South Sea Co Bubble

=The South Sea Company (officially The Governor and Company of the merchants of Great Britain, trading to the South Seas and other parts of America, and for the encouragement of the Fishery)<a href="https://en.wikipedia.org/wiki/South_Sea_Company#cite_note-3" style="text-decoration-line: none; background: none;">[3]</a> was a British <a href="https://en.wikipedia.org/wiki/Joint-stock_company" title="Joint-stock company" style="text-decoration-line: none; background: none;">joint-stock company</a> founded in January 1711, created as a <a href="https://en.wikipedia.org/wiki/Public-private_partnership" class="mw-redirect" title="Public-private partnership" style="text-decoration-line: none; background: none;">public-private partnership</a> to <a href="https://en.wikipedia.org/wiki/Debt_consolidation" title="Debt consolidation" style="text-decoration-line: none; background: none;">consolidate</a> and reduce the cost of the <a href="https://en.wikipedia.org/wiki/National_debt" class="mw-redirect" title="National debt" style="text-decoration-line: none; background: none;">national debt</a>. To generate income, in 1713 the company was granted a monopoly (the <a href="https://en.wikipedia.org/wiki/Asiento_de_Negros" title="Asiento de Negros" style="text-decoration-line: none; background: none;">Asiento de Negros</a>) to supply African slaves to the islands in the "<a href="https://en.wikipedia.org/wiki/South_Seas" title="South Seas" style="text-decoration-line: none; background: none;">South Seas</a>" and <a href="https://en.wikipedia.org/wiki/South_America" title="South America" style="text-decoration-line: none; background: none;">South America</a>.<a href="https://en.wikipedia.org/wiki/South_Sea_Company#cite_note-:0-4" style="text-decoration-line: none; background: none;">[4]</a> When the company was created, Britain was involved in the <a href="https://en.wikipedia.org/wiki/War_of_the_Spanish_Succession" title="War of the Spanish Succession" style="text-decoration-line: none; background: none;">War of the Spanish Succession</a> and Spain and Portugal controlled most of South America. There was thus no realistic prospect that trade would take place, and as it turned out, the Company never realised any significant profit from its monopoly. However, Company stock rose greatly in value as it expanded its operations dealing in government debt, and peaked in 1720 before suddenly collapsing to little above its original <a href="https://en.wikipedia.org/wiki/Flotation(shares)" class="mw-redirect" title="Flotation (shares)" style="text-decoration-line: none; background: none;">flotation</a> price. The notorious <a href="https://en.wikipedia.org/wiki/Economic_bubble" title="Economic bubble" style="text-decoration-line: none; background: none;">economic bubble</a> thus created, which ruined thousands of investors, became known as the South Sea Bubble.The <a href="https://en.wikipedia.org/wiki/Bubble_Act" title="Bubble Act" style="text-decoration-line: none; background: none;">Bubble Act</a> 1720 (<a href="https://en.wikipedia.org/wiki/6_Geo_I" class="mw-redirect" title="6 Geo I" style="text-decoration-line: none; background: none;">6 Geo I</a>, c 18), which forbade the creation of joint-stock companies without <a href="https://en.wikipedia.org/wiki/Royal_charter" title="Royal charter" style="text-decoration-line: none; background: none;">royal charter</a>, was promoted by the South Sea Company itself before its collapse.In Great Britain, many investors were ruined by the share-price collapse, and as a result, the national economy diminished substantially. The founders of the scheme engaged in <a href="https://en.wikipedia.org/wiki/Insider_trading" title="Insider trading" style="text-decoration-line: none; background: none;">insider trading</a>, by using their advance knowledge of the timings of national debt consolidations to make large profits from purchasing debt in advance. Huge bribes were given to politicians to support the <a href="https://en.wikipedia.org/wiki/Act_of_Parliament" title="Act of Parliament" style="text-decoration-line: none; background: none;">Acts of Parliament</a> necessary for the scheme.