This section features a person who is historically insignificant in the business world, but is included to illustrate a point about bubbles. When bubbles are viewed at a granular level from the perspective of individuals rather than at a fiscal level, it becomes obvious that they are much more complicated than the statistics would suggest. The bubble in question is known as the California Gold Rush and we’ll examine it from the standpoint of Johann Suter, known in the U.S. as John Sutter. He was an immigrant from Switzerland who became famous after the discovery of gold on his property in 1848 precipitated the California Gold Rush.
Sutter arrived in the area of what is today Sacramento in about July 1839, when California was part of Mexico. He became a Mexican citizen in 1840 and was granted title to 48,827 acres of land in the Sacramento area, which is almost 200 square kilometers. His goal was to build an agricultural settlement known as New Helvetia.1 In the course of building his settlement, he hired a workman named James Marshall to build a sawmill. Obviously, a certain amount of wood would be required to build the dwellings and farm structures of an agricultural settlement. About the time the settlement was being developed, the United States seized the territory of California from Mexico, and it became American territory.
In 1848, while working on the settlement, Marshall found gold, the discovery of which Sutter wished to keep quiet. Sutter had no interest in developing the gold, because he feared, correctly as it turned out, that a gold discovery in the area would cause it to be overrun by squatters. However, since news of that type cannot be kept secret, Sutter’s land was, in fact, overrun. The great California Gold Rush of 1849 had begun, and the people who flocked to California in that period of time are known as the forty-niners.
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