Causes
l'Union Générale rose from 500 francs a share in 1879 to over 3,000 francs at its peak. Investors saw the booming market for new securities and jumped into the forward market. Speculators also printed counterfeit money; they renewed their forward contracts in hopes for a continuous rise in prices.
As the market grew, interest rates began to rise and lenders began demanding a premium – a warning that a collapse would occur. These events are very similar to the events leading up to the American 1929 boom. As this happened, the price of l'Union Générale began to deteriorate. The bank failed to sell all its capital and falsified public reports. Between January 5, 1881 and January 14, 1881 the cash price of a share dropped from 3,040 to 2,800 francs.
Read more about this topic: Paris Bourse Crash Of 1882