<a href="https://en.wikipedia.org/wiki/South_Sea_Company#cite_note-5" style="text-decoration-line: none; background: none;">[5]</a> Company money was used to deal in its own shares, and selected individuals purchasing shares were given cash loans backed by those same shares to spend on purchasing more shares. The expectation of profits from trade with South America was talked up to encourage the public to purchase shares, but the bubble prices reached far beyond what the actual profits of the business (namely the slave trade) could justify.<a href="https://en.wikipedia.org/wiki/South_Sea_Company#cite_note-6" style="text-decoration-line: none; background: none;">[6]</a>A <a href="https://en.wikipedia.org/wiki/Parliamentary_inquiry" class="mw-redirect" title="Parliamentary inquiry" style="text-decoration-line: none; background: none;">parliamentary inquiry</a> was held after the bursting of the bubble to discover its causes. A number of politicians were disgraced, and people found to have profited immorally from the company had personal assets confiscated proportionate to their gains (most had already been rich and remained so). Finally, the Company was restructured and continued to operate for more than a century after the Bubble. The headquarters were in <a href="https://en.wikipedia.org/wiki/Threadneedle_Street" title="Threadneedle Street" style="text-decoration-line: none; background: none;">Threadneedle Street</a>, at the centre of the <a href="https://en.wikipedia.org/wiki/City_of_London" title="City of London" style="text-decoration-line: none; background: none;">City of London</a>, the financial district of the capital. At the time of these events, the <a href="https://en.wikipedia.org/wiki/Bank_of_England" title="Bank of England" style="text-decoration-line: none; background: none;">Bank of England</a> was also a private company dealing in national debt, and the crash of its rival confirmed its position as banker to the British government.<a href="https://en.wikipedia.org/wiki/South_Sea_Company#cite_note-7" style="text-decoration-line: none; background: none;">[7]</a><div id="toc" class="toc" role="navigation" aria-labelledby="mw-toc-heading" style="border: 1px solid rgb(162, 169, 177); background-color: rgb(248, 249, 250); padding: 7px; display: table;"><ul style="list-style: none; margin: 0.3em 0px; padding: 0px;"><li class="toclevel-1 tocsection-1" style="margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/South_Sea_Company#Foundation" style="text-decoration-line: none; background: none;">Foundation</a><ul style="list-style: none; margin: 0px 0px 0px 2em; padding: 0px;"><li class="toclevel-2 tocsection-2" style="margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/South_Sea_Company#Conception_of_the_Company" style="text-decoration-line: none; background: none;">1.1Conception of the Company</a></li><li class="toclevel-2 tocsection-3" style="margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/South_Sea_Company#Initial_speculation" style="text-decoration-line: none; background: none;">1.2Initial speculation</a></li><li class="toclevel-2 tocsection-4" style="margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/South_Sea_Company#Flotation" style="text-decoration-line: none; background: none;">1.3Flotation</a></li><li class="toclevel-2 tocsection-5" style="margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/South_Sea_Company#The_slave_trade" style="text-decoration-line: none; background: none;">1.4The slave trade</a></li><li class="toclevel-2 tocsection-6" style="margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/South_Sea_Company#Changes_of_management" style="text-decoration-line: none; background: none;">1.5Changes of management</a></li><li class="toclevel-2 tocsection-7" style="margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/South_Sea_Company#War" style="text-decoration-line: none; background: none;">1.6War</a></li></ul></li><li class="toclevel-1 tocsection-8" style="margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/South_Sea_Company#Refinancing_government_debt" style="text-decoration-line: none; background: none;">2Refinancing government debt</a><ul style="list-style: none; margin: 0px 0px 0px 2em; padding: 0px;"><li class="toclevel-2 tocsection-9" style="margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/South_Sea_Company#Trading_more_debt_for_equity" style="text-decoration-line: none; background: none;">2.1Trading more debt for equity</a><ul style="list-style: none; margin: 0px 0px 0px 2em; padding: 0px;"><li class="toclevel-3 tocsection-10" style="margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/South_Sea_Company#Public_announcement" style="text-decoration-line: none; background: none;">2.1.1Public announcement</a></li></ul></li><li class="toclevel-2 tocsection-11" style="margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/South_Sea_Company#Inflating_the_share_price" style="text-decoration-line: none; background: none;">2.2Inflating the share price</a></li><li class="toclevel-2 tocsection-12" style="margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/South_Sea_Company#Bubble_Act" style="text-decoration-line: none; background: none;">2.3Bubble Act</a></li><li class="toclevel-2 tocsection-13" style="margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/South_Sea_Company#Top_reached" style="text-decoration-line: none; background: none;">2.4Top reached</a></li><li class="toclevel-2 tocsection-14" style="margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/South_Sea_Company#Recriminations" style="text-decoration-line: none; background: none;">2.5Recriminations</a></li><li class="toclevel-2 tocsection-15" style="margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/South_Sea_Company#Quotations_prompted_by_the_collapse" style="text-decoration-line: none; background: none;">2.6Quotations prompted by the collapse</a></li></ul></li><li class="toclevel-1 tocsection-16" style="margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/South_Sea_Company#A_trading_company" style="text-decoration-line: none; background: none;">3A trading company</a><ul style="list-style: none; margin: 0px 0px 0px 2em; padding: 0px;"><li class="toclevel-2 tocsection-17" style="margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/South_Sea_Company#Slave_trade_under_the_Asiento" style="text-decoration-line: none; background: none;">3.1Slave trade under the Asiento</a></li><li class="toclevel-2 tocsection-18" style="margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/South_Sea_Company#The_annual_ship" style="text-decoration-line: none; background: none;">3.2The annual ship</a></li><li class="toclevel-2 tocsection-19" style="margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/South_Sea_Company#Arctic_whaling" style="text-decoration-line: none; background: none;">3.3Arctic whaling</a></li></ul></li><li class="toclevel-1 tocsection-20" style="margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/South_Sea_Company#Government_debt_after_the_Seven_Years'War" style="text-decoration-line: none; background: none;">4Government debt after the Seven Years' War</a></li><li class="toclevel-1 tocsection-21" style="margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/South_Sea_Company#Armorials" style="text-decoration-line: none; background: none;">5Armorials</a></li><li class="toclevel-1 tocsection-22" style="margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/South_Sea_Company#Officers_of_the_South_Sea_Company" style="text-decoration-line: none; background: none;">6Officers of the South Sea Company</a></li><li class="toclevel-1 tocsection-23" style="margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/South_Sea_Company#In_fiction" style="text-decoration-line: none; background: none;">7In fiction</a></li><li class="toclevel-1 tocsection-24" style="margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/South_Sea_Company#See_also" style="text-decoration-line: none; background: none;">8See also</a></li><li class="toclevel-1 tocsection-25" style="margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/South_Sea_Company#Notes" style="text-decoration-line: none; background: none;">9Notes</a></li><li class="toclevel-1 tocsection-26" style="margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/South_Sea_Company#References" style="text-decoration-line: none; background: none;">10References</a></li><li class="toclevel-1 tocsection-27" style="margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/South_Sea_Company#External_links" style="text-decoration-line: none; background: none;">11External links</a></li></ul></div><h2 style="margin: 1em 