5 Forgotten Bubbles and Crashes


Everyone loves to cite the famous bubbles, where the wise and lucky few escape just in time with their fortune, and the unlucky or inattentive were left holding the bag. It’s almost a daily occurrence to hear a tale of someone’s giant windfall or daring escape during the not so distant housing bubble or the internet mania of 2000.

Keep in mind; there are also some fantastic stories of lesser-known bubbles throughout history. Even some of the most obscure bubbles and manias have strikingly similar traits and characteristics. If you’ve lived through them and experienced them first-hand, there’s no need to recap because bubbles tend to leave a lasting impression on its participants. If you’re still waiting to experience your first bubble, or love discovering their traits, here’s a few good examples you might not have heard yet.

Bicycle Mania of the 1890s

Often, bubbles are ignited by a technological development that unleashes possibilities once considered impossible. This happened to the bicycle industry in the late 1800s. The invention of the “safety bicycle” propelled cycling popularity throughout the United States and Europe. This new and improved version of the bicycle lowered riders so their feet could safely touch the ground. Previous versions called “penny-farthing” or “high wheel” bikes had huge front wheels where the peddler would sit elevated and not able to touch the ground.

The innovative design lowered riders closer to the ground, making it easier to stop and reduced injury during falls. The newly designed bicycles also featured chain-driven gears and air-filled tires. These significant developments created the beginning of the great Bike Boom of the 1890s.

safety bicycle
An example of the newly designed “safety bicycle” of the 1890s.

In 1890, there were an estimated 40,000 bicycles produced. By 1896 that number grew to over 1,200,000. Employment in the bike industry went from 2,000 to 20,000. New bicycles were desirable to an entire middle class as the first mode of transportation, which was both private and affordable. For roughly $100 in 1893, you could purchase a brand new bicycle and travel like never before.

Bike boom
A Los Angeles bicycle club, 1890.

Hundreds of bike manufactures were entering the business. The bicycle industry was one of the few areas of the economy growing because of the ongoing economic depression. An increase in production and eventual overcapacity of bikes soon caused a downward spiral of the industry. Intense competition and over-supply flooded the market, and many bike manufacturers eventually went out of business.

In 1901, an astute observer of the great bike craze recalled the boom and bust, with echos and similarities of so many manias. He was quoted as saying, “Bicycle-parties were fashionable. Bicycle-language was spoken as extensively as the language of golf is spoken today. Go where you would you could hear nothing but talk about different models and condition of the highways, while map-makers reaped a small fortune by publishing little guides and roadbooks for the use of the bicycle fiend. Even the crowded streets of the city swarmed with riders. Businessmen rode down to their offices on bicycles, and many of them took spins in the park before breakfast…”

The Bowling Bubble

Before the Dot.com bubble and the Beanie Baby bubble of the late 1990s, there was a raging bubble in bowling. The 1950s and 60s in America saw the game of bowling gain in massive popularity throughout the country. This was due in part to the invention of the automatic pin setter in bowling alleys. From 1955 to 1963, the number of bowling alleys almost doubled from 6,500 to 11,000. By the end of that year, over seven million people were involved in bowling leagues at their local bowling alley.

The sport dates back to 300 A.D. when it originated in Germany. It’s said that bowling began as a religious ritual by rolling stones at clubs to absolve sins. The game endured throughout history, where there’s a written record of its popularity in England during the 1300s. King Edward III restricted the game because he felt his army was getting distracted by bowling too much when they should be practicing archery. The king later found the need to ban bowling for all upper class in his kingdom due to the people’s infatuation with the game.

Nixon Bowling
President Richard Nixon bowling at the White House, 1970. Over the Line !

Centuries later, bowling continued to gain attention. In the late 1940s and 1950s, bowling was heavily promoted by the United States Armed Forces. Technological advancements included automated pin setting machines where people were no longer required to stand behind the pins to set them back up. After the end of prohibition, beer companies found new ways to advertise by teaming up with the Bowling Proprietor’s Association. The emergence of “Beer Leagues” sponsored by beer companies such as Budweiser and Stroh’s helped stoke the bowling fire.

In 1963, professional bowler Harry Smith earned more money than Major League Baseball’s Most Valuable Player Sandy Koufax and the NFL’s MVP combined. Sports Illustrated featured the pro bowler in a feature article where they proclaimed, “Harry does so well that he is able to support a wife and four children in style, tool around the circuit in a maroon Lincoln Continental and indulge a taste for epicurean delicacies. In short, he is the personification of the prosperity that has suddenly overtaken the world of professional bowling.”

bowling boom
1960 Rheingold Beer and Bowling advertisement.

Evidence of the bowling craze sweeping the nation shown through in the stock prices of companies involved in the sport. Brunswick Corp. saw it’s stock price rise over 1,500% in four years leading up to 1961.

