The lesson: A scheme can be legal, popular, and endorsed by the state, and still be a bubble.
The South Sea Bubble of 1720 shows that government backing and popularity don't make a price real. The South Sea Company's stock ran from around £128 in January to over £1,000 by August, on a monopoly trading claim and a debt-restructuring scheme approved by Parliament, and then gave nearly all of it back by year's end.
This wasn't some shadowy back-alley scam. The company had a royal charter. Members of Parliament held shares. The scheme was designed, in part, to help the British government refinance its war debt, so the state had every incentive to want it to work. What none of that did was tell you what the stock was actually worth, and the company's real trading profits never came close to justifying the price people were paying.
what the charter couldn't tell you
A royal charter tells you a scheme is allowed. It doesn't tell you it's priced right, and people kept treating the first as proof of the second. For a while, what carried the price was simply that everyone else seemed to believe it, including people who should have known better.
“I can calculate the motion of heavenly bodies, but not the madness of people.”· widely attributed