0px 0.25em; padding: 0px; overflow: hidden; border-bottom: 1px solid rgb(162, 169, 177); font-weight: normal; line-height: 1.3; background-color: rgb(255, 255, 255);">Foundation[</h2>When in August 1710 <a href="https://en.wikipedia.org/wiki/Robert_Harley,1st_Earl_of_Oxford_and_Earl_Mortimer" title="Robert Harley, 1st Earl of Oxford and Earl Mortimer" style="text-decoration-line: none; background: none;">Robert Harley</a> was appointed <a href="https://en.wikipedia.org/wiki/Chancellor_of_the_Exchequer" title="Chancellor of the Exchequer" style="text-decoration-line: none; background: none;">Chancellor of the Exchequer</a>, the government had already become reliant on the <a href="https://en.wikipedia.org/wiki/Bank_of_England" title="Bank of England" style="text-decoration-line: none; background: none;">Bank of England</a>, a privately owned company chartered 16 years previously, which had obtained a monopoly as the lender to Westminster,[<a href="https://en.wikipedia.org/wiki/Wikipedia:Please_clarify" title="Wikipedia:Please clarify" style="text-decoration-line: none; background: none;">clarification needed</a>] in return for arranging and managing loans to the government. The government had become dissatisfied with the service it was receiving and Harley was actively seeking new ways to improve the national finances.A new Parliament met in November 1710 resolved to attend to national finances, which were suffering from the pressures of <a href="https://en.wikipedia.org/wiki/List_of_wars_involving_Great_Britain" class="mw-redirect" title="List of wars involving Great Britain" style="text-decoration-line: none; background: none;">two simultaneous wars</a>: the <a href="https://en.wikipedia.org/wiki/War_of_the_Spanish_Succession" title="War of the Spanish Succession" style="text-decoration-line: none; background: none;">War of the Spanish Succession</a> with France, which ended in 1713, and the <a href="https://en.wikipedia.org/wiki/Great_Northern_War" title="Great Northern War" style="text-decoration-line: none; background: none;">Great Northern War</a>, which was not to end until 1721. Harley came prepared, with detailed accounts describing the situation of the national debt, which was customarily a piecemeal arrangement, with each government department borrowing independently as the need arose. He released the information steadily, continually adding new reports of debts incurred and scandalous expenditure, until in January 1711 the House of Commons agreed to appoint a committee to investigate the entire debt. The committee included Harley himself, the two <a href="https://en.wikipedia.org/wiki/Auditor_of_the_Imprests" class="mw-redirect" title="Auditor of the Imprests" style="text-decoration-line: none; background: none;">Auditors of the Imprests</a> (whose task was to investigate government spending), <a href="https://en.wikipedia.org/wiki/Edward_Harley(1664%E2%80%931735)" title="Edward Harley (1664–1735)" style="text-decoration-line: none; background: none;">Edward Harley</a> (the Chancellor's brother), Paul Foley (the Chancellor's brother-in-law), the <a href="https://en.wikipedia.org/wiki/Secretary_to_the_Treasury" title="Secretary to the Treasury" style="text-decoration-line: none; background: none;">Secretary of the Treasury</a>, <a href="https://en.wikipedia.org/wiki/William_Lowndes(British_politician)" class="mw-redirect" title="William Lowndes (British politician)" style="text-decoration-line: none; background: none;">William Lowndes</a> (who had had significant responsibility for reminting the entire debased British coinage in 1696) and <a href="https://en.wikipedia.org/wiki/John_Aislabie" title="John Aislabie" style="text-decoration-line: none; background: none;">John Aislabie</a> (who represented the <a href="https://en.wikipedia.org/wiki/October_Club" title="October Club" style="text-decoration-line: none; background: none;">October Club</a>, a group of about 200 MPs who had agreed to vote together).