History of Economic Bubbles

2017-06-22T17:52:54Z

Sqjohnson:

=History of Economic Bubbles=

{{Infobox
|title = Article Title
|header1 = The Chandos Portrait
of William Shakespeare
|bodystyle = width:25em
|image = [[File:Articlepicture.jpg|x450px|alt=Article Image]]
|caption = Representative Article Image
|label2 = '''Artist'''
|data2 = Attributed to [[John Taylor]]
|label3 = '''Year'''
|data3 = c. 1600s
|label4 = '''Dimensions'''
|data4 = 55.2 cm × 43.8 cm ( 21 3⁄4 in × 17 1⁄4 in)
|label5 = '''Location'''
|data5 = National Portrait Gallery, London

}}

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=Background =
 
What is a bubble?

A bubble is the sharp rise and fall of asset prices over a period of time. The rise of the bubble is often caused by speculation of future prices causing the asset to be overvalued. When the asset is overvalued it is being traded or sold at a price above its actual value or intrinsic value. After the people come to the conclusion that the asset is overvalued the price crashes and returns back to its intrinsic value bursting the bubble.

Examples of Bubbles

Tulip Bubble

The first recorded bubble in history was the tulip mania bubble that took place in holland in the mid 1600s. Tulips were a new addition to the garden in Holland and became very popular. Then a virus started to infect the tulips leaving them with fire like patterns. These new tulips became in demand by almost all of holland, driving the price up. Eventually the continual rise in price caused the tulips to be viewed as a good investment because the price should continue to go up. The price escalated to the point of people exchanging land, jewels, and cows for the tulips. By the time the tulips had reached their peak the price had increased 20 fold. With the price so high people some people decided that it would be advantageous to sell the tulips and collect their profits. This lowered the price of the tulips for the first time. Because the tulips had no reason for escalating in price other than speculation the prices crashed with no reason to speculate on the tulips.

South Sea Bubble

The South Sea bubble is a bubble of new company stock caused by the desire for investment opportunities in 18th century England. The East India Company was hugely successful and paid out huge sums of money to its investors. However, only very few people were able to invest in the East India Company leaving many wealthy people without investment opportunity. In France the Mississippi Company had just started up and was bringing lots of money for the French investors. The wealthy Englishmen wanted an investment outlet and the South Sea Company offered that. The South Sea Company was set up to trade with South America and hopefully be as successful as the East India Company. However, South America was under the control of Spain and Portugal leaving little hope for the success rivaling the East India Company as the East India Company had full control over India. The South Sea Company attempted many trade ventures such as slave trading and and wool trading. However, the mortality was too high on the slave boats and they could not sell the wool stuck rotting on docks for many of them to be profitable.

Internet Bubble
The invention of the internet was one of the single greatest achievements of recent years and changed the way people interacted and obtained information. Many companies were created to use the new technology. These companies were heavily invested in because of how exciting and promising the internet seemed to be. With all these investments the stocks rose quickly over time attracting more and more investors. All that was needed was just and idea to obtain insane amounts of investment capital from investors wanting to get in on the internet boom. With the rising amount of people investing in internet companies, more and more people pitched their ideas in an attempt to grab money.

Companies often changed their name to have “com” in it hoping to cash in on the internet craze. New start-ups were created and raised money from investors with silly or non-existent business plans that were eerily similar to the start-ups during the South Sea Bubble. All that mattered was having a cool sounding name and a registered internet domain name. The rest would be figured out later. And, the money came pouring in.

Growth Stock New Issue Craze
Investors had a huge appetite for space-age stocks in the Soaring Sixties. More new issues were created in the 1959-62 period than in previous period in the history of the stock market. It was labeled the “tronics” boom. Many of the stock offerings had names with some garbled version of the word “electronics” in their name, even if the company had nothing to do with electronics. Investors quickly bought up shares in just about any company with “tronics” in its name.

Conglomerate Boom
What investors wanted was growth in earnings per share. By the mid 1960’s businesses found a way to create this with conglomerates touting “synergies”. Synergism is the quality that 2+2 = 5. Thus because of supposed synergies two companies combined would create more earnings per share than the two of the separately. Essentially a firm with higher price/earnings multiples would buy another company which trades at lower price/earnings multiples. The combined company would have higher earnings per share, thus having an increased earnings per share growth. But, all that was happening was the conglomerate (the combined companies) revaluing the earnings of the lower multiple company at the other firms’s higher multiple. It all worked until the conglomerates could not keep buying up cheaper companies and pulling in their earnings into their own at high multiples. When that happened the conglomerate boom collapsed.

Concept Stock Bubble
This fad was in stocks with a good story to tell, or a “concept”. This became known as the “go-go era”. Often these concept stocks had something to do with marketing to youth. It was the youth culture of the 1960’s and one of the concepts was that only youth could market to and sell to youth. Only they understood other youths. One such stock was NSM, National Student Marketing”. Each of its divisions had something to do with the college-age youth market from posters to records sweatshirts.

The Nifty Fifty
After the last couple of bubbles, investors decided they needed safe growth stocks. About 50 stocks were considered safe premier growth stocks. These included familiar names such as IBM, Xerox, Avon, Kodak, McDonalds, Polaroid, and Disney. As more and more investors purchased these supposedly safe growth stocks they pushed their prices to higher and higher levels till many of them were trading at as much as 80 times earnings, compared to a typical stocks 15 times earnings. Ultimately this bubble ended and the Nifty Fifty stocks cam crashing back to earth.

Roaring Eighties - Return of the New Issues
Just like in the early 1960’s, the 1980’s were a new issue market. This time around the craze centered around Biotechnology and Microelectronics stocks. Most Biotech companies were not profitable, and the potential for profits was very far in the future. But, still investors flocked to them, bid their prices up to very high levels. The results were predictable. A lot of stocks with names and business plans in the Biotech or Microelectronics areas were sold, went up, and then ultimately crashed to earth. In the late 1980’s most biotech stocks lost 75% of their value, or more.

=Deliverable=

Comparing the South Sea Bubble to More Modern Bubbles
A bubble is an economic term describing a cycle of rapid expansion of asset prices followed by a rapid contraction. Often the increase in price is a result of trend-following investors who believe the price will continue to rise in the future. In the theoretical literature of bubbles a bubble occurs when the expected rate of change in the price of an asset is an important factor in determining the current market price of the asset. In other words, the rapid run up in prices is more important to investors and speculators than the asset’s true intrinsic value. During bubbles speculators often purchase the assets using borrowed money or debt. Bubbles are also often accompanied by a belief that “this time is different”.
In a bubble investors hope to sell the asset later on at a higher price to future investors. This is known as the greater fool theory because each investor or fool has bought an overvalued financial asset in the hope that a future investor or greater fool will buy it from him. The bursting of bubbles occurs when there are no more fools willing to invest in the overpriced asset and a mass selloff of the asset causes the price to plummet. Although this seems like a simple trap to avoid, because of the difficulty in accurately determining an asset’s intrinsic or true value it is hard to detect bubbles until they have already occurred. Bubbles can occur in a variety of assets and have occurred many times throughout history. Some of the asset bubbles covered here include tulips, stocks, and housing prices.

Tulip Bulb Mania
One of the earliest documented examples of a bubble was the Tulip Mania Bubble in Holland during the mid 1600’s. Tulips were a new flower introduced in the 1600’s and over time the tulip became very popular and expensive. A non-fatal virus known as “mosaic” occurred which resulted in contrasting colored stripes or “flame” like patterns on the tulip petals. These new tulips, which were called “bizarres” were highly sought after and much more expensive than plain tulips. The more bizarre a tulip, the greater its price. Merchants began trying to predict which variegated tulip style would be the most popular for the coming year and buy those in bulk to hold, anticipating an increase in price. This was not much different than merchants stockpiling any other item such as cloth, anticipating that if that color or weave of cloth was in fashion the next year it would command higher prices. Shown below are a plain tulip and a variegated or “bizarre” tulip.

As bizarre variegated tulip prices began to rise wildly, people started to view tulips as a sound investment instead of just a decoration. As the price of tulips continued to climb more and more people bought and traded tulips in the hopes of selling them at a higher prices. People who believed that Tulip prices could not go any higher watched as their relatives and friends made enormous profits. The temptation to join in the tulip speculation and trading was was huge and it took a very disciplined person to resist the siren call to get rich quickly in tulips.

Near the end of the tulip mania in 1634 to early 1637 people were exchanging land jewels and furniture to obtain the bulbs. Thus, this irrational stage at its peak lasted several years. Eventually all bubbles peak. The Tulip bubble appears to have peaked when bulb prices reached astronomical levels. Near the very end of the bubble in January 1637 tulip bulb prices increased twenty-fold in that one month. Eventually prices got so high that some people decided they would sell out of tulips. Then, others followed their lead. Like a snowball rolling down a hill the sell-off gathered momentum as more and more people sold their tulips. This resulted in rapidly decreasing tulip prices. Government ministers stated that there was no reason for tulip prices to fall. Tulip bulb dealers went out of business. Tulip bulb prices declined and declined until finally the prices stabilized at about the price of a common onion! Although this example of a bubble about 400 years ago dealing with tulip bulbs may seem almost farcical, the pattern of the tulip bubble has been repeated many times in many different situations in the ensuing centuries.

The South Sea Bubble
The early 1700’s followed a long period of prosperity. Thus people in Britain had substantial savings and few investment alternatives. In addition there was a corporation, the East India Company, which had the exclusive rights to trade in the Indian subcontinent and China. By the 1700’s the East India Company accounted for roughly half the world’s trade, particularly in silk, cotton, indigo dye, salt, and tea. Given the huge success of the East India Company, and the wealth accumulated by its less than 500 shareholders, there was considerable appetite for a similar company that people might invest in, and hopefully become rich from.
In 1711 the South Sea Company was created and granted by the British government the exclusive right to trade with South America. However, Spain and Portugal controlled virtually all the colonies in South America. Thus, the value of the ability to trade with the South American colonies by a British company was somewhat dubious. Nevertheless, the South Sea Company issued stock shares which were eagerly snapped up and purchased by a citizenry eager to reap the rewards of a government granted monopoly which they hoped would be similar to that enjoyed by the East India Company.
None of the directors of the South Sea Company had any experience in trade with South America. They outfitted ships for the slave trade to South America, which turned out to not be profitable due to the mortality rate of the slaves on their ships. Wool that was to be sold in Vera Cruz was instead sent to Cartagena, where it rotted due to lack of buyers. What the directors lacked in business experience they made up with the image they created with the public. They rented a luxurious house in London to entertain in and court prospective investors. Demand for South Sea stock was such that the Directors issued more stock, which was purchased by an eager public. This issuance of stock was repeated several more times, with it being quickly bought up by a public eager to to buy more, and each time driving up the price of the stock.
Seeing investors reactions to the South Sea Company stock many people started their own companies to attract investors. With the willingness to invest so high, the company business plan didn't even need to feasible. One company’s business plan was to extract light from cucumbers. Another company intended to build a perpetual motion machine. One company was set up with the promise of bringing investors money, however the investors could not know the business plan as it was completely secret. All of these companies succeeded in attracting investors and driving up their stock prices. However, each one of their stocks crashed after a couple weeks like most of the new companies at the time leaving the investors poorer and the entrepreneurs richer.
None of the failures in the start-up companies with silly business plans caused a change in the desire of the British people to invest in more companies that were being created because of the continued success of the South Sea Company. However, the directors of the South Sea Company recognized that their stock price was inflated and likely to crash just like the smaller companies and the directors sold off their stocks. At this point the stock had risen over seven-fold from around 125 to 950 pounds, as shown in the figure below. Now the South Sea Company lost its only asset, that of appearing to be profitable . The South Sea Company stock price plummeted leaving the investors at a huge loss while enriching the directors. After seeing the failure of the South Sea Company, investors no longer had an appetite for the new start-ups with silly or fraudulent business plans. No longer could promoters create a startup with no real business plan and wait for investors to flock to buy the stock. An era had ended. With so many investors hurt including the famous Isaac Newton, Parliament passed the bubble act ending the ability for companies to issue stock.