In the mid-1960s, signs of a bust began to emerge. The industry was overbuilt. The excitement of the previous decades encouraged developers to build bowling alleys at breakneck speed, doubling the supply of bowling centers in just eight years. As attendance in bowling alleys began to decline, many bowling centers quickly closed their doors. Public bowling stocks AMF and Brunswick tanked.

After the bowling bust, another professional bowler who was known as one of the best of his era, Carmen Salvino, would reflect on the bowling mania, “We were like rockstars… it’s a little different for the guys today.”

John Law and the Mississippi Company Bubble

The spectacular collapse of the Mississippi Company gets overshadowed, in my opinion, by other great bubbles of its time period. The South Sea Company bubble in England was from the same era and gets arguably more historical attention. Perhaps overshadowing both the South Sea Company and the Mississippi Company bubbles is the infamous Tulip Mania in Holland, which occurred roughly eighty years prior to both. Nonetheless, the story of John Law and the Mississippi Company bubble had enormous historical effects and included all the classic traits found in a boom and bust scenario.

John Law rose to power and influence after successfully demonstrating his economic ideas to the Duke of Orleans in France. Law had views on how to issue paper money backed by land. He persuaded the Duke, arguing that only supplying money backed by gold and other metals restricted the potential of the economy. His ideas went into effect, where Law created the privately held bank, Banque Generale. A year later, it was nationalized where it would become the first Central Bank of France. This Central Bank of France was backed partially by silver and partly by government-accepted paper notes, a new concept at the time.

The bank opened new locations throughout France, and paper credit was created to enhance the economy. Invigorated by his successful Central Bank, Law turned to expansion plans overseas where he could experiment with his economic ideas. The French controlled land around the Mississippi River in the colonies, and Law envisioned a company that could profit from trade in the new territory. In 1717, The Mississippi Company was created.

John Law
Paper money issued and signed by John Law.

As the second most powerful man in France and Controller General of Finance, John Law consolidated various trading companies into the Mississippi Company. In only a few years, he combined all French trade outside of Europe into the Mississippi Company, making it an enormous conglomerate. Next, Law engineered various financial maneuvers to shift risky government debt for equity in the Mississippi Company. The seemingly unshakable company started to gain interest from investors not only in France but across Europe. Soon, everyone wanted a piece of the iron-clad company. Shares initially traded at 500 livres, then 1,000, and soon after that, 10,000 livres per share.

Ordinary citizens flocked to Paris to participate in the trading of Mississippi Company shares. French aristocracy, along with other influential Europeans, traded shares in the company. The word “Millionaire” actually originated from traders involved in the Mississippi Company as the value skyrocketed.

boom and bust
John Law, born into a family of bankers. Killed Edward Wilson in a London duel. Found guilty of murder, imprisoned, escaped to Amsterdam. Turned Economist, appointed Controller General of Finances in France. Crashed economy, escaped to Brussels.

Rapidly emerging price inflation spoiled Law’s party, and the share price began to fall. Law would not go quietly in defeat just yet. He attempted to control the reduction in value and maintain the share price at 9,000. It didn’t work. The public rushed to sell shares and buy coins. Law was forced to close the banks for ten days and limit the size of trades once he reopened. Inflation continued to skyrocket, and food prices rose by 60%.

While the shares of the Mississippi Company rose as high as 15,000 livres per share, they were soon crashing down to 4,000. People rushed to convert all their paper money to coins, which led to bank closings and riots in the street. Angry groups occupied town squares and attacked financiers as they entered.

John Law escaped the upheaval he created in the middle of the night and fled to Brussels. He spent the next few years gambling in Venice, Rome, and Copenhagen and died a poor man in 1729.

Many experts say John Law’s theories are very much alive in present-day finance. In his book, John Law: Economic Theorist and Policy-maker, Antonin E. Murphy wrote, Law, “captured many key conceptual points which are very much a part of modern monetary theorizing.”

Panic of 1819 Bubble

The Panic of 1819 was the first major financial crisis in the United States, but the causes of the boom and the impending bust has all the telltale signs of a typical bubble.

Many historians would agree that one cause of the bubble was unregulated banks. Easy credit was extended to entrepreneurs, farmers, and bankers to stoke local economies. The massive growth in chartered banks encouraged lending. The number of chartered banks increased from 88 in 1811 to 208 in just four years later.

The Second Bank of the United States
The Second Bank of the United States

The desire to expand the country westward and the lax oversight from the US Treasury contributed to rapid growth in lending for land. The government encouraged settlement expansion by offering partial down payments and installment loans. Outstanding debt for land settlement rose from $3 million in 1815 to over $17 million in three years.

Experts say the panic was triggered by the Second Bank of the United States when it underwent a sharp contraction in credit midway through 1818. Prices for crops dropped, and the value of farmland dropped just as quickly. Payments were missed, and banks began to foreclose on properties and transferred them back to the Second Bank of the United States. The country plunged into a recession, and the Second Bank reduced its lending to attempt to get back on solid footing.