<a href="https://en.wikipedia.org/wiki/South_Sea_Company#cite_note-8" style="text-decoration-line: none; background: none;">[8]</a>Harley's first concern was to find £300,000 for the next quarter's payroll for the British army operating on the Continent under the <a href="https://en.wikipedia.org/wiki/John_Churchill,1st_Duke_of_Marlborough" title="John Churchill, 1st Duke of Marlborough" style="text-decoration-line: none; background: none;">Duke of Marlborough</a>. This funding was provided by a private consortium of Edward Gibbon, grandfather of <a href="https://en.wikipedia.org/wiki/Edward_Gibbon#Early_life:1737%E2%80%931752" title="Edward Gibbon" style="text-decoration-line: none; background: none;">the historian</a>, <a href="https://en.wikipedia.org/wiki/George_Caswall" title="George Caswall" style="text-decoration-line: none; background: none;">George Caswall</a>, and <a href="https://en.wikipedia.org/wiki/C.Hoare%26_Co" title="C. Hoare & Co" style="text-decoration-line: none; background: none;">Hoare's Bank</a>. The Bank of England had been operating a <a href="https://en.wikipedia.org/wiki/State_lottery" class="mw-redirect" title="State lottery" style="text-decoration-line: none; background: none;">Lottery</a> on behalf of the government, but in 1710 this had produced less revenue than expected and another begun in 1711 was also performing poorly; Harley granted the authority to sell tickets to <a href="https://en.wikipedia.org/wiki/Sir_John_Blunt,1st_Baronet" class="mw-redirect" title="Sir John Blunt, 1st Baronet" style="text-decoration-line: none; background: none;">John Blunt</a>, a director of the <a href="https://en.wikipedia.org/wiki/Hollow_Sword_Blade_Company" title="Hollow Sword Blade Company" style="text-decoration-line: none; background: none;">Hollow Sword Blade Company</a>, which despite its name was an unofficial bank. Sales commenced on 3 March 1711 and tickets had completely sold out by the 7th, making it the first truly successful English state lottery.<a href="https://en.wikipedia.org/wiki/South_Sea_Company#cite_note-9" style="text-decoration-line: none; background: none;">[9]</a>The success was shortly followed by another larger lottery, "The Two Million Adventure" or "The Classis", with tickets costing £100, with a top prize of £20,000 and every ticket winning a prize of at least £10. Although prizes were advertised by their total value, they were in fact paid out by instalments in the form of a fixed annuity over a period of years, so that the government effectively held the prize money as borrowings until the whole value had been paid out to the winners. Marketing was handled by members of the Sword Blade syndicate, Gibbon selling £200,000 of tickets and earning £4,500 commission, and Blunt selling £993,000. Charles Blunt (a relative) was made Paymaster of the lottery with expenses of £5,000.<h3 style="margin: 0.3em 0px 0px; padding-top: 0.5em; padding-bottom: 0px; overflow: hidden; line-height: 1.6; background-color: rgb(255, 255, 255);">Conception of the Company[</h3>The national debt investigation concluded that a total of £9 million was owed by the government, with no specifically allocated income to pay it off. Edward Harley and John Blunt had jointly devised a scheme to consolidate this debt in much the same way that the Bank of England had consolidated previous debts, although the Bank still held the monopoly for operating as a bank. All holders of the debt (creditors) would be required to surrender it to a new company formed for the purpose, the South Sea Company, which in return would issue them shares in itself to the same nominal value. The government would make an annual payment to the Company of £568,279, equating to 6% interest plus expenses, which would then be redistributed to the shareholders as a dividend. The company was also granted a monopoly to trade with South America, a potentially lucrative enterprise, but one controlled by Spain, with whom Britain was at war.<a href="https://en.wikipedia.org/wiki/South_Sea_Company#cite_note-auto2-10" style="text-decoration-line: none; background: none;">[10]</a>At that time, when the continent of America was being explored and colonized, Europeans applied the term "South Seas" only to South America and surrounding waters. The concession both held out the potential for future profits and encouraged a desire for an end to the war, necessary if any profits were to be made. The original suggestion for the South Sea scheme came from <a href="https://en.wikipedia.org/wiki/William_Paterson(banker)" title="William Paterson (banker)" style="text-decoration-line: none; background: none;">William Paterson</a>, one of the founders of the Bank of England and of the financially disastrous <a href="https://en.wikipedia.org/wiki/Darien_Scheme" class="mw-redirect" title="Darien Scheme" style="text-decoration-line: none; background: none;">Darien Scheme</a>.