Dot-Com Bubble

The invention of the internet was one of the single greatest achievements of recent years and changed the way people interacted and obtained information. Many companies were created to use the new technology. These companies were heavily invested in because of how exciting and promising the internet seemed to be. With all these investments the stocks rose quickly over time attracting more and more investors. One of the first huge internet companies was TheGlobe.com a messaging service hoping to earn money from website advertising. TheGlobe.com started off at $9 a share and exploded to $97 a share by the end of the first day of trading even without existing revenue. The success of TheGlobe.com became extremely dangerous as it showed that new internet companies did not need to be profitable. All that was needed was just and idea to obtain insane amounts of investment capital from investors wanting to get in on the internet boom. With the rising amount of people investing in internet companies, more and more people pitched their ideas in an attempt to grab money.

Companies often changed their name to have “com” in it hoping to cash in on the internet craze. New start-ups were created and raised money from investors with silly or non-existent business plans that were eerily similar to the start-ups during the South Sea Bubble. For example, instead of a company to extract light from cucumbers, in the dot-com era we had companies such as “bunions.com”, “Zap.com”, “Fogdog”, and more. There was a rush to register what people believed would be the premier names in some business segment such as “DrugStore.com”. All that mattered was having a cool sounding name and a registered internet domain name. The rest would be figured out later. And, the money came pouring in.

There was a belief that “this time is different”. There was a belief that these “new economy” technology and dot-com stocks were different and that old valuations principles did not apply. That coupled with rapidly rising prices, and so many people getting rich, led others to get in because they thought they were getting left behind. New startups prided themselves on their “burn rate” -- the rate that they burned through funding investors had provided. They burned through the money designing cool glamorous offices with no thought to the actual business. This was similar to the fancy house in London the directors of the South Sea Company rented to entertain and impress potential investors. Worrying about a viable product or service, or profitability, were considered passe’ and old fashioned. New cable news networks were started such as CNBC to constantly hype these new internet and technology companies and tell investors that the old principals did not apply any more.
More and more ordinary people were investing in stocks, often with on-line trading accounts, which were a new creation, and also part of the dot-com bubble. Everyone was making money hand over fist, or at least expected to soon be making money hand over fist. Cocktail parties, cookouts, kids sports games, all were places where people would gather and talk about their investments. A survey of individual investors near the peak of the dot-com bubble revealed that most of them expected to earn returns on their investments of 35% to 50% per year in the long run. This despite the fact that the long-run return on stocks had long ago been documented to average about 10% in the long run.
Eventually all bubbles burst. And, so it was with the dot-com bubble. The internet was one of the greatest achievements of recent years. However, the dot-com/technology bubble also represented the largest creation, and subsequent destruction of stock market wealth of all time. When the dot-com bubble imploded in the early 2000’s over $8 trillion of stock market value evaporated. Eventually investors began to look at a company’s intrinsic value again, and found that it didn’t exist for many many internet stocks. Stocks such as JDS Uniphase, which had risen over 3,000% lost almost all of their value and were selling at pennies per share. Worldcom, PalmPilot, Nortel, and many many other once high flying household internet stock names crashed and lost almost all of their value. The names were different, the fad this time was different (the internet) but the bubble followed the classic playbook all the way through including the inevitable crash.

Housing Bubble

In the early 2000’s housing prices seemed to only rise driven by demand for housing spiraling out of control. The demand was driven mainly by the changing of lending practices. Banks had stopped holding on to mortgages and collecting money from people instead sold the mortgage to investment companies who packaged the mortgages into mortgage backed securities to sell as investment opportunities that payed off if the majority of the loans were paid off. Mortgage backed securities became a very popular investment opportunity. However, with a finite amount of mortgages bankers needed to change lending practices in order to obtain more mortgages to keep up with the demand from the investment bankers. The banks lowered the standards of people who were eligible for mortgages to the point where NINJA (no income no job no assets) loans became widely used because after they sold the loan there was no risk for the banks. This accomplished the goal of creating more mortgages to sell. However it also allowed people who did not have the financial assets to buy an expensive house they could not afford and in some cases buy multiple extravagant houses. The mortgage backed securities that the risky loans were put into were rated AAA, the highest rating, by the rating agencies making the mortgage backed securities everyone was investing very dangerous. While the mortgage backed securities were becoming riskier and riskier the housing market kept rising. Eventually like all the bubbles it popped. The demand for housing ended around 2008 when the default rates on mortgages skyrocketed ending the demand for housing and plummeting the value of houses back down to before the 2000’s. This wiped out many American families as their house, their most valuable asset, plummeted in value and many found themselves paying off mortgages worth more than their houses current value. However, the aftermath would not stop there. The mortgage backed securities that were so popular were now failing and brought down many global financial institutions that had invested in them spreading the crisis around the world.

Conclusion
Conclusion
Unfortunately the saying history repeats itself is true with regards to investing in financial bubbles. Time and time again people get caught up in the new way to make money and often times end up worse than before. However, all of the bubbles do have common similarities. The first one is all bubbles occur after a time period that allows for high amounts of investing. This often means that there is a lot of wealth such as in the time before the South Sea Bubble or in the highly successful 90’s before the Dot-Com Bubble but it can also occur in other ways such as the loose lending before the Housing Bubble. The other main reason for bubbles is the attitude that this time it will be different. As shown by the Tulip bubble, economists have known about bubbles for hundreds of years and yet people always follow the current get rich quick plan. In the 1600’s it was tulips and in the 2000’s it was Dot-Com stocks. When the success of some lucky investors spreads it can attract more investors further raising the price and causing the cycle to repeat. Even some who see through the now overpriced assets still invest in the hopes that they can be smart and sell out before it is too late. Although it is impossible to completely prevent bubbles, there is still hope that people can learn from societies mistakes and decrease the frequency bubbles occur and how devastating they are to the economy.

==Use Subsections Headings==
 
Organize each section of this article so that it has a logical flow. If you intend to discuss one aspect of the origin of a person, place, thing, or idea, identify the appropriate existing section of the article, or create that section if it doesn't exist. Then, make a clear subheading. If you notice that some other information is not organized clearly, rearrange the information, but do so cautiously and responsibly! The goal here is clarity for the reader.
 
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[[Category:History]]

History of Economic Bubbles

2017-06-22T14:45:03Z

Sqjohnson:

=History of Economic Bubbles=

{{Infobox
|title = Article Title
|header1 = The Chandos Portrait
of William Shakespeare
|bodystyle = width:25em
|image = [[File:Articlepicture.jpg|x450px|alt=Article Image]]
|caption = Representative Article Image
|label2 = '''Artist'''
|data2 = Attributed to [[John Taylor]]
|label3 = '''Year'''
|data3 = c. 1600s
|label4 = '''Dimensions'''
|data4 = 55.2 cm × 43.8 cm ( 21 3⁄4 in × 17 1⁄4 in)
|label5 = '''Location'''
|data5 = National Portrait Gallery, London

}}

Use this page as a template when creating new articles by clicking ''Actions>View Source'' and create a new page with the name of the article you're creating. In the newly copied page, [[Special:Upload|upload]] your own image, then replace the "Articlepicture.jpg" above with the new image name. Replace "Representative Image" in both the image line and the top-level heading above with your first and last name. Delete this whole paragraph beneath the Representative Image title but not including the ''Table of Contents'' tag
<nowiki>__TOC__</nowiki>.

=Overview=
The paragraph should give a three to five sentence abstract about your article. '''PLEASE NOTE:''' this article template has only a few sections as examples, but your actual article contributions should have '''many''' relevant sections '''and''' subsections. Please start to block out and complete those sections with relevant information such as the '''very objective, fact-based, and heavily referenced''' "who, what, when, where, and why" about this article. Articles don't just have to be huge buildings; '''individual artifacts and lesser-known people, places, and things count as article topics'''! Don't forget to include relevant [[#Category tags|category tags]] for each article!
 
__TOC__
 

=Background =
 
What is a bubble?

A bubble is the sharp rise and fall of asset prices over a period of time. The rise of the bubble is often caused by speculation of future prices causing the asset to be overvalued. When the asset is overvalued it is being traded or sold at a price above its actual value or intrinsic value. After the people come to the conclusion that the asset is overvalued the price crashes and returns back to its intrinsic value bursting the bubble.

Examples of Bubbles

Tulip Bubble

The first recorded bubble in history was the tulip mania bubble that took place in holland in the mid 1600s. Tulips were a new addition to the garden in Holland and became very popular. Then a virus started to infect the tulips leaving them with fire like patterns. These new tulips became in demand by almost all of holland, driving the price up. Eventually the continual rise in price caused the tulips to be viewed as a good investment because the price should continue to go up. The price escalated to the point of people exchanging land, jewels, and cows for the tulips. By the time the tulips had reached their peak the price had increased 20 fold. With the price so high people some people decided that it would be advantageous to sell the tulips and collect their profits. This lowered the price of the tulips for the first time. Because the tulips had no reason for escalating in price other than speculation the prices crashed with no reason to speculate on the tulips.

South Sea Bubble

The South Sea bubble is a bubble of new company stock caused by the desire for investment opportunities in 18th century England. The East India Company was hugely successful and paid out huge sums of money to its investors. However, only very few people were able to invest in the East India Company leaving many wealthy people without investment opportunity. In France the Mississippi Company had just started up and was bringing lots of money for the French investors. The wealthy Englishmen wanted an investment outlet and the South Sea Company offered that. The South Sea Company was set up to trade with South America and hopefully be as successful as the East India Company. However, South America was under the control of Spain and Portugal leaving little hope for the success rivaling the East India Company as the East India Company had full control over India. The South Sea Company attempted many trade ventures such as slave trading and and wool trading. However, the mortality was too high on the slave boats and they could not sell the wool stuck rotting on docks for many of them to be profitable.

Internet Bubble
The invention of the internet was one of the single greatest achievements of recent years and changed the way people interacted and obtained information. Many companies were created to use the new technology. These companies were heavily invested in because of how exciting and promising the internet seemed to be. With all these investments the stocks rose quickly over time attracting more and more investors. All that was needed was just and idea to obtain insane amounts of investment capital from investors wanting to get in on the internet boom. With the rising amount of people investing in internet companies, more and more people pitched their ideas in an attempt to grab money.

Companies often changed their name to have “com” in it hoping to cash in on the internet craze. New start-ups were created and raised money from investors with silly or non-existent business plans that were eerily similar to the start-ups during the South Sea Bubble. All that mattered was having a cool sounding name and a registered internet domain name. The rest would be figured out later. And, the money came pouring in.

