Planet Money Summer School History 3: The first stock and perpetual life
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Jul 26, 2024 Discover the origins of the stock market in 17th-century Amsterdam, where small businesses transformed into trading giants. The episode dives into the life of Isaac Lemaire and his controversial financial tactics, including the invention of short selling. Learn how middlemen shaped early market dynamics and how Dutch innovations fueled modern finance. Explore the dual nature of financial exuberance and its effects on market stability. Uncover the significance of perpetual bonds and their lasting impact on economic trust.
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Shares Made Mass Investment Possible
- The Dutch in 1600 created transferable shares so anyone could own a piece of a trading company.
- That invention made large-scale, long-distance trade and capital pooling possible and scalable.
Isaac Lemaire's Revenge Short
- Isaac Lemaire, an early major shareholder and director, tried to short the Dutch East India Company after being forced out.
- His henchmen spread rumors, the company paid a maize dividend, shorts were partly banned, and Lemaire lost millions and left town.
Short Sellers Check Market Exuberance
- Short selling exposes overvaluation and slows bubbles, but spreading rumors is illegal and socially condemned.
- The market needs skeptics to find fair prices, even if they are vilified.