buy more stock); and one “for improving malt liquors” (at least that one was useful).
Perhaps the boldest invention, though, was history’s first hedge fund: “A company for carrying on an undertaking of great advantage, but nobody to know what it is.”
That’s a hedge fund. The fellow who devised this one offered 5,000 shares, at 100 pounds apiece, each share guaranteed to produce 100 pounds income per year. For a deposit of 2 pounds, an investor bought the right to purchase one magical share, once he scraped up 98 pounds more.
“How this immense profit was to be obtained, he did not condescend to inform them at that time,” Mackay wrote. Nonetheless, on Day One of his Initial Public Offering, the dude took deposits on 1,000 shares.
“He was philosopher enough to be contented with his venture, and set off the same evening for the Continent,” Mackay wrote. “He was never heard of again.”
Pardon me if I list one more bubble: Puckle’s Machine Company, which proposed to make square cannonballs and bullets, “making a total revolution in the art of war.”
So- defense fraud, hedge funds, religious phonies, credit scams – none of it’s new.
All that’s changed is that today, the idiots – that’s us – let the thieves get off scot-free.
After the Mississippi bubble burst, France had the good sense to chop off a few malefactors’ heads. It’s a damn shame that Angelo Mozilo and his cronies at Countrywide Financial don’t have to worry about that.