Growth Stock New Issue Craze
Investors had a huge appetite for space-age stocks in the Soaring Sixties. More new issues were created in the 1959-62 period than in previous period in the history of the stock market. It was labeled the “tronics” boom. Many of the stock offerings had names with some garbled version of the word “electronics” in their name, even if the company had nothing to do with electronics. Investors quickly bought up shares in just about any company with “tronics” in its name.

Conglomerate Boom
What investors wanted was growth in earnings per share. By the mid 1960’s businesses found a way to create this with conglomerates touting “synergies”. Synergism is the quality that 2+2 = 5. Thus because of supposed synergies two companies combined would create more earnings per share than the two of the separately. Essentially a firm with higher price/earnings multiples would buy another company which trades at lower price/earnings multiples. The combined company would have higher earnings per share, thus having an increased earnings per share growth. But, all that was happening was the conglomerate (the combined companies) revaluing the earnings of the lower multiple company at the other firms’s higher multiple. It all worked until the conglomerates could not keep buying up cheaper companies and pulling in their earnings into their own at high multiples. When that happened the conglomerate boom collapsed.

Concept Stock Bubble
This fad was in stocks with a good story to tell, or a “concept”. This became known as the “go-go era”. Often these concept stocks had something to do with marketing to youth. It was the youth culture of the 1960’s and one of the concepts was that only youth could market to and sell to youth. Only they understood other youths. One such stock was NSM, National Student Marketing”. Each of its divisions had something to do with the college-age youth market from posters to records sweatshirts.

The Nifty Fifty
After the last couple of bubbles, investors decided they needed safe growth stocks. About 50 stocks were considered safe premier growth stocks. These included familiar names such as IBM, Xerox, Avon, Kodak, McDonalds, Polaroid, and Disney. As more and more investors purchased these supposedly safe growth stocks they pushed their prices to higher and higher levels till many of them were trading at as much as 80 times earnings, compared to a typical stocks 15 times earnings. Ultimately this bubble ended and the Nifty Fifty stocks cam crashing back to earth.

Roaring Eighties - Return of the New Issues
Just like in the early 1960’s, the 1980’s were a new issue market. This time around the craze centered around Biotechnology and Microelectronics stocks. Most Biotech companies were not profitable, and the potential for profits was very far in the future. But, still investors flocked to them, bid their prices up to very high levels. The results were predictable. A lot of stocks with names and business plans in the Biotech or Microelectronics areas were sold, went up, and then ultimately crashed to earth. In the late 1980’s most biotech stocks lost 75% of their value, or more.

=Deliverable=

Comparing the South Sea Bubble to More Modern Bubbles
A bubble is an economic term describing a cycle of rapid expansion of asset prices followed by a rapid contraction. Often the increase in price is a result of trend-following investors who believe the price will continue to rise in the future. In the theoretical literature of bubbles a bubble occurs when the expected rate of change in the price of an asset is an important factor in determining the current market price of the asset. In other words, the rapid run up in prices is more important to investors and speculators than the asset’s true intrinsic value. During bubbles speculators often purchase the assets using borrowed money or debt. Bubbles are also often accompanied by a belief that “this time is different”.
In a bubble investors hope to sell the asset later on at a higher price to future investors. This is known as the greater fool theory because each investor or fool has bought an overvalued financial asset in the hope that a future investor or greater fool will buy it from him. The bursting of bubbles occurs when there are no more fools willing to invest in the overpriced asset and a mass selloff of the asset causes the price to plummet. Although this seems like a simple trap to avoid, because of the difficulty in accurately determining an asset’s intrinsic or true value it is hard to detect bubbles until they have already occurred. Bubbles can occur in a variety of assets and have occurred many times throughout history. Some of the asset bubbles covered here include tulips, stocks, and housing prices.

Tulip Bulb Mania
One of the earliest documented examples of a bubble was the Tulip Mania Bubble in Holland during the mid 1600’s. Tulips were a new flower introduced in the 1600’s and over time the tulip became very popular and expensive. A non-fatal virus known as “mosaic” occurred which resulted in contrasting colored stripes or “flame” like patterns on the tulip petals. These new tulips, which were called “bizarres” were highly sought after and much more expensive than plain tulips. The more bizarre a tulip, the greater its price. Merchants began trying to predict which variegated tulip style would be the most popular for the coming year and buy those in bulk to hold, anticipating an increase in price. This was not much different than merchants stockpiling any other item such as cloth, anticipating that if that color or weave of cloth was in fashion the next year it would command higher prices. Shown below are a plain tulip and a variegated or “bizarre” tulip.

As bizarre variegated tulip prices began to rise wildly, people started to view tulips as a sound investment instead of just a decoration. As the price of tulips continued to climb more and more people bought and traded tulips in the hopes of selling them at a higher prices. People who believed that Tulip prices could not go any higher watched as their relatives and friends made enormous profits. The temptation to join in the tulip speculation and trading was was huge and it took a very disciplined person to resist the siren call to get rich quickly in tulips.

Near the end of the tulip mania in 1634 to early 1637 people were exchanging land jewels and furniture to obtain the bulbs. Thus, this irrational stage at its peak lasted several years. Eventually all bubbles peak. The Tulip bubble appears to have peaked when bulb prices reached astronomical levels. Near the very end of the bubble in January 1637 tulip bulb prices increased twenty-fold in that one month. Eventually prices got so high that some people decided they would sell out of tulips. Then, others followed their lead. Like a snowball rolling down a hill the sell-off gathered momentum as more and more people sold their tulips. This resulted in rapidly decreasing tulip prices. Government ministers stated that there was no reason for tulip prices to fall. Tulip bulb dealers went out of business. Tulip bulb prices declined and declined until finally the prices stabilized at about the price of a common onion! Although this example of a bubble about 400 years ago dealing with tulip bulbs may seem almost farcical, the pattern of the tulip bubble has been repeated many times in many different situations in the ensuing centuries.

The South Sea Bubble
The early 1700’s followed a long period of prosperity. Thus people in Britain had substantial savings and few investment alternatives. In addition there was a corporation, the East India Company, which had the exclusive rights to trade in the Indian subcontinent and China. By the 1700’s the East India Company accounted for roughly half the world’s trade, particularly in silk, cotton, indigo dye, salt, and tea. Given the huge success of the East India Company, and the wealth accumulated by its less than 500 shareholders, there was considerable appetite for a similar company that people might invest in, and hopefully become rich from.
In 1711 the South Sea Company was created and granted by the British government the exclusive right to trade with South America. However, Spain and Portugal controlled virtually all the colonies in South America. Thus, the value of the ability to trade with the South American colonies by a British company was somewhat dubious. Nevertheless, the South Sea Company issued stock shares which were eagerly snapped up and purchased by a citizenry eager to reap the rewards of a government granted monopoly which they hoped would be similar to that enjoyed by the East India Company.
None of the directors of the South Sea Company had any experience in trade with South America. They outfitted ships for the slave trade to South America, which turned out to not be profitable due to the mortality rate of the slaves on their ships. Wool that was to be sold in Vera Cruz was instead sent to Cartagena, where it rotted due to lack of buyers. What the directors lacked in business experience they made up with the image they created with the public. They rented a luxurious house in London to entertain in and court prospective investors. Demand for South Sea stock was such that the Directors issued more stock, which was purchased by an eager public. This issuance of stock was repeated several more times, with it being quickly bought up by a public eager to to buy more, and each time driving up the price of the stock.
Seeing investors reactions to the South Sea Company stock many people started their own companies to attract investors. With the willingness to invest so high, the company business plan didn't even need to feasible. One company’s business plan was to extract light from cucumbers. Another company intended to build a perpetual motion machine. One company was set up with the promise of bringing investors money, however the investors could not know the business plan as it was completely secret. All of these companies succeeded in attracting investors and driving up their stock prices. However, each one of their stocks crashed after a couple weeks like most of the new companies at the time leaving the investors poorer and the entrepreneurs richer.
None of the failures in the start-up companies with silly business plans caused a change in the desire of the British people to invest in more companies that were being created because of the continued success of the South Sea Company. However, the directors of the South Sea Company recognized that their stock price was inflated and likely to crash just like the smaller companies and the directors sold off their stocks. At this point the stock had risen over seven-fold from around 125 to 950 pounds, as shown in the figure below. Now the South Sea Company lost its only asset, that of appearing to be profitable . The South Sea Company stock price plummeted leaving the investors at a huge loss while enriching the directors. After seeing the failure of the South Sea Company, investors no longer had an appetite for the new start-ups with silly or fraudulent business plans. No longer could promoters create a startup with no real business plan and wait for investors to flock to buy the stock. An era had ended. With so many investors hurt including the famous Isaac Newton, Parliament passed the bubble act ending the ability for companies to issue stock.

Dot-Com Bubble

The invention of the internet was one of the single greatest achievements of recent years and changed the way people interacted and obtained information. Many companies were created to use the new technology. These companies were heavily invested in because of how exciting and promising the internet seemed to be. With all these investments the stocks rose quickly over time attracting more and more investors. One of the first huge internet companies was TheGlobe.com a messaging service hoping to earn money from website advertising. TheGlobe.com started off at $9 a share and exploded to $97 a share by the end of the first day of trading even without existing revenue. The success of TheGlobe.com became extremely dangerous as it showed that new internet companies did not need to be profitable. All that was needed was just and idea to obtain insane amounts of investment capital from investors wanting to get in on the internet boom. With the rising amount of people investing in internet companies, more and more people pitched their ideas in an attempt to grab money.

Companies often changed their name to have “com” in it hoping to cash in on the internet craze. New start-ups were created and raised money from investors with silly or non-existent business plans that were eerily similar to the start-ups during the South Sea Bubble. For example, instead of a company to extract light from cucumbers, in the dot-com era we had companies such as “bunions.com”, “Zap.com”, “Fogdog”, and more. There was a rush to register what people believed would be the premier names in some business segment such as “DrugStore.com”. All that mattered was having a cool sounding name and a registered internet domain name. The rest would be figured out later. And, the money came pouring in.

There was a belief that “this time is different”. There was a belief that these “new economy” technology and dot-com stocks were different and that old valuations principles did not apply. That coupled with rapidly rising prices, and so many people getting rich, led others to get in because they thought they were getting left behind. New startups prided themselves on their “burn rate” -- the rate that they burned through funding investors had provided. They burned through the money designing cool glamorous offices with no thought to the actual business. This was similar to the fancy house in London the directors of the South Sea Company rented to entertain and impress potential investors. Worrying about a viable product or service, or profitability, were considered passe’ and old fashioned. New cable news networks were started such as CNBC to constantly hype these new internet and technology companies and tell investors that the old principals did not apply any more.
More and more ordinary people were investing in stocks, often with on-line trading accounts, which were a new creation, and also part of the dot-com bubble. Everyone was making money hand over fist, or at least expected to soon be making money hand over fist. Cocktail parties, cookouts, kids sports games, all were places where people would gather and talk about their investments. A survey of individual investors near the peak of the dot-com bubble revealed that most of them expected to earn returns on their investments of 35% to 50% per year in the long run. This despite the fact that the long-run return on stocks had long ago been documented to average about 10% in the long run.
Eventually all bubbles burst. And, so it was with the dot-com bubble. The internet was one of the greatest achievements of recent years. However, the dot-com/technology bubble also represented the largest creation, and subsequent destruction of stock market wealth of all time. When the dot-com bubble imploded in the early 2000’s over $8 trillion of stock market value evaporated. Eventually investors began to look at a company’s intrinsic value again, and found that it didn’t exist for many many internet stocks. Stocks such as JDS Uniphase, which had risen over 3,000% lost almost all of their value and were selling at pennies per share. Worldcom, PalmPilot, Nortel, and many many other once high flying household internet stock names crashed and lost almost all of their value. The names were different, the fad this time was different (the internet) but the bubble followed the classic playbook all the way through including the inevitable crash.