Panic of 1819
Depiction of a run on the bank during the Panic of 1819.

Economists view the Panic of 1819 as a total failure in expansionary monetary policy. Many would agree that the Panic was the country’s first experience with economic boom and bust cycles, which would be a common occurrence thereafter.

Souk Al-Manakh Stock Market Bubble

Throughout the 1970s, Kuwait experienced a rapid rise in wealth due to increasing oil prices and the country’s growth in production. With this newly created wealth that was much more widely distributed to the middle class than ever before, a new idea for investment was created.

Frustration grew with the Kuwait stock exchange, known as the Boursa. It was considered a place where royalty and an elite few traded shares among each other, with inside deals prevalent. It was also heavily regulated because of the Shiek’s fear that an extensive exchange could get out of hand and topple over. To get around these regulations and make investments in a variety of businesses, as well as firms outside the Kuwaiti borders, the Souk al-Manakh was formed in 1978.

Wealth continued to surge in Kuwait as the Iranian Revolution in 1979 sparked oil prices to double in a short amount of time, further enriching oil-producing countries such as Kuwait. The citizens were eager for new ways to speculate with their quickly growing wealth.

Some historians attribute the Iranian revolution as a contributing factor to a rapid rise in oil prices, where Kuwait experienced enormous wealth from their oil production.

One of the most incredible details from the Souk Al-Manakh Stock Market was that investors could purchase shares with post-dated checks. This meant that participants had nearly infinite leverage to buy stocks on the exchange. Default was considered unimaginable at this time. Cash was plentiful, and if for some crazy reason, you needed to sell, there were many buyers lined up ready to take your shares at high prices.

Post-dated checks were always paid on time. Investors were able to pay any amount they planned to borrow just by selling a few shares for a profit. Legend has it that a young government employee borrowed nearly $14 billion with post-dated checks.

5 forgotten bubbles and crashes
The entrance to the air-conditioned parking garage, the location of the Souk Al-Manakh Stock Market.

Another fact was that just a few years prior, a small bubble formed, and prices suddenly dropped. The Kuwait government quickly swooped in and bought shares saving anyone who might have been in trouble. This was an assurance that you could not lose money in the market, or so they thought.

Companies began listing their shares on the Souk Al-Manakh stock market and enjoying enormous price gains. Some doubled within months; others increased 10 to 15 times in value in just a few months. Sometimes even doubling on an hourly basis. Eventually, shell companies began to form. These companies were simply names on paper – falsely registered as legitimate businesses, but the businesses didn’t exist.

In the spring of 1982, the amount of post-dated checks outstanding reached $94 billion. The value of the entire Souk Al-Manakh Stock Market increased to where it was the 3rd largest stock market in the world behind the United States and Japan. Next, rumors began swirling that many of the companies on the exchange were shell companies and didn’t exist. They were worthless. Shortly after the rumors started swirling, a Kuwaiti finance minister made a terrifying comment to investors. “Speculators should pay for their sins in accordance with Islamic tradition.” He was quoted as saying. This spooked investors, and many began to fear the government would not step in to prevent losses as they did in the previous crash. Finally, a post-dated check bounced when a dealer presented a check for payment. This was enough to spark the crash.

Widespread panic ensued. Trading stopped, as there was no agreed bid and ask prices to execute. The losses were enormous. Kuwait’s entire economy plunged into recession, along with the entire gulf region. Only one bank was left standing, which was on life support by the Central Bank. The government devised an extensive set of policies called the Difficult Credit Facilities Resettlement Program, which was only part-way implemented when Iraq invaded Kuwait in 1990.

Booms, Busts, Panics, Manias and Crashes

Once you begin delving into booms and busts, you’ll find there are so many examples it will make your head spin. Most have recurring attributes and universal themes. Fear and greed play a considerable role. The fear of missing out, better known as FOMO, is definitely a factor in bubbles. One of the most incredible things I realize when learning about lesser-known bubbles is how transformative they can be. Even the most obscure bubbles and crashes have literally shaped the history of the world over and over again.

Legendary investor Jesse Livermore figured out a way to make a fortune from greed and fear. He played booms and busts to perfection at times, then losing everything and making it back again several times over. His arena was public equities in the early 1900s, but his lessons apply to every market that involves human nature. A few of his words stick with me as I consider what the future might hold. He said, “All through time, people have basically acted and reacted the same way in the market as a result of: greed, fear, ignorance, and hope. That is why the numerical formations and patterns recur on a constant basis.”

He later added, “There is nothing new on Wall Street or in stock speculation. What has happened in the past will happen again, and again, and again. This is because human nature does not change, and it is human emotion, solidly build into human nature, that always gets in the way of human intelligence. Of this I am sure.”


One of the great scenes from Trading Places, where a fortune was made trading frozen concentrated orange juice futures contracts.