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OF BUBBLES & BISCUITS : 10 Bizarre Moments in Financial History

In the last 2,000 years, commodity shortages, financial speculation, wars, famines, and outright manias have created some pretty strange economic behaviour throughout the world. Be it the doom of cultures, or the advent of wars, one thing has never changed, and that is the role of finance and the absolute importance of being ahead of the game at all times, which has culminated into some of the most bizarre and surreal moments in financial and economic history

1. Back to Basics- Bartering in the 5th Century.

The fall of the Roman Empire in the 5th Century AD was perhaps the most significant event in the history of later antiquity which resulted in the commencement of the mediaeval period. Scholars who have already earmarked this period, attribute a plethora of reasons to this great downfall of an empire that once navigated the world’s moral and economic compass. These causes are still debatable, but the two most important results are the Christianisation of the empire and the complete disappearance of money for 4 centuries. Indeed, part of the collapse was the disappearance of Roman coinage and as the empire fell incredibly hard, so did its financial system. Nowhere was this more evident than in England, where, according to archeological evidence, money basically disappeared, driving the British isles straight back to a barter economy. Coinage only came back in the 9th century when the English were forced to pay protection money (Danegeld) to the Vikings to stop the constant pillaging and the concept of money was reinvigorated

2. Silken Oaths - Mischief in the Orient

The Parthians were an Ancient Iranian dynasty that succeeded the mighty Achaemenids and managed to wipe out the majority of the Hellenic influence from central and west Asia. Their empire lasted extremely long, 400 years, which was tremendous and arduous considering the trend at that point of time. The Romans, who have been talked about herein previously, were their nemesis who constantly tried to come into contact with the Han Chinese to bolster their ties which directly threatened the very existence of the Persians as there was no other route to reach mainland at that time but the Silk Route which traversed through the heart of the Persian mainland and especially the capital city of Susa. The only possible way was to indirectly establish contacts with the reproachable and reclusive Chinese through the exchange of embassies and emissaries. To counter this indirect influence the Parthians are known to have told the Chinese many distorted accounts of the Roman Empire, but one is particularly clever: they took coarse Chinese silk brocades to Roman Syria, where weavers would unravel the brocade and re-weave it into gauze that was finer than Chinese weavers could produce. The Parthians then took this cloth and sold it back to the Chinese—but instead of revealing how it was produced, they apparently told the Chinese that the Romans had native silkworms which produced better raw silk than Chinese silkworms. So the Chinese, while actually having a worldwide monopoly on silk production, were forced to lower their prices to compete with the superior silk they thought the Romans were producing independently which several years later precipitated an economic downturn , possibly the worst in early Chinese history that led to the collapse of the Han empire.

3. Mississippi Burning

In 1717, a Scottish financier and investor named John Law assumed command of a French company known as the Mississippi Company. He transformed the business into the primary economic driver of the French territories around the globe within only a few short years. The company's share price increased from roughly 500 livres in 1719 to 10,000 livres in 1720. But just a year later, in a turn of events reminiscent of Enron, the stock price plummeted, Law left France, and the French government—the company's largest shareholder—was compelled to cancel a sizable percentage of its debt commitments, ruining lenders all over the world. The incident is referred to by economists as the "Mississippi Bubble." Law ultimately defected to the British, who were back then at loggerheads with the French, carving a venerable legacy for himself as per British standards which includes a lesson in modern day corporate law textbooks about stock etiquette .

4. Bond like the French

For nearly 285 years, the French government has carried an unusual debt on its balance sheet: an annuity owed to the family of an 18th century lawyer. The debt dates to 1738, when a man named Claude Linotte acted as a financial advisor to the French Duke of Bouillon and his children. As compensation for his services, Linotte persuaded the Duke to provide him with a perpetual life annuity of 1,000 French livres per year, which was to remain active until “the date of death of the last survivor among the descendants of Mr. and Mrs. Linotte.” Linotte’s family line proved resilient, and his annuity later survived a turbulent few centuries that included the French Revolution, the rise and fall of Napoleon and two World Wars. According to economist François Velde, who first discovered the Linotte story in 2009, the French government even tried to buy out the annuity in the early 20th century, only to have their offers rejected by Linotte’s descendants. While the pension is still active today, several centuries of inflation and currency changes have taken their toll. As of 2009, its value had dwindled to a measly $1.25 per year. The family, too , has decided not to adopt measures or take steps to prove their descent to the French government . Talk about relationships and bonds !!