Housing Bubble

In the early 2000’s housing prices seemed to only rise driven by demand for housing spiraling out of control. The demand was driven mainly by the changing of lending practices. Banks had stopped holding on to mortgages and collecting money from people instead sold the mortgage to investment companies who packaged the mortgages into mortgage backed securities to sell as investment opportunities that payed off if the majority of the loans were paid off. Mortgage backed securities became a very popular investment opportunity. However, with a finite amount of mortgages bankers needed to change lending practices in order to obtain more mortgages to keep up with the demand from the investment bankers. The banks lowered the standards of people who were eligible for mortgages to the point where NINJA (no income no job no assets) loans became widely used because after they sold the loan there was no risk for the banks. This accomplished the goal of creating more mortgages to sell. However it also allowed people who did not have the financial assets to buy an expensive house they could not afford and in some cases buy multiple extravagant houses. The mortgage backed securities that the risky loans were put into were rated AAA, the highest rating, by the rating agencies making the mortgage backed securities everyone was investing very dangerous. While the mortgage backed securities were becoming riskier and riskier the housing market kept rising. Eventually like all the bubbles it popped. The demand for housing ended around 2008 when the default rates on mortgages skyrocketed ending the demand for housing and plummeting the value of houses back down to before the 2000’s. This wiped out many American families as their house, their most valuable asset, plummeted in value and many found themselves paying off mortgages worth more than their houses current value. However, the aftermath would not stop there. The mortgage backed securities that were so popular were now failing and brought down many global financial institutions that had invested in them spreading the crisis around the world.

Conclusion
Unfortunately the saying history repeats itself is true with regards to investing in financial bubbles. Time and time again people get caught up in the new way to make money and often times end up worse than before. However, all of the bubbles do have common similarities. The first one is all bubbles occur after a time period that allows for high amounts of investing. This often means that there is a lot of wealth such as in the time before the South Sea Bubble or in the highly successful 90’s before the Dot-Com Bubble but it can also occur from

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[[Category:History]]

History of Economic Bubbles

2017-06-22T14:40:58Z

Sqjohnson:

=History of Economic Bubbles=

{{Infobox
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|header1 = The Chandos Portrait
of William Shakespeare
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|label2 = '''Artist'''
|data2 = Attributed to [[John Taylor]]
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|data3 = c. 1600s
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|data5 = National Portrait Gallery, London

}}

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=Background =
 
What is a bubble?

A bubble is the sharp rise and fall of asset prices over a period of time. The rise of the bubble is often caused by speculation of future prices causing the asset to be overvalued. When the asset is overvalued it is being traded or sold at a price above its actual value or intrinsic value. After the people come to the conclusion that the asset is overvalued the price crashes and returns back to its intrinsic value bursting the bubble.

Examples of Bubbles

Tulip Bubble

The first recorded bubble in history was the tulip mania bubble that took place in holland in the mid 1600s. Tulips were a new addition to the garden in Holland and became very popular. Then a virus started to infect the tulips leaving them with fire like patterns. These new tulips became in demand by almost all of holland, driving the price up. Eventually the continual rise in price caused the tulips to be viewed as a good investment because the price should continue to go up. The price escalated to the point of people exchanging land, jewels, and cows for the tulips. By the time the tulips had reached their peak the price had increased 20 fold. With the price so high people some people decided that it would be advantageous to sell the tulips and collect their profits. This lowered the price of the tulips for the first time. Because the tulips had no reason for escalating in price other than speculation the prices crashed with no reason to speculate on the tulips.

South Sea Bubble

The South Sea bubble is a bubble of new company stock caused by the desire for investment opportunities in 18th century England. The East India Company was hugely successful and paid out huge sums of money to its investors. However, only very few people were able to invest in the East India Company leaving many wealthy people without investment opportunity. In France the Mississippi Company had just started up and was bringing lots of money for the French investors. The wealthy Englishmen wanted an investment outlet and the South Sea Company offered that. The South Sea Company was set up to trade with South America and hopefully be as successful as the East India Company. However, South America was under the control of Spain and Portugal leaving little hope for the success rivaling the East India Company as the East India Company had full control over India. The South Sea Company attempted many trade ventures such as slave trading and and wool trading. However, the mortality was too high on the slave boats and they could not sell the wool stuck rotting on docks for many of them to be profitable.

Internet Bubble
The invention of the internet was one of the single greatest achievements of recent years and changed the way people interacted and obtained information. Many companies were created to use the new technology. These companies were heavily invested in because of how exciting and promising the internet seemed to be. With all these investments the stocks rose quickly over time attracting more and more investors. All that was needed was just and idea to obtain insane amounts of investment capital from investors wanting to get in on the internet boom. With the rising amount of people investing in internet companies, more and more people pitched their ideas in an attempt to grab money.

Companies often changed their name to have “com” in it hoping to cash in on the internet craze. New start-ups were created and raised money from investors with silly or non-existent business plans that were eerily similar to the start-ups during the South Sea Bubble. All that mattered was having a cool sounding name and a registered internet domain name. The rest would be figured out later. And, the money came pouring in.

Growth Stock New Issue Craze
Investors had a huge appetite for space-age stocks in the Soaring Sixties. More new issues were created in the 1959-62 period than in previous period in the history of the stock market. It was labeled the “tronics” boom. Many of the stock offerings had names with some garbled version of the word “electronics” in their name, even if the company had nothing to do with electronics. Investors quickly bought up shares in just about any company with “tronics” in its name.

Conglomerate Boom
What investors wanted was growth in earnings per share. By the mid 1960’s businesses found a way to create this with conglomerates touting “synergies”. Synergism is the quality that 2+2 = 5. Thus because of supposed synergies two companies combined would create more earnings per share than the two of the separately. Essentially a firm with higher price/earnings multiples would buy another company which trades at lower price/earnings multiples. The combined company would have higher earnings per share, thus having an increased earnings per share growth. But, all that was happening was the conglomerate (the combined companies) revaluing the earnings of the lower multiple company at the other firms’s higher multiple. It all worked until the conglomerates could not keep buying up cheaper companies and pulling in their earnings into their own at high multiples. When that happened the conglomerate boom collapsed.

Concept Stock Bubble
This fad was in stocks with a good story to tell, or a “concept”. This became known as the “go-go era”. Often these concept stocks had something to do with marketing to youth. It was the youth culture of the 1960’s and one of the concepts was that only youth could market to and sell to youth. Only they understood other youths. One such stock was NSM, National Student Marketing”. Each of its divisions had something to do with the college-age youth market from posters to records sweatshirts.

The Nifty Fifty
After the last couple of bubbles, investors decided they needed safe growth stocks. About 50 stocks were considered safe premier growth stocks. These included familiar names such as IBM, Xerox, Avon, Kodak, McDonalds, Polaroid, and Disney. As more and more investors purchased these supposedly safe growth stocks they pushed their prices to higher and higher levels till many of them were trading at as much as 80 times earnings, compared to a typical stocks 15 times earnings. Ultimately this bubble ended and the Nifty Fifty stocks cam crashing back to earth.

Roaring Eighties - Return of the New Issues
Just like in the early 1960’s, the 1980’s were a new issue market. This time around the craze centered around Biotechnology and Microelectronics stocks. Most Biotech companies were not profitable, and the potential for profits was very far in the future. But, still investors flocked to them, bid their prices up to very high levels. The results were predictable. A lot of stocks with names and business plans in the Biotech or Microelectronics areas were sold, went up, and then ultimately crashed to earth. In the late 1980’s most biotech stocks lost 75% of their value, or more.

=Deliverable=

Comparing the South Sea Bubble to More Modern Bubbles
A bubble is an economic term describing a cycle of rapid expansion of asset prices followed by a rapid contraction. Often the increase in price is a result of trend-following investors who believe the price will continue to rise in the future. In the theoretical literature of bubbles a bubble occurs when the expected rate of change in the price of an asset is an important factor in determining the current market price of the asset. In other words, the rapid run up in prices is more important to investors and speculators than the asset’s true intrinsic value. During bubbles speculators often purchase the assets using borrowed money or debt. Bubbles are also often accompanied by a belief that “this time is different”.
In a bubble investors hope to sell the asset later on at a higher price to future investors. This is known as the greater fool theory because each investor or fool has bought an overvalued financial asset in the hope that a future investor or greater fool will buy it from him. The bursting of bubbles occurs when there are no more fools willing to invest in the overpriced asset and a mass selloff of the asset causes the price to plummet. Although this seems like a simple trap to avoid, because of the difficulty in accurately determining an asset’s intrinsic or true value it is hard to detect bubbles until they have already occurred. Bubbles can occur in a variety of assets and have occurred many times throughout history. Some of the asset bubbles covered here include tulips, stocks, and housing prices.

Tulip Bulb Mania
One of the earliest documented examples of a bubble was the Tulip Mania Bubble in Holland during the mid 1600’s. Tulips were a new flower introduced in the 1600’s and over time the tulip became very popular and expensive. A non-fatal virus known as “mosaic” occurred which resulted in contrasting colored stripes or “flame” like patterns on the tulip petals. These new tulips, which were called “bizarres” were highly sought after and much more expensive than plain tulips. The more bizarre a tulip, the greater its price. Merchants began trying to predict which variegated tulip style would be the most popular for the coming year and buy those in bulk to hold, anticipating an increase in price. This was not much different than merchants stockpiling any other item such as cloth, anticipating that if that color or weave of cloth was in fashion the next year it would command higher prices. Shown below are a plain tulip and a variegated or “bizarre” tulip.

As bizarre variegated tulip prices began to rise wildly, people started to view tulips as a sound investment instead of just a decoration. As the price of tulips continued to climb more and more people bought and traded tulips in the hopes of selling them at a higher prices. People who believed that Tulip prices could not go any higher watched as their relatives and friends made enormous profits. The temptation to join in the tulip speculation and trading was was huge and it took a very disciplined person to resist the siren call to get rich quickly in tulips.

Near the end of the tulip mania in 1634 to early 1637 people were exchanging land jewels and furniture to obtain the bulbs. Thus, this irrational stage at its peak lasted several years. Eventually all bubbles peak. The Tulip bubble appears to have peaked when bulb prices reached astronomical levels. Near the very end of the bubble in January 1637 tulip bulb prices increased twenty-fold in that one month. Eventually prices got so high that some people decided they would sell out of tulips. Then, others followed their lead. Like a snowball rolling down a hill the sell-off gathered momentum as more and more people sold their tulips. This resulted in rapidly decreasing tulip prices. Government ministers stated that there was no reason for tulip prices to fall. Tulip bulb dealers went out of business. Tulip bulb prices declined and declined until finally the prices stabilized at about the price of a common onion! Although this example of a bubble about 400 years ago dealing with tulip bulbs may seem almost farcical, the pattern of the tulip bubble has been repeated many times in many different situations in the ensuing centuries.

