Advances and Setbacks: 1720–1815
During the eighteenth century the global securities market grew in size and importance, with stock exchanges being established in several major European financial centres and in the 1780s extending overseas to the newly independent United States. The basis of this market remained government debt created for military purposes, whether for the incessant conflicts within Europe or the expenses incurred in gaining independence from colonial masters, as in the case of the United States. These debts were increasingly organized in a transferable form suitable for trading in the securities markets. Governments were also more conscious of the need to maintain the confidence of investors and mostly refrained from cancelling their borrowings unilaterally or failing to make interest payments when they fell due. Such was the growing belief in the guaranteed nature of government debt that it also attracted more distant investors. Amsterdam emerged as the centre of a global market for government debt used by both borrowers and investors from across Europe and later the United States. In contrast, the eighteenth century was not a period when joint-stock companies flourished once the excesses of the speculative bubble of 1719–20 was over. Only a small nucleus of companies existed whose shares were actively traded and these were more proxies for government debt, such as the Bank of England and the English East India Company. Even in Amsterdam activity centred increasingly on government debt rather than on shares in such as the VOC. Promotion of joint-stock companies was on a local or small scale, generating little by way of a market beyond the confines of a restricted group of investors. After 1720 the fortunes of the eighteenth-century global securities market rose and fell in line with government borrowing and their commitment to servicing their debts.
The speculative bubble of 1719–20 had few long-term implications for Amsterdam, then the world's largest securities market, as it had remained on the fringes of the frenzied buying and selling. That was not the case with Paris, the epicentre of speculation. Once the French government had