5. Ageing like fine wine - Who ended the cold war ?

People always get hung up on debating whether Mikhail Gorbachev or Ronald Reagan ended the Cold War but the role played by Saudi Arabia in the 80s was the final nail in the coffin for the Russians. To punish Russia (for a variety of reasons), Saudi Arabia flooded the world's oil market in the mid-80s, tanking the price of oil. Russia, flying high on 1970s oil shock prices, was deprived of a key source of hard currency revenue (which in turn led to them squeezing the Bloc states harder) to the tune of $20 Billion a year. Russia had its own poor decision making to blame as well. Gorbachev, the last premier of the Soviet Union, decided, rightly, that Russians were drinking too much alcohol and this was contributing to serious economic problems like loss of productivity and health concerns. He created a scheme that significantly reduced alcohol consumption over a short period, but in doing so deprived the state a significant amount of tax revenue, leading to a budget deficit and an overall economic slowdown. The enactment of other slew of measures (known as Perestroika) , to make the economy more market oriented, turned out to be counterproductive given the Saudi fiasco . The Union ultimately collapsed in 1991, not even a couple of years later.

6. Dreams of Avarice, Nightmares of Charity

Jay Gould intentionally wrecked the US gold market, causing the collapse known as "Black Friday". His motivation was greed. Mansa Musa accidentally wrecked the economies along his route during a pilgrimage to Mecca. He gave away so much gold, he caused devastating hyperinflation. His motivation was charity. Kind of makes you think, doesn't it? Two opposite motivations, greed and charity, can both be devastating when practised to excess. Gould, despite the deliberate execution of his actions, inadvertently led to the great German Hyperinflation of the 1920s which was a precursor to the Great Depression of 1929 and the rise of an Austrian Art student who would go on to become the most notoriously famous leader of the contemporary world and the initiator of the Second World War.

Musa on the other hand, did fix the inflation in Mamluk Egypt by buying gold in abundance from the Arab and Berber moneylenders but in the process, the political economy of his couldn’t withstand the lust for clout in the Western Sahara and Sahel region and the Songhai Empire much like many of its contemporaries , peaked , twilighted and ultimately fell. However, Musa by various accounts did eventually become the richest person to have ever walked this planet as macro measurement parameters modernised and inflation accounting came into being.

7. Gold for Silver, Slippery indeed

Spain (and the entire Iberian peninsula) was conquered and colonised by the Romans because of their massive silver mines which Rome then plundered. Several millennia later, the Spanish conquered, colonised and plundered Central and Southern Mexico of its plentiful silver resources. In a way, the Spaniards hilariously were just vying to replenish the silver they had once lost. The Crown’s primary shipping armada caused a bubble so big they had a valuation higher than all the money in England while basically doing nothing useful. The accumulation of extensive amounts of silver was too much for the Spanish economy to cope with and the boom stagnated with massive amounts of wealth being drained as people began to frantically sell their biscuits of silver in international markets bringing an end to the golden age of Spain that was funnily nothing related to gold but silver.

8. Confederacy vs the Union and it’s the Turk who loses.

The British textile industry was huge. Pretty much the marvel of the world. And its biggest supplier of cotton was the American south. The Civil War disrupted the supply of cotton, so the British turned to Egypt instead to buy cotton grown in the Nile River valley. The influx of British money literally transformed the Egyptian economy overnight. That increase in wealth was one of the things that led to Egypt breaking off from the Ottoman Empire. Egypt however, soon got vindicated by the colonial zest of its British overlords while the Ottoman Empire went downhill henceforth losing 40 percent of its territory in Europe and all of it in Africa before ultimately collapsing in 1922 after the first world war.

9. Hungary for money

The Hungarian pengö was the currency with the highest hyperinflation in history, so absurdly high that by the end of its life cycle 1 USD was equivalent to 4.6 x 1029 pengös or 460 octillion of pengö. Following World War II, the Hungarian pengo lost its value after experiencing the most severe case of hyperinflation in history, worse than that of Germany after World War I, Yugoslavia in 1992, and even more serious than that of Zimbabwe between 2004 and 2009. In 1944, around 90% of Hungary’s industrial facilities were damaged when the country became the seat of war between Germany and Russia. Because of the decline in production, the prices of goods were skyrocketing. However, prices kept going up and were unmanageable. At the peak of inflation, the price increase rate was at about 150,000% a day. As an attempt to slow down inflation, Hungary implemented a 75% capital levy in December 1945 to no avail. '1 billion trillion pengö' is the highest ever recorded monetary value in terms of a banknote

10. Killing for a living - The Rothschild Saga

Nathan Rothschild, an ordinary British merchant banker with branches all across Europe had deployed a spy on the Waterloo battlefield in 1815 , who was told that he should remain at a safe distance from the battle and watch it until there was a winner. Afterwards, he rode to London with the news to Lord Rothschild (the British won the battle). Later, Rothschild would spread the gossip that the British were the losers. Soon the London stock market would fall drastically, allowing Lord Rothschild to buy everything cheaper than ever. By the time the truth was known, Lord Rothschild was in absolute control of the British economy. The Rothschild family went on to become one of the richest and the most famous banking corporations and of course, families on the Earth with some speculation even asserting that it is wealthier than even the Sultan of Brunei (who holds the distinction of being the world’s richest reigning monarch) .


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