The South Sea Bubble
The early 1700’s followed a long period of prosperity. Thus people in Britain had substantial savings and few investment alternatives. In addition there was a corporation, the East India Company, which had the exclusive rights to trade in the Indian subcontinent and China. By the 1700’s the East India Company accounted for roughly half the world’s trade, particularly in silk, cotton, indigo dye, salt, and tea. Given the huge success of the East India Company, and the wealth accumulated by its less than 500 shareholders, there was considerable appetite for a similar company that people might invest in, and hopefully become rich from.
In 1711 the South Sea Company was created and granted by the British government the exclusive right to trade with South America. However, Spain and Portugal controlled virtually all the colonies in South America. Thus, the value of the ability to trade with the South American colonies by a British company was somewhat dubious. Nevertheless, the South Sea Company issued stock shares which were eagerly snapped up and purchased by a citizenry eager to reap the rewards of a government granted monopoly which they hoped would be similar to that enjoyed by the East India Company.
None of the directors of the South Sea Company had any experience in trade with South America. They outfitted ships for the slave trade to South America, which turned out to not be profitable due to the mortality rate of the slaves on their ships. Wool that was to be sold in Vera Cruz was instead sent to Cartagena, where it rotted due to lack of buyers. What the directors lacked in business experience they made up with the image they created with the public. They rented a luxurious house in London to entertain in and court prospective investors. Demand for South Sea stock was such that the Directors issued more stock, which was purchased by an eager public. This issuance of stock was repeated several more times, with it being quickly bought up by a public eager to to buy more, and each time driving up the price of the stock.
Seeing investors reactions to the South Sea Company stock many people started their own companies to attract investors. With the willingness to invest so high, the company business plan didn't even need to feasible. One company’s business plan was to extract light from cucumbers. Another company intended to build a perpetual motion machine. One company was set up with the promise of bringing investors money, however the investors could not know the business plan as it was completely secret. All of these companies succeeded in attracting investors and driving up their stock prices. However, each one of their stocks crashed after a couple weeks like most of the new companies at the time leaving the investors poorer and the entrepreneurs richer.
None of the failures in the start-up companies with silly business plans caused a change in the desire of the British people to invest in more companies that were being created because of the continued success of the South Sea Company. However, the directors of the South Sea Company recognized that their stock price was inflated and likely to crash just like the smaller companies and the directors sold off their stocks. At this point the stock had risen over seven-fold from around 125 to 950 pounds, as shown in the figure below. Now the South Sea Company lost its only asset, that of appearing to be profitable . The South Sea Company stock price plummeted leaving the investors at a huge loss while enriching the directors. After seeing the failure of the South Sea Company, investors no longer had an appetite for the new start-ups with silly or fraudulent business plans. No longer could promoters create a startup with no real business plan and wait for investors to flock to buy the stock. An era had ended. With so many investors hurt including the famous Isaac Newton, Parliament passed the bubble act ending the ability for companies to issue stock.

Dot-Com Bubble

The invention of the internet was one of the single greatest achievements of recent years and changed the way people interacted and obtained information. Many companies were created to use the new technology. These companies were heavily invested in because of how exciting and promising the internet seemed to be. With all these investments the stocks rose quickly over time attracting more and more investors. One of the first huge internet companies was TheGlobe.com a messaging service hoping to earn money from website advertising. TheGlobe.com started off at $9 a share and exploded to $97 a share by the end of the first day of trading even without existing revenue. The success of TheGlobe.com became extremely dangerous as it showed that new internet companies did not need to be profitable. All that was needed was just and idea to obtain insane amounts of investment capital from investors wanting to get in on the internet boom. With the rising amount of people investing in internet companies, more and more people pitched their ideas in an attempt to grab money.

Companies often changed their name to have “com” in it hoping to cash in on the internet craze. New start-ups were created and raised money from investors with silly or non-existent business plans that were eerily similar to the start-ups during the South Sea Bubble. For example, instead of a company to extract light from cucumbers, in the dot-com era we had companies such as “bunions.com”, “Zap.com”, “Fogdog”, and more. There was a rush to register what people believed would be the premier names in some business segment such as “DrugStore.com”. All that mattered was having a cool sounding name and a registered internet domain name. The rest would be figured out later. And, the money came pouring in.

There was a belief that “this time is different”. There was a belief that these “new economy” technology and dot-com stocks were different and that old valuations principles did not apply. That coupled with rapidly rising prices, and so many people getting rich, led others to get in because they thought they were getting left behind. New startups prided themselves on their “burn rate” -- the rate that they burned through funding investors had provided. They burned through the money designing cool glamorous offices with no thought to the actual business. This was similar to the fancy house in London the directors of the South Sea Company rented to entertain and impress potential investors. Worrying about a viable product or service, or profitability, were considered passe’ and old fashioned. New cable news networks were started such as CNBC to constantly hype these new internet and technology companies and tell investors that the old principals did not apply any more.
More and more ordinary people were investing in stocks, often with on-line trading accounts, which were a new creation, and also part of the dot-com bubble. Everyone was making money hand over fist, or at least expected to soon be making money hand over fist. Cocktail parties, cookouts, kids sports games, all were places where people would gather and talk about their investments. A survey of individual investors near the peak of the dot-com bubble revealed that most of them expected to earn returns on their investments of 35% to 50% per year in the long run. This despite the fact that the long-run return on stocks had long ago been documented to average about 10% in the long run.
Eventually all bubbles burst. And, so it was with the dot-com bubble. The internet was one of the greatest achievements of recent years. However, the dot-com/technology bubble also represented the largest creation, and subsequent destruction of stock market wealth of all time. When the dot-com bubble imploded in the early 2000’s over $8 trillion of stock market value evaporated. Eventually investors began to look at a company’s intrinsic value again, and found that it didn’t exist for many many internet stocks. Stocks such as JDS Uniphase, which had risen over 3,000% lost almost all of their value and were selling at pennies per share. Worldcom, PalmPilot, Nortel, and many many other once high flying household internet stock names crashed and lost almost all of their value. The names were different, the fad this time was different (the internet) but the bubble followed the classic playbook all the way through including the inevitable crash.

Housing Bubble

In the early 2000’s housing prices seemed to only rise driven by demand for housing spiraling out of control. The demand was driven mainly by the changing of lending practices. Banks had stopped holding on to mortgages and collecting money from people instead sold the mortgage to investment companies who packaged the mortgages into mortgage backed securities to sell as investment opportunities that payed off if the majority of the loans were paid off. Mortgage backed securities became a very popular investment opportunity. However, with a finite amount of mortgages bankers needed to change lending practices in order to obtain more mortgages to keep up with the demand from the investment bankers. The banks lowered the standards of people who were eligible for mortgages to the point where NINJA (no income no job no assets) loans became widely used because after they sold the loan there was no risk for the banks. This accomplished the goal of creating more mortgages to sell. However it also allowed people who did not have the financial assets to buy an expensive house they could not afford and in some cases buy multiple extravagant houses. The mortgage backed securities that the risky loans were put into were rated AAA, the highest rating, by the rating agencies making the mortgage backed securities everyone was investing very dangerous. While the mortgage backed securities were becoming riskier and riskier the housing market kept rising. Eventually like all the bubbles it popped. The demand for housing ended around 2008 when the default rates on mortgages skyrocketed ending the demand for housing and plummeting the value of houses back down to before the 2000’s. This wiped out many American families as their house, their most valuable asset, plummeted in value and many found themselves paying off mortgages worth more than their houses current value. However, the aftermath would not stop there. The mortgage backed securities that were so popular were now failing and brought down many global financial institutions that had invested in them spreading the crisis around the world.

Conclusion
Unfortunately the saying history repeats itself is true with regards to investing in financial bubbles. Time and time again people get caught up in the new way to make money and often times end up worse than before. However, all of the bubbles do have common similarities. The first one is all bubbles occur after a time period that allows for high amounts of investing. This often means that there is a lot of wealth such as in the time before the South Sea Bubble or in the highly successful 90’s before the Dot-Com Bubble but it can also occur from

==Use Subsections Headings==
 
Organize each section of this article so that it has a logical flow. If you intend to discuss one aspect of the origin of a person, place, thing, or idea, identify the appropriate existing section of the article, or create that section if it doesn't exist. Then, make a clear subheading. If you notice that some other information is not organized clearly, rearrange the information, but do so cautiously and responsibly! The goal here is clarity for the reader.
 
Add links to other articles, but '''do not link to personal student profile pages or milestone pages'''. Add media as needed in the appropriate sections.
 
[[File: Articlepicture.jpg|x350px|right|thumb|frame|Representative Image]] 

=References=
If appropriate, add a references section
 

[[Category:History]]

History of Economic Bubbles

2017-06-22T14:39:31Z

Sqjohnson: Created page with "=History of Economic Bubbles= {{Infobox |title = Article Title |header1 = The Chandos Portrait of William Shakespeare |bodystyle = width:25em |image = File:Articlepicture...."

Crossing the English Channel

2017-06-22T14:37:23Z

Sqjohnson:

=Crossing the English Channel=

{{Infobox
|title = Portrait of Louis Bleriot
|header1 = The Chandos Portrait
of William Shakespeare
|bodystyle = width:25em
|image = [[File:220px-Louis_Bleriot-1.jpg|x450px|alt=Article Image]]
|caption = Samuel Johnson
|label2 = '''Artist'''
|data2 = Attributed to [[John Taylor]]
|label3 = '''Year'''
|data3 = c. 1600s
|label4 = '''Dimensions'''
|data4 = 55.2 cm × 43.8 cm ( 21 3⁄4 in × 17 1⁄4 in)
|label5 = '''Location'''
|data5 = National Portrait Gallery, London

}}

Use this page as a template when creating new articles by clicking ''Actions>View Source'' and create a new page with the name of the article you're creating. In the newly copied page, [[Special:Upload|upload]] your own image, then replace the "Articlepicture.jpg" above with the new image name. Replace "Representative Image" in both the image line and the top-level heading above with your first and last name. Delete this whole paragraph beneath the Representative Image title but not including the ''Table of Contents'' tag
<nowiki>__TOC__</nowiki>.

=Overview=
The paragraph should give a three to five sentence abstract about your article. '''PLEASE NOTE:''' this article template has only a few sections as examples, but your actual article contributions should have '''many''' relevant sections '''and''' subsections. Please start to block out and complete those sections with relevant information such as the '''very objective, fact-based, and heavily referenced''' "who, what, when, where, and why" about this article. Articles don't just have to be huge buildings; '''individual artifacts and lesser-known people, places, and things count as article topics'''! Don't forget to include relevant [[#Category tags|category tags]] for each article!
 
__TOC__
 

=Background or Origin of Article=
 

In 1909, after early achievements the new field of aviation entered its next phase. The beginning of this next phase was kicked off by the crossing of the English channel, for the first time. The crossing occurred between Calais, France, and Dover on the English side. The crossing of the channel was formalized by a contest sponsored by the Daily Mail, a newspaper, with the goal of increasing readership. This was initiated by the owner of the Daily Mail, Lord Northcliffe, who believed newspapers should create news, not just report it. Lord Northcliffe put a prize of 1,000 pounds to the first person to successfully cross the English Channel by air. Lord Northcliffe also believed in the future of aviation.

