Economic bubbles form when rampant speculation and overconfidence in the marketplace cause the price of a commodity to soar to dizzying heights. The sudden surge of financial hysteria allows people to strike it rich in the short term, but the fallout when the bubble inevitably bursts can be enough to ruin investors and bring whole economies to their knees. From a 17th century Dutch tulip craze to the infamous 1929 stock market crash, learn the stories behind six historical booms that eventually went bust.

Tulip Mania

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Tulip flowers have often been used to symbolize love, but in 17th century Holland, they came to represent doom for many overzealous investors. The Dutch fell head over heels for tulips shortly after the lilies were first introduced to Europe in the mid-16th century. Tulips became a powerful status symbol, and nobles and middle class admirers alike began scrambling to get their hands on rare specimens. By the 1630s, Tulip marts had sprung up in city centers, and bulbs were traded in the same way as modern stocks on Wall Street. A single tulip bulb often sold for the same price as everything from a carriage and a pair of horses to 1,000 pounds of cheese.

Tulip mania continued unabated until February 1637, when the market collapsed after a few of the bigger players decided to sell out. Prices plummeted, and a brief panic ensued as investors raced to dump their stores of lilies. “Substantial merchants were reduced almost to beggary,” wrote Charles Mackay, who later helped popularized the story of the tulip craze. “Many a representative of a noble line saw the fortunes of his house ruined beyond redemption.” The Dutch government formed a commission to clean up the tulip mess, but the economy sank into a minor depression in the years that followed.

The South Sea Bubble

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Painting depicting the marketplace during the bubble.

Use of the term “bubble” to describe financial boom and bust first entered the lexicon in the early 18th century, when Britain’s South Sea Company collapsed and took many investors’ personal fortunes with it. The doomed enterprise had launched in 1711, when its owners agreed to take on millions in British war debt in exchange for exclusive trading rights in South America. The venture enjoyed little success—Spain still had a stranglehold on South American trade—but in 1720, a few well-placed bribes saw the South Sea Company win a new agreement to subsume Britain’s entire national debt. After spreading rumors of the vast riches they had already claimed in the South Seas, the company issued several new stock offerings to the public. Investors were allowed to pay for their shares in installments, and it wasn’t long before people from every strata of society were clamoring to get in on the action.

Share prices shot up from £128 in January to around £1,000 by June, but fortunes turned shortly thereafter, when a frenzy of selling saw South Sea Company Stock drop through the floor. By December, prices had tumbled to £124, leaving thousands of overextended investors in financial ruin. Government investigations later uncovered the bribery and corruption involved in causing the crisis, and several politicians and South Sea Company higher-ups were arrested.

The Mississippi Bubble

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John Law

In 1716, France was plagued by crippling government debts and currency shortages. To solve the crisis, the French Regent turned to John Law, a Scottish gambler and finance wizard who proposed using paper currency to jumpstart the economy. With the Regent’s blessing, Law established a bank and began issuing paper notes that were supposedly redeemable in hard currency such as gold and silver. A year later, he formed the Mississippi Company, a trading venture that was given a monopoly over France’s Louisiana territory and its rumored deposits of gold. Law began selling stock in the company in exchange for government backed bonds and paper notes, and public interest quickly reached a fever pitch. Over less than a year, the price shot up from 500 livres to 18,000.

Law’s scheme initially boosted the economy and made many people wealthy, but his Mississippi Company never succeeded in finding riches in the Americas. His bank also overprinted paper money to meet the public’s demand to buy stock, which sent inflation soaring. The whole system came crashing down in 1720, after suspicious investors went to redeem their paper notes and found there was only enough gold in France to cover a fraction of their claims. Bank runs ensued, and the value of Mississippi Company shares plummeted. Many new millionaires were pauperized over night. Law, meanwhile, was forced to flee the country in disguise out of fear for his life.

The Florida land boom

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Florida’s reputation as a tropical hotspot first developed after World War I, when increased prosperity saw many Americans head for the Sunshine State in search of cheap property and easy living. People began buying and selling land with reckless abandon, and by the mid-1920s, prices were often doubling every few months. In some cases, speculators didn’t even have the cash to pay for their purchases. They simply forked over the down payments and then resold at a profit before the full balance was due. As the bonanza continued, Florida’s real estate market became clogged with hucksters. Charles Ponzi—already notorious for having fleeced investors in a 1920 pyramid scheme—tricked out-of-state buyers into purchasing plots of land supposedly located in Jacksonville. The properties actually sat in a swamp some 65 miles away.

For a while it seemed as though there was no ceiling to the Florida land boom, but in early 1926, supplies of building materials and potential buyers trailed off. Investors were forced to jettison their holdings at astronomical losses. A further blow came that autumn, when a hurricane ravaged the state and destroyed scores of properties. By 1928, Florida’s bank clearings had plunged from over $1 billion to less than $150 million.

Railway Mania

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In the 1840s, the introduction of modern railroads sparked the 19th century equivalent of a tech boom in Britain. Hundreds of new railroad lines were proposed in just a few short years, each more ambitious and opulent than the one that preceded it. Market prices exploded, and the British Parliament approved plans for more than 9,000 miles of prospective railroad track. According to scholar Andrew Odlyzko, the amount of money involved in railway construction was at one point more than double what the British government spent on its military.

Despite the frenzy of speculation, the railroad industry proved more fickle than many investors had been led to believe. After peaking in 1845, railway stocks underwent an agonizing multi-year slide. Many investments were worth less than 50 percent of their original value by 1850. Thousands of Britons felt the squeeze, including the famed novelist Charlotte Brontë, who saw the value of her shares plunge from £120 at their peak to a measly £20. “The business is certainly very bad,” she noted. “Many, very many, are by the late strange Railway System deprived almost of their daily bread.”

The Wall Street Crash of 1929

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The Brooklyn Daily Eagle headlines for Black Thursday. (Credit: Underwood Archives/Getty Images)

During the Roaring Twenties, the U.S. stock exchange boomed like never before. Legions of ordinary Americans took out loans and invested in the hope of striking it rich, and the market rewarded them by more than quadrupling between 1920 and 1929. People confidently bought stocks on “margin”—that is, by borrowing money from brokers—and banks began speculating with their customers’ money without permission. By late-1929, stock prices had climbed to seemingly irrational heights. Other parts of the economy were lagging behind the market, and there were whispers of an impending fall, yet many of the nation’s most respected economists promised that the “bull market” was here to stay.

The optimism finally evaporated on October 24, 1929, better known as “Black Thursday.” Stocks went into a nosedive that day, and panicked investors made some 13 million trades—so many that Wall Street tickers couldn’t keep up with all the action. The fall continued on “Black Tuesday,” when the market dipped even further. Billions of dollars were sucked out of the economy, launching a financial pandemonium that would see some 4,000 banks fail by 1933. The chaos helped bring on the Great Depression, which would linger over the United States for roughly a decade.