America’s first bubble

As America approaches its 250^th birthday, many are wondering if the nation is in the grip of a stock market bubble. Is the SpaceX IPO a sign of market mania?[1] To assess our situation today, let’s look back to America’s first stock market bubble, the “scriptomania” of 1791. Like the year 2026, the year 1791 involved a blockbuster IPO, extreme price volatility, crazed retail investors, and plenty of controversy.

“This spirit of gambling”

July 4, 2026 is not only the 250^th anniversary of the Declaration of Independence in Philadelphia, but also the 235^th anniversary of the IPO for the Bank of the United States, also occurring in Philadelphia. The public offering was for subscriptions – “script” or “scrip” – for bank shares.

The Bank of the United States was the brainchild of Alexander Hamilton. Not unlike SpaceX, it was a controversial and ambitious project championed by a polarizing and energetic immigrant. Among Hamilton’s many enemies was Thomas Jefferson, who preferred that America remain an agrarian society unsullied by the grubby business of finance and commerce.

The IPO took place on July 4, 1791, and it was oversubscribed, as with SpaceX. George Washington saw the successful IPO as a good sign:[2]

This, I believe, exceeds the expectation of the most sanguine among us. and a late instance, unparalleled in this Country, has been given of the confidence reposed in our measures, by the rapidity with which the subscriptions to the Bank of the United States were filled. In two hours after the Books were opened by the Commissioners the whole number of shares were taken up, & four thousand more applied for than were allowed by the Institution … This circumstance was not only pleasing as it related to the confidence in Government; but as it exhibited an unexpected proof of the resources of our Citizens.

Jefferson took a different view:[3]

… the bank filled and overflowed in the moment it was opened … it is impossible to say where the appetite for gambling will stop.

…As yet the delirium of speculation is too strong to admit sober reflection … I am afraid it is the intention to nourish this spirit of gambling …

Both in 1791 and 2026, leverage is part of the story. The bank script embodied leverage from the start: it was sold for $25 but represented $400 of equity (the script owner had to provide the other $375 over the next two years). Many traders borrowed money to buy the script, thus piling leverage atop leverage. In the case of SpaceX, at least 11 leveraged single-stock ETFs for it were introduced immediately after the IPO.

“A moral certainty of gain”

The market price of script quickly rose following the IPO. Here’s James Madison, writing from New York City on July 10:[4]

The Bank-Shares have risen as much in the Market here as at Philadelphia. It seems admitted on all hands now that the plan of the institution gives a moral certainty of gain to the Subscribers with scarce a physical possibility of loss. … Nothing new is talked of here. In fact stockjobbing drowns every other subject. The Coffee House is in an eternal buzz with the gamblers.

Madison’s “moral certainty of gain” is similar to the claim that SpaceX is a sure thing since it has a near-monopoly on commercial space launch. SpaceX, we’re told, has a position that “is nearly impossible to replicate”[5] and is “too big to fail.”[6]

“No small share of envy”

By August, the bubble had reached its peak, with the price rising from $25 to $200. Here’s Dr. Benjamin Rush, a signer of the Declaration of Independence and a founding figure of American medicine:[7]

The city of Philadelphia for several days has exhibited the marks of a great gaming house. At every corner you hear citizens talk of nothing but Script … The great speculators became talkative and communicative or dull, sullen, silent, and peevish. Genl. Stewart, who had just begun to deal in Script, said that he could not sleep at nights. Never did I see so universal a frenzy. Nothing else was spoken of in all companies, even by those who were not interested in it.

It excited febrile diseases in three persons who became my patients. In one of them, the acquisition of twelve thousand dollars in a few minutes by a lucky sale, brought on madness which terminated in death in a few days. The whole city felt the impulse of this paroxysm of avarice.

While I’m unaware of any “febrile diseases” brought about by AI mania or any deaths caused by trading SpaceX, many of the other symptoms described by Rush seem relevant today. Then, as now, FOMO played a role:[8]

The late rise of paper and bank stock … has excited no small share of envy among those who might have made money by it, yet did not.

Pardon me, are you William Duer, sir?

After many twists and turns, the bubble ultimately collapsed, leading to the Panic of 1792. Here’s Rush in April 1792:[9]

… great distress prevails in New York. Men are often seen to weep in the streets.

Many blamed William Duer, the Bernie Madoff of the 1790s. Duer, at one point Hamilton’s right-hand man at the Treasury, was an embezzler and gambler. He raised money for his financial schemes from widows, orphans, merchants, mechanics, and butchers, being a pioneer of “democratizing finance.” When it all came crashing down, Duer turned himself in to the New York authorities for his own protection, as his investors were howling for his blood. Here’s Jefferson describing the situation:[10]

I learn with real concern the calamaties which are fallen on New York … all that stuff called scrip, of whatever description, was folly or roguery … It was reported here last night that there had been a collection of people round the place of Duer’s confinement of so threatening an appearance as to call out the Governor and militia, and to be fired on by them: and that several of them were killed. I hope it is not true. 

The story was, in fact, not true; there were no fatalities involved in defending Duer. He lived the remainder of his life in debtors’ prison, dying in 1799.

“Things must assume their proper sizes”

Now, I’m not saying that we’re necessarily heading for a crash, with men weeping in the streets and leveraged ETF promoters in debtors’ prison. But if the events of 1791 remind you of 2026, you’ve got to be concerned. Let me conclude with a poem published at the height of the bubble:[11]

Touched by the wand of speculation,
A frenzy runs throughout the nation;
For soon or late, so truth advises,
Things must assume their proper sizes –
And sure as death all mortals trips.
Thousands will rue their faith in SCRIPS.

“Things must assume their proper sizes.” I think there’s a lot of wisdom in those words. Whatever ends up happening with SpaceX, AI, and the stock market, I’m pretty sure that things will eventually assume their proper sizes.

This article originally appeared on Fortune.com.

Endnotes

[1] References to this and other companies should not be interpreted as recommendations to buy or sell specific securities. Acadian and/or the author of this post may hold positions in one or more securities associated with these companies.