The creation of the prize for crossing the English Channel caught the imagination of the public. Other newspapers in Europe and in the US had to send their reporters to cover it. Thousands of people travelled to the French and English sides of the channel when it was reported that attempts would be made to cross. These tens of thousands of people were hoping to experience history being made. Lord Northcliffe’s goal was achieved and he created a huge amount of public interest in the aviation milestone of crossing the English Channel.

Three men attempted or planned to attempt the English Channel Crossing. They were: Hubert Latham, the Comte de Lambert, and Louis Bleriot. The Comte de Lambert had actually been taught to fly by Wilbur Wright. And, he had a Wright biplane. Unfortunately, he crashed his biplane while practicing near the French side of the channel, and was out of the competition.

Hubert Latham was a wealthy French Playboy. He once described his profession as “man of the world”. He had many accomplishments under his belt. He had raced automobiles. He had raced speed boats. He had crossed the English Channel in a balloon with a cousin, who was the pilot. His latest interest became airplanes. He learned to fly at the aircraft works of the French Antonette firm who also made the engines of the boats he raced. He quickly became on of the most skilled pilots also a flying instructor. He quickly began setting a variety of records with the Antonette airplane. He set an altitude record. Then, he set a record for distance. He showed off how stable the Antonette airplane was during the distance record by taking his hands off the wheel and lighting and smoking a cigarette in his trademark ivory holder. If he crashed that was the first thing he would do after the crash, light up a cigarette and smoke it in his ivory holder. He was known to carry his cigarette and holder in a silver case with him everywhere he went, particularly on his adventures.

Louis Bleriot was a self-made man. He had gone to college at Ecole Centrale, a polytechnic school in Paris, where he earned a degree in engineering. His first job was at an electrical engineering company. He developed the first successful head lamp for automobiles. Then he formed his own company to manufacture headlamps and sell them to automobile manufacturers. His company was very successful and he became a wealthy many. This meant he could pursue his interests in aviation with the profits from his headlamp business. He had long had an interest in aviation. He began his aeroplane experiments by designing and building a flapping wing plane, which was a failure. He was a self taught pilot, learning as he created new aeroplane designs, constructed them, and attempted to fly them. In fact, he was noted for his crashes. But, he stuck to it, and by 1909, he had what he called his Bleriot XI, his eleventh iteration of his airplane experiments.

The Planes

Bleriot’s experiments had evolved towards monoplanes, which meant the plane had one wing. Many other early experimenters, including the Wright Brothers were focused on biplanes, planes with two wings. Bleriot’s eleventh airplane the Bleriot XI was the culmination of his work and had what now looks like a modern layout. It was a monoplane with the engine up front at the nose, a single set of wings, and a rudder and elevator at the tail. This was different than the Wright biplane that had an elevator out in the front, rudders at the rear, and pusher props behind the wing. Unlike the Wright biplane where the pilot sat on the front of the wing, in Bleriot’s plane the pilot sat in a fuselage between the wings. The plane relied on a 3 cylinder air cooled Anzani Engine motorcycle in order to power it along with a more efficient propeller. It also used advanced landing suspension that could bend and pivot in order to allow it land in fields better.

After the English Channel crossing Bleriot and his plane were world famous. There was lots of demand for Bleriot XI’s around the world and his company set about producing them. Many were produced in his own factory. Others were produced under license by other firms. Over 800 Bleriot XI’s were produced worldwide over the next five years, making it the first mass produced airplane. The Bleriot XI design continued to evolve. The first major change early on in producing Bleriot XI’s was fitting the more powerful 7-cylinder rotary Gnome engine. In the Gnome engine the engine cylinders actually spun around with the propellor unlike the 3-cylinder Anzani used in the original. Later variants of the XI included two-seat versions that could carry a passenger. The Bleriot company would later produce the SPAD fighter flown by the Allies in WWI. The Bleriot aircraft company was still a thriving airplane manufacturer at the time of Louis’ death in 1936.

Hubert Latham did not design his own plane. He was a pilot, and piloted the Antonette, a plane designed a man named Leon Levavasseur, at the Antoinette company. The Antoinette was also a monoplane, with the rudder and elevator back at the rear of the plane. The engine and propellor were up front, and the pilot sat sort of in and sort of on top of the fuselage behind the wings. So, the Antoinette was also in the more modern configuration of an airplane. The Antoinette had a V-8 water cooled engine manufactured by their firm, originally for racing boats. The radiators for the water were attached along the sides of the fuselage up by the nose of the airplane. The propellor on the Antoinette was much cruder than the Bleriot, and resembled very simple rowing paddles. The Antoinette was a considerably larger airplane than the Bleriot.

The Antoinette airplane did not become famous like the Bleriot since it did not achieve the first flight over the channel. The Antoinette airplane continued to be developed over the next several years. They switched the control back from ailerons to wing-warping. And, they installed a larger V-16 engine and a more modern carved wood propellor. But, the overall design stayed very similar to the one that Latham attempted the Channel crossing with. There was very little demand for the Antoinette airplanes, since most people were buying Bleriot’s. By 1912, just three years after the English Channel crossing the Antoinette firm was bankrupt and out of business.

The Race

Hubert Latham attempted to cross the English Channel from Calais France to Dover England after arriving on July 19th 1909. Because of an engine failure he was forced to attempt to land in the Channel. Each time he flew he had a French destroyer following him in order to rescue him if he crashed into the water. After they arrived at his floating plane wreck, they found him dry sitting on top of the wreck smoking a cigarette. Latham’s Antoinette was destroyed from the crash and a new one had to be sent up via train.

On July 21st Bleriot arrived in Calais with his Bleriot XI ready to attempt crossing the English Channel. Because of the severe wind at the time bleriot and latham were grounded for a couple days. However, on July 25th Bleriot and his mechanic are awake very early and catch good weather for crossing the channel and set off around 4:40 am. The noise of Bleriot taking off woke up Latham and his team who rushed to prepare the Antoinette. However, they were too late as the wind had become unfavorable when they were ready to take off.

When Bleriot took off he did not have any navigational devices with him such as a compass, map, or clock. This lead to him losing his orientation and arriving down the coast from his landing point in dover. However, he was able to correct his course and arrive in dover completing the Daily Mail Prize and successfully crossing the English Channel. After arriving Bleriot offered to split the prize money with Latham if he could make it across. This gesture was never tested as Latham failed to cross the channel again resulting in another rescue of him and his wreckage. Latham was never able to attempt completing the Daily Mail prize as the Antoinette company did not want to lose another plane.

=Deliverable=

<mediaplayer>File:Crossing_the_English_Channe_low_res.mp4</mediaplayer>

 

=References=
If appropriate, add a references section
 

[[Category:History]]

History of the Battle of Britain

2017-06-22T14:33:37Z

Sqjohnson: Created page with "=History of the Battle of Britain= {{Infobox |title = Article Title |header1 = The Chandos Portrait of William Shakespeare |bodystyle = width:25em |image = File:Articlepic..."

=History of the Battle of Britain=

{{Infobox
|title = Article Title
|header1 = The Chandos Portrait
of William Shakespeare
|bodystyle = width:25em
|image = [[File:Articlepicture.jpg|x450px|alt=Article Image]]
|caption = Representative Article Image
|label2 = '''Artist'''
|data2 = Attributed to [[John Taylor]]
|label3 = '''Year'''
|data3 = c. 1600s
|label4 = '''Dimensions'''
|data4 = 55.2 cm × 43.8 cm ( 21 3⁄4 in × 17 1⁄4 in)
|label5 = '''Location'''
|data5 = National Portrait Gallery, London

}}

Use this page as a template when creating new articles by clicking ''Actions>View Source'' and create a new page with the name of the article you're creating. In the newly copied page, [[Special:Upload|upload]] your own image, then replace the "Articlepicture.jpg" above with the new image name. Replace "Representative Image" in both the image line and the top-level heading above with your first and last name. Delete this whole paragraph beneath the Representative Image title but not including the ''Table of Contents'' tag
<nowiki>__TOC__</nowiki>.

=Overview=
The paragraph should give a three to five sentence abstract about your article. '''PLEASE NOTE:''' this article template has only a few sections as examples, but your actual article contributions should have '''many''' relevant sections '''and''' subsections. Please start to block out and complete those sections with relevant information such as the '''very objective, fact-based, and heavily referenced''' "who, what, when, where, and why" about this article. Articles don't just have to be huge buildings; '''individual artifacts and lesser-known people, places, and things count as article topics'''! Don't forget to include relevant [[#Category tags|category tags]] for each article!
 
__TOC__
 

=Background =
 
Pre Battle Background

Hitler began his conquest of Europe by annexing Austria into Germany. After Czechoslovakia quickly surrendered it too was added to Germany’s growing empire. WWII truly began after Hitler invaded Poland bringing Poland’s allies Britain and France into the War against Germany. The invasions continued and soon Hitler had taken Denmark and Norway. With most of the European resistance now under Hitler’s control, his focus turned to Britain his last remaining threat. In order to conquer Britain troops would first have to be moved across the English Channel this was known as Operation Sea Lion. Hitler believed that he needed air control over the English channel to successfully transport soldiers. The desire for air superiority lead to the bombing raids over England.

Prior Bombings of England

In WWI Germany was in the same situation hitler was facing. In order to weaken the British the Germans used the newly developed Zeppelin airships to fly across the Channel and bomb Britain. Although not very effective because the Zeppelin’s were in accurate the bombings caused a lot of panic. The british responded to limit the Zeppelin’s damage and dimmed the city streets to hurt the zeppelin visibility. However, the key to was to be able to reliably take out the Zeppelins instead of just limiting them. Eventually incendiary bullets were developed for airplane fighters allowing them to take out the Zeppelins with ease.

With the Zeppelin threat almost eliminated the Germans switched from the sitting duck Zeppelins to the bi-plane Gotha Bombers. These bombers were much more successful. Attacking the Gotha Bombers required the creation of communication between fighter planes and new combat maneuvers. In a year over 60 Gotha bombers were destroyed proving the success of the new british tactics.

New Technology

After experiencing the bombing of WWI, in 1935 England started to look for a solution to prepare it self for the seemly inevitable bombing raids in WWII. After 3 years of work the British were able to create a 30 MHz radar system. Using this radar the British created the dowding system, a series of radar towers and airfields organized to quickly deploy fighters in response to a bombing raid. After German forces had been detected by the radar the message was relayed to command centers until the closest airfield sent out fighters to intercept the bombers. This system was named after its creator Air Chief Marshal Hugh Dowding.

Planes

Aircraft in the Battle of Britain

Boulton Paul Defiant

· 1030 hp Rolls-Royce twelve cylinder liquid-cooled engine
· 39ft wide
· 35ft 4 inch long
· Max speed 304 mph
· Armament 4 .303in Browning machine guns in turret
· Pilot and air gunner
· Production fell behind leading up to the war
· Turret interceptor plane
· Forced into action besides Spitfire and Hurricane

Bristol Beaufighter

· Pilot gunner and radar operator
· 2 1400 hp Bristol Hercules xi fourteen cylinder air-cooled engines
· 57ft 10 inch wide
· 41ft 4 inch length
· max speed 321 mph
· four 20mm hispano cannon in the nose and six .303in browning machine guns in wings
· night fighter and torpedo bomber

Bristol Blenheim

· two 840 hp Bristol Mercury VIII nine-cylinder air-cooled engines.
· 56ft 4 in wide
· 39ft 9 in length
· max speed 285 mph
· 4 .303in browning machine guns mounted 1 .303 in machine gun in turret.
· Failed as a day fighter used as a night fighter instead.

