🧵Isaac Newton was a genius of his age<we all know>, But DYN, what monetary policy came via his ‘‘fit of absent-mindedness’. And, why he once said this in 1720:
“I can calculate the motions of heavenly bodies, but not the madness of people” and Bubble Investments. Read 👇
“I can calculate the motions of heavenly bodies, but not the madness of people” and Bubble Investments. Read 👇
As a child, he spent his pocket money on tools and made a working model of a windmill. A treadmill, run by a mouse. Also, fixed a paper lantern to a kite. By, 1665 he had to return home due to Plague from Trinity College, Cambridge. And, soon he developed his law of gravity.
Devised laws of mechanics to explain moving bodies, invented the differential & integral calculus (along with German philosopher Gottfried Leibniz). Made significant discoveries in optics. After astronomy, physics & mathematics, he got an exciting role, as warden of Royal Mint.
Soon he was Master of the Mint <1699>, this was generally regarded as a sinecure job. Britain’s coinage was in a shoddy state. Pound was so named, as = pound in weight of sterling silver coins. But here comes the ‘Newton as detective’. Estimated that ~20% of the coins are FAKE.
Minting in those time was also a combination of gold and silver. But, people were clipping< slivers of gold or silver been shaved off their edges> to be melted down and sold as Metal. Counterfeiting was an act of treason, hardly anyone was ever convicted, till Newton came.
First he suggested minting by machines to make them more uniform; they would be ‘milled’ at the edges to make them more difficult to counterfeit. But the problem remained. Paper currency (PC) was suggested. When he was asked for an opinion.
He said: “Gentlemen, in applied mathematics, you must describe your unit. PC can't be described mathematically as money”. No one dared to argue, Treasury accepted his plan and Britain is the First Modern Nation to have Gold Standard (GS)< by 1717> 
He then set the conversion rate at a level that seemed to undervalue silver. Gresham’s Law duly kicked in. Britons were unwilling to exchange their silver for gold at an unfavourable rate; they withheld their silver coins from circulation. Creating some troubles in the market.
Anyways, Britain was still vying with France for military leadership and with the Dutch for economic power. So, no one followed on Gold Standard at the time. And, the silver crisis did help them and made London as the primary market for Gold Trading.
In between, he was appointed by Parliament to lead a committee seeking the best way to “Discover Longitude at Sea”. He spent a few years dealing with a flood of cranky proposals. In the end, it was John Harrison <won the Cash Prize> for his chronometer, used by Captain Cook.
This was the same time when Britain was fighting with Spain, Portuguese and Dutch for the supremacy over Sea. ambition in the Malay Archipelago had begun to shift eastwards, towards the South Seas. Read More about Portuguese and Goa:
South Sea Company had been founded in 1711 with monopoly trading rights to much of South America, even though the well-established Spanish and Portuguese empires there made the region. Its political origins, as a counterweight to the East India Company, were fundamental.
Now, he thought of leveraging his analytical skills to make money in stocks and to outperform the average broker/speculator. Prices were extremely volatile and if you could predict future price movements = make a killing. Stock in the South Sea Company especially caught his eye.
Having made an initial 100% profit he decided to BUY them again at their peak in a Co. that was kind of ‘financial revolution’. While there was NO revenue everyone was bullish about their FUTURE potential prospect of untold riches from trade (and Slaves) with the New World.
Countless fortunes were made by those who rode the wave up and got off before the crash. Big winner <always> = big loser. As new shares issued were absurdly overvalued since most were buying for short-term profit. Now, there was NO buyer. The SoftBank-WeWork moment was there.
A New term was coined for this revolution-turned fraud, Bubble. The Sea company was all in the Bubble and it got kaput. A host of other Sea-Tradin-Companies<‘bubbles’> also got busted and this lead to the formation of insurance companies < Royal Exchange and London Assurance>
Sir Justus Beck, a director of the Bank of England, went bankrupt and Newton, lost quite a big amount, so did Alexander Pope. Later, Newton complained in his diary that he was unable to fathom the “madness of people,” <Newton’s Folly>
A man who made ‘standing on the shoulder of giants’ famous was in fact, had his overconfidence in his own analysis, to be blamed. He went to live with his niece, until dying in his sleep in London in 1727.
Mercury poisoning has been suspected: traces of the metal were found in his hair. It fits with his experiments in alchemy, and could explain why he became eccentric in his old age.