Hawker Hurricane

· 1030 hp Rolls-Royce Merlin III twelve cylinder liquid-cooled engine
· span 40ft
· length 31ft 4 in
· max speed 328 mph
· eight .303 in browning machine guns mounted in wings
· pilot only
· fighter in battle of Britain
· 1715 flew in the period of the battle

Super marine Spitfire

· 1,1030 hp Rolls-Royce merlin III twelve-cylinder liquid-cooled engine
· Span 36ft 11 inch
· Length 29ft 11 in
· Max Speed 362 mph
· Eight .303 in Browning machine guns mounted in wings
· Pilot
· Main airplane used in the battle of Britain

Dornier Do17

· Two 1,000 hp Bramo 322P nine-cylinder air-cooled engines
· Span 59ft ¾ inch
· Length 52ft
· Max Speed 265 mph
· Between 4 and 8 7.9 mm machine guns in front, rear and beam cockpit mountings and ventral position
· Bomb load of 2,200 lb
· Pilot and 4 gunners navigators and bomb aimers
· Bomber used by the Germans in the battle of Britain

Heinkel He 111

· Two 1,100 Daimler-Benz DB601A-1 twelve-cylinder liquid-cooled engines
· Span 74ft 1 ¾ in
· Length 53ft 9 ½ in
· Max Speed 247 mph
· Three 7.9 mm machine guns in nose dorsal and ventral positions
· Pilot two gunners navigators bomb aimers
· Bomb load 4,410lb
· Started off being designed as a mail and people carrier

Flight Tactics for Germany

The German bombers flew in a formation toward the target. While there was no threat to the bombers, German fighters flew above the bombers ready to engage any opposing British fighters. The German Messerschmitt performed better at higher altitudes than the British planes giving them the advantage if the British were at that altitude. However most of the advantage came from the sun blinding opposing fighters and having gravity on their side when it came time to engage.

Flight Tactics for Britain

In the beginning of the war the British prided themselves on having excellent formation flying skills and developed formations to maintain in combat. However, the use of the formation limited the maneuverability of the whole fighter squadron and as a result the squadrons effectiveness. Eventually the British changed their formations to allow the fighters to adapt in the fight becoming more fluid.

 
==Use Subsections Headings==
 
Organize each section of this article so that it has a logical flow. If you intend to discuss one aspect of the origin of a person, place, thing, or idea, identify the appropriate existing section of the article, or create that section if it doesn't exist. Then, make a clear subheading. If you notice that some other information is not organized clearly, rearrange the information, but do so cautiously and responsibly! The goal here is clarity for the reader.
 
Add links to other articles, but '''do not link to personal student profile pages or milestone pages'''. Add media as needed in the appropriate sections.
 
[[File: Articlepicture.jpg|x350px|right|thumb|frame|Representative Image]] 

=References=
If appropriate, add a references section
 
=External Links=
If appropriate, add an external links section
 
=Image Gallery=
If appropriate, add an image gallery
 
=Category tags=
'''Don't forget to add category tags!!! Your Article Pages MUST contain one or more Category tags like this: 
<nowiki>
[[Category:Art]]</nowiki> 
<nowiki>
[[Category:Music]]</nowiki> 
<nowiki>
[[Category:Philosophy & Religion]]</nowiki> 
<nowiki>
[[Category:Drama & Theater]]</nowiki> 
<nowiki>
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[[Category:History]]

Crossing the English Channel

2017-06-22T14:30:15Z

Sqjohnson:

=Crossing the English Channel=

{{Infobox
|title = Portrait of Louis Bleriot
|header1 = The Chandos Portrait
of William Shakespeare
|bodystyle = width:25em
|image = [[File:220px-Louis_Bleriot-1.jpg|x450px|alt=Article Image]]
|caption = Samuel Johnson
|label2 = '''Artist'''
|data2 = Attributed to [[John Taylor]]
|label3 = '''Year'''
|data3 = c. 1600s
|label4 = '''Dimensions'''
|data4 = 55.2 cm × 43.8 cm ( 21 3⁄4 in × 17 1⁄4 in)
|label5 = '''Location'''
|data5 = National Portrait Gallery, London

}}

Use this page as a template when creating new articles by clicking ''Actions>View Source'' and create a new page with the name of the article you're creating. In the newly copied page, [[Special:Upload|upload]] your own image, then replace the "Articlepicture.jpg" above with the new image name. Replace "Representative Image" in both the image line and the top-level heading above with your first and last name. Delete this whole paragraph beneath the Representative Image title but not including the ''Table of Contents'' tag
<nowiki>__TOC__</nowiki>.

=Overview=
The paragraph should give a three to five sentence abstract about your article. '''PLEASE NOTE:''' this article template has only a few sections as examples, but your actual article contributions should have '''many''' relevant sections '''and''' subsections. Please start to block out and complete those sections with relevant information such as the '''very objective, fact-based, and heavily referenced''' "who, what, when, where, and why" about this article. Articles don't just have to be huge buildings; '''individual artifacts and lesser-known people, places, and things count as article topics'''! Don't forget to include relevant [[#Category tags|category tags]] for each article!
 
__TOC__
 

=Background or Origin of Article=
 

In 1909, after early achievements the new field of aviation entered its next phase. The beginning of this next phase was kicked off by the crossing of the English channel, for the first time. The crossing occurred between Calais, France, and Dover on the English side. The crossing of the channel was formalized by a contest sponsored by the Daily Mail, a newspaper, with the goal of increasing readership. This was initiated by the owner of the Daily Mail, Lord Northcliffe, who believed newspapers should create news, not just report it. Lord Northcliffe put a prize of 1,000 pounds to the first person to successfully cross the English Channel by air. Lord Northcliffe also believed in the future of aviation.

The creation of the prize for crossing the English Channel caught the imagination of the public. Other newspapers in Europe and in the US had to send their reporters to cover it. Thousands of people travelled to the French and English sides of the channel when it was reported that attempts would be made to cross. These tens of thousands of people were hoping to experience history being made. Lord Northcliffe’s goal was achieved and he created a huge amount of public interest in the aviation milestone of crossing the English Channel.

Three men attempted or planned to attempt the English Channel Crossing. They were: Hubert Latham, the Comte de Lambert, and Louis Bleriot. The Comte de Lambert had actually been taught to fly by Wilbur Wright. And, he had a Wright biplane. Unfortunately, he crashed his biplane while practicing near the French side of the channel, and was out of the competition.

Hubert Latham was a wealthy French Playboy. He once described his profession as “man of the world”. He had many accomplishments under his belt. He had raced automobiles. He had raced speed boats. He had crossed the English Channel in a balloon with a cousin, who was the pilot. His latest interest became airplanes. He learned to fly at the aircraft works of the French Antonette firm who also made the engines of the boats he raced. He quickly became on of the most skilled pilots also a flying instructor. He quickly began setting a variety of records with the Antonette airplane. He set an altitude record. Then, he set a record for distance. He showed off how stable the Antonette airplane was during the distance record by taking his hands off the wheel and lighting and smoking a cigarette in his trademark ivory holder. If he crashed that was the first thing he would do after the crash, light up a cigarette and smoke it in his ivory holder. He was known to carry his cigarette and holder in a silver case with him everywhere he went, particularly on his adventures.

Louis Bleriot was a self-made man. He had gone to college at Ecole Centrale, a polytechnic school in Paris, where he earned a degree in engineering. His first job was at an electrical engineering company. He developed the first successful head lamp for automobiles. Then he formed his own company to manufacture headlamps and sell them to automobile manufacturers. His company was very successful and he became a wealthy many. This meant he could pursue his interests in aviation with the profits from his headlamp business. He had long had an interest in aviation. He began his aeroplane experiments by designing and building a flapping wing plane, which was a failure. He was a self taught pilot, learning as he created new aeroplane designs, constructed them, and attempted to fly them. In fact, he was noted for his crashes. But, he stuck to it, and by 1909, he had what he called his Bleriot XI, his eleventh iteration of his airplane experiments.

The Planes

Bleriot’s experiments had evolved towards monoplanes, which meant the plane had one wing. Many other early experimenters, including the Wright Brothers were focused on biplanes, planes with two wings. Bleriot’s eleventh airplane the Bleriot XI was the culmination of his work and had what now looks like a modern layout. It was a monoplane with the engine up front at the nose, a single set of wings, and a rudder and elevator at the tail. This was different than the Wright biplane that had an elevator out in the front, rudders at the rear, and pusher props behind the wing. Unlike the Wright biplane where the pilot sat on the front of the wing, in Bleriot’s plane the pilot sat in a fuselage between the wings. The plane relied on a 3 cylinder air cooled Anzani Engine motorcycle in order to power it along with a more efficient propeller. It also used advanced landing suspension that could bend and pivot in order to allow it land in fields better.

After the English Channel crossing Bleriot and his plane were world famous. There was lots of demand for Bleriot XI’s around the world and his company set about producing them. Many were produced in his own factory. Others were produced under license by other firms. Over 800 Bleriot XI’s were produced worldwide over the next five years, making it the first mass produced airplane. The Bleriot XI design continued to evolve. The first major change early on in producing Bleriot XI’s was fitting the more powerful 7-cylinder rotary Gnome engine. In the Gnome engine the engine cylinders actually spun around with the propellor unlike the 3-cylinder Anzani used in the original. Later variants of the XI included two-seat versions that could carry a passenger. The Bleriot company would later produce the SPAD fighter flown by the Allies in WWI. The Bleriot aircraft company was still a thriving airplane manufacturer at the time of Louis’ death in 1936.

Hubert Latham did not design his own plane. He was a pilot, and piloted the Antonette, a plane designed a man named Leon Levavasseur, at the Antoinette company. The Antoinette was also a monoplane, with the rudder and elevator back at the rear of the plane. The engine and propellor were up front, and the pilot sat sort of in and sort of on top of the fuselage behind the wings. So, the Antoinette was also in the more modern configuration of an airplane. The Antoinette had a V-8 water cooled engine manufactured by their firm, originally for racing boats. The radiators for the water were attached along the sides of the fuselage up by the nose of the airplane. The propellor on the Antoinette was much cruder than the Bleriot, and resembled very simple rowing paddles. The Antoinette was a considerably larger airplane than the Bleriot.

The Antoinette airplane did not become famous like the Bleriot since it did not achieve the first flight over the channel. The Antoinette airplane continued to be developed over the next several years. They switched the control back from ailerons to wing-warping. And, they installed a larger V-16 engine and a more modern carved wood propellor. But, the overall design stayed very similar to the one that Latham attempted the Channel crossing with. There was very little demand for the Antoinette airplanes, since most people were buying Bleriot’s. By 1912, just three years after the English Channel crossing the Antoinette firm was bankrupt and out of business.

The Race

Hubert Latham attempted to cross the English Channel from Calais France to Dover England after arriving on July 19th 1909. Because of an engine failure he was forced to attempt to land in the Channel. Each time he flew he had a French destroyer following him in order to rescue him if he crashed into the water. After they arrived at his floating plane wreck, they found him dry sitting on top of the wreck smoking a cigarette. Latham’s Antoinette was destroyed from the crash and a new one had to be sent up via train.

On July 21st Bleriot arrived in Calais with his Bleriot XI ready to attempt crossing the English Channel. Because of the severe wind at the time bleriot and latham were grounded for a couple days. However, on July 25th Bleriot and his mechanic are awake very early and catch good weather for crossing the channel and set off around 4:40 am. The noise of Bleriot taking off woke up Latham and his team who rushed to prepare the Antoinette. However, they were too late as the wind had become unfavorable when they were ready to take off.

When Bleriot took off he did not have any navigational devices with him such as a compass, map, or clock. This lead to him losing his orientation and arriving down the coast from his landing point in dover. However, he was able to correct his course and arrive in dover completing the Daily Mail Prize and successfully crossing the English Channel. After arriving Bleriot offered to split the prize money with Latham if he could make it across. This gesture was never tested as Latham failed to cross the channel again resulting in another rescue of him and his wreckage. Latham was never able to attempt completing the Daily Mail prize as the Antoinette company did not want to lose another plane.

=Deliverable=

<mediaplayer>File:Crossing_the_English_Channe_low_res.mp4</mediaplayer>

 
==Use Subsections Headings==
 
Organize each section of this article so that it has a logical flow. If you intend to discuss one aspect of the origin of a person, place, thing, or idea, identify the appropriate existing section of the article, or create that section if it doesn't exist. Then, make a clear subheading. If you notice that some other information is not organized clearly, rearrange the information, but do so cautiously and responsibly! The goal here is clarity for the reader.
 
Add links to other articles, but '''do not link to personal student profile pages or milestone pages'''. Add media as needed in the appropriate sections.
 

=References=
If appropriate, add a references section
 
=External Links=
If appropriate, add an external links section
 
=Image Gallery=
If appropriate, add an image gallery
 
=Category tags=
'''Don't forget to add category tags!!! Your Article Pages MUST contain one or more Category tags like this: 
<nowiki>
[[Category:Art]]</nowiki> 
<nowiki>
[[Category:Music]]</nowiki> 
<nowiki>
[[Category:Philosophy & Religion]]</nowiki> 
<nowiki>
[[Category:Drama & Theater]]</nowiki> 
<nowiki>
[[Category:Writing & Rhetoric]]</nowiki> 
<nowiki>
[[Category:History]]</nowiki> 
<nowiki>
[[Category:English]]</nowiki> 
 
...and '''NO OTHER TAGS''' especially "project" tags.
 
See the [[Help_page!!#Tagging_Categories_for_Your_Page|Category Help]] page for assistance. Don't include irrelevant category tags in your article pages (like the Template category!)
 
Delete this entire "Category section" when editing this page--Categories don't need a heading.

[[Category: Template Pages]]

Crossing the English Channel

2017-06-22T14:29:40Z

Sqjohnson: Created page with "=Crossing the English Channel= {{Infobox |title = Portrait of Louis Bleriot |header1 = The Chandos Portrait of William Shakespeare |bodystyle = width:25em |image = File:Ar..."

=Crossing the English Channel=

{{Infobox
|title = Portrait of Louis Bleriot
|header1 = The Chandos Portrait
of William Shakespeare
|bodystyle = width:25em
|image = [[File:Articlepicture.jpg|x450px|alt=Article Image]]
|caption = Samuel Johnson
|label2 = '''Artist'''
|data2 = Attributed to [[John Taylor]]
|label3 = '''Year'''
|data3 = c. 1600s
|label4 = '''Dimensions'''
|data4 = 55.2 cm × 43.8 cm ( 21 3⁄4 in × 17 1⁄4 in)
|label5 = '''Location'''
|data5 = National Portrait Gallery, London

}}

Use this page as a template when creating new articles by clicking ''Actions>View Source'' and create a new page with the name of the article you're creating. In the newly copied page, [[Special:Upload|upload]] your own image, then replace the "Articlepicture.jpg" above with the new image name. Replace "Representative Image" in both the image line and the top-level heading above with your first and last name. Delete this whole paragraph beneath the Representative Image title but not including the ''Table of Contents'' tag
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=Overview=
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__TOC__
 

=Background or Origin of Article=
 

In 1909, after early achievements the new field of aviation entered its next phase. The beginning of this next phase was kicked off by the crossing of the English channel, for the first time. The crossing occurred between Calais, France, and Dover on the English side. The crossing of the channel was formalized by a contest sponsored by the Daily Mail, a newspaper, with the goal of increasing readership. This was initiated by the owner of the Daily Mail, Lord Northcliffe, who believed newspapers should create news, not just report it. Lord Northcliffe put a prize of 1,000 pounds to the first person to successfully cross the English Channel by air. Lord Northcliffe also believed in the future of aviation.

The creation of the prize for crossing the English Channel caught the imagination of the public. Other newspapers in Europe and in the US had to send their reporters to cover it. Thousands of people travelled to the French and English sides of the channel when it was reported that attempts would be made to cross. These tens of thousands of people were hoping to experience history being made. Lord Northcliffe’s goal was achieved and he created a huge amount of public interest in the aviation milestone of crossing the English Channel.

Three men attempted or planned to attempt the English Channel Crossing. They were: Hubert Latham, the Comte de Lambert, and Louis Bleriot. The Comte de Lambert had actually been taught to fly by Wilbur Wright. And, he had a Wright biplane. Unfortunately, he crashed his biplane while practicing near the French side of the channel, and was out of the competition.

Hubert Latham was a wealthy French Playboy. He once described his profession as “man of the world”. He had many accomplishments under his belt. He had raced automobiles. He had raced speed boats. He had crossed the English Channel in a balloon with a cousin, who was the pilot. His latest interest became airplanes. He learned to fly at the aircraft works of the French Antonette firm who also made the engines of the boats he raced. He quickly became on of the most skilled pilots also a flying instructor. He quickly began setting a variety of records with the Antonette airplane. He set an altitude record. Then, he set a record for distance. He showed off how stable the Antonette airplane was during the distance record by taking his hands off the wheel and lighting and smoking a cigarette in his trademark ivory holder. If he crashed that was the first thing he would do after the crash, light up a cigarette and smoke it in his ivory holder. He was known to carry his cigarette and holder in a silver case with him everywhere he went, particularly on his adventures.

Louis Bleriot was a self-made man. He had gone to college at Ecole Centrale, a polytechnic school in Paris, where he earned a degree in engineering. His first job was at an electrical engineering company. He developed the first successful head lamp for automobiles. Then he formed his own company to manufacture headlamps and sell them to automobile manufacturers. His company was very successful and he became a wealthy many. This meant he could pursue his interests in aviation with the profits from his headlamp business. He had long had an interest in aviation. He began his aeroplane experiments by designing and building a flapping wing plane, which was a failure. He was a self taught pilot, learning as he created new aeroplane designs, constructed them, and attempted to fly them. In fact, he was noted for his crashes. But, he stuck to it, and by 1909, he had what he called his Bleriot XI, his eleventh iteration of his airplane experiments.

The Planes

Bleriot’s experiments had evolved towards monoplanes, which meant the plane had one wing. Many other early experimenters, including the Wright Brothers were focused on biplanes, planes with two wings. Bleriot’s eleventh airplane the Bleriot XI was the culmination of his work and had what now looks like a modern layout. It was a monoplane with the engine up front at the nose, a single set of wings, and a rudder and elevator at the tail. This was different than the Wright biplane that had an elevator out in the front, rudders at the rear, and pusher props behind the wing. Unlike the Wright biplane where the pilot sat on the front of the wing, in Bleriot’s plane the pilot sat in a fuselage between the wings. The plane relied on a 3 cylinder air cooled Anzani Engine motorcycle in order to power it along with a more efficient propeller. It also used advanced landing suspension that could bend and pivot in order to allow it land in fields better.

After the English Channel crossing Bleriot and his plane were world famous. There was lots of demand for Bleriot XI’s around the world and his company set about producing them. Many were produced in his own factory. Others were produced under license by other firms. Over 800 Bleriot XI’s were produced worldwide over the next five years, making it the first mass produced airplane. The Bleriot XI design continued to evolve. The first major change early on in producing Bleriot XI’s was fitting the more powerful 7-cylinder rotary Gnome engine. In the Gnome engine the engine cylinders actually spun around with the propellor unlike the 3-cylinder Anzani used in the original. Later variants of the XI included two-seat versions that could carry a passenger. The Bleriot company would later produce the SPAD fighter flown by the Allies in WWI. The Bleriot aircraft company was still a thriving airplane manufacturer at the time of Louis’ death in 1936.

Hubert Latham did not design his own plane. He was a pilot, and piloted the Antonette, a plane designed a man named Leon Levavasseur, at the Antoinette company. The Antoinette was also a monoplane, with the rudder and elevator back at the rear of the plane. The engine and propellor were up front, and the pilot sat sort of in and sort of on top of the fuselage behind the wings. So, the Antoinette was also in the more modern configuration of an airplane. The Antoinette had a V-8 water cooled engine manufactured by their firm, originally for racing boats. The radiators for the water were attached along the sides of the fuselage up by the nose of the airplane. The propellor on the Antoinette was much cruder than the Bleriot, and resembled very simple rowing paddles. The Antoinette was a considerably larger airplane than the Bleriot.

The Antoinette airplane did not become famous like the Bleriot since it did not achieve the first flight over the channel. The Antoinette airplane continued to be developed over the next several years. They switched the control back from ailerons to wing-warping. And, they installed a larger V-16 engine and a more modern carved wood propellor. But, the overall design stayed very similar to the one that Latham attempted the Channel crossing with. There was very little demand for the Antoinette airplanes, since most people were buying Bleriot’s. By 1912, just three years after the English Channel crossing the Antoinette firm was bankrupt and out of business.

The Race

Hubert Latham attempted to cross the English Channel from Calais France to Dover England after arriving on July 19th 1909. Because of an engine failure he was forced to attempt to land in the Channel. Each time he flew he had a French destroyer following him in order to rescue him if he crashed into the water. After they arrived at his floating plane wreck, they found him dry sitting on top of the wreck smoking a cigarette. Latham’s Antoinette was destroyed from the crash and a new one had to be sent up via train.

On July 21st Bleriot arrived in Calais with his Bleriot XI ready to attempt crossing the English Channel. Because of the severe wind at the time bleriot and latham were grounded for a couple days. However, on July 25th Bleriot and his mechanic are awake very early and catch good weather for crossing the channel and set off around 4:40 am. The noise of Bleriot taking off woke up Latham and his team who rushed to prepare the Antoinette. However, they were too late as the wind had become unfavorable when they were ready to take off.

When Bleriot took off he did not have any navigational devices with him such as a compass, map, or clock. This lead to him losing his orientation and arriving down the coast from his landing point in dover. However, he was able to correct his course and arrive in dover completing the Daily Mail Prize and successfully crossing the English Channel. After arriving Bleriot offered to split the prize money with Latham if he could make it across. This gesture was never tested as Latham failed to cross the channel again resulting in another rescue of him and his wreckage. Latham was never able to attempt completing the Daily Mail prize as the Antoinette company did not want to lose another plane.

=Deliverable=

<mediaplayer>File:Crossing_the_English_Channe_low_res.mp4</mediaplayer>

 
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File:220px-Louis Bleriot-1.jpg

2017-06-22T14:28:09Z

Sqjohnson:

2017-05-09T14:41:04Z

Sqjohnson:

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2017-05-05T21:23:04Z

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2017-04-20T01:07:22Z

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2017-03-31T22:21:47Z

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