<a href="https://en.wikipedia.org/wiki/South_Sea_Company#cite_note-auto2-10" style="text-decoration-line: none; background: none;">[10]</a>Harley was rewarded for delivering the scheme by being created Earl of Oxford on 23 May 1711 and was promoted to <a href="https://en.wikipedia.org/wiki/Lord_High_Treasurer" title="Lord High Treasurer" style="text-decoration-line: none; background: none;">Lord High Treasurer</a>. With a more secure position, he began secret peace negotiations with France.<h3 style="margin: 0.3em 0px 0px; padding-top: 0.5em; padding-bottom: 0px; overflow: hidden; line-height: 1.6; background-color: rgb(255, 255, 255);">Initial speculation[</h3>The scheme to thus consolidate all government debt and to manage it better in the future held out the prospect of all existing creditors being repaid the full nominal value of their loans, which at the time before the scheme was publicised were valued at a discounted rate of £55 per £100 nominal value, as the lotteries were discredited and the government's ability to repay in full was widely doubted. Thus bonds representing the debt intended to be consolidated under the scheme were available for purchase on the open market at a price that allowed anyone with advance knowledge to buy and resell in the immediate future at a high profit, for as soon as the scheme became publicised the bonds would once again be worth at least their nominal value, as repayment was now more certain a prospect. This anticipation of gain made it possible for Harley to bring further financial supporters into the scheme, such as James Bateman and <a href="https://en.wikipedia.org/wiki/Sir_Theodore_Janssen,1st_Baronet" class="mw-redirect" title="Sir Theodore Janssen, 1st Baronet" style="text-decoration-line: none; background: none;">Theodore Janssen</a>.<a href="https://en.wikipedia.org/wiki/South_Sea_Company#cite_note-11" style="text-decoration-line: none; background: none;">[11]</a><a href="https://en.wikipedia.org/wiki/Daniel_Defoe" title="Daniel Defoe" style="text-decoration-line: none; background: none;">Daniel Defoe</a> commented:<a href="https://en.wikipedia.org/wiki/South_Sea_Company#cite_note-12" style="text-decoration-line: none; background: none;">[12]</a>
<blockquote class="templatequote" style="overflow: hidden; margin: 1em 0px; padding: 0px 40px; border-left: none; background-color: rgb(255, 255, 255);">Unless the Spaniards are to be divested of common sense, infatuate, and given up, abandoning their own commerce, throwing away the only valuable stake they have left in the world, and in short, bent on their own ruin, we cannot suggest that they will ever, on any consideration, or for any equivalent, part with so valuable, indeed so inestimable a jewel, as the exclusive trade to their own plantations.</blockquote>The originators of the scheme knew that there was no money to invest in a trading venture, and no realistic expectation that there would ever be a trade to exploit, but nevertheless the potential for great wealth was widely publicised at every opportunity, so as to encourage interest in the scheme. The objective for the founders was to create a company that they could use to become wealthy and that offered scope for further government deals.<a href="https://en.wikipedia.org/wiki/South_Sea_Company#cite_note-13" style="text-decoration-line: none; background: none;">[13]</a><h3 style="margin: 0.3em 0px 0px; padding-top: 0.5em; padding-bottom: 0px; overflow: hidden; line-height: 1.6; background-color: rgb(255, 255, 255);">Flotation[</h3><div class="thumb tright" style="clear: right; float: right; margin: 0.5em 0px 1.3em 1.4em; width: auto; background-color: rgb(255, 255, 255);"><div class="thumbinner" style="min-width: 100px; border: 1px solid rgb(200, 204, 209); padding: 3px; background-color: rgb(248, 249, 250); text-align: center; overflow: hidden; width: 222px;"><a href="https://en.wikipedia.org/wiki/File:Bubble.folly.jpg" class="image" style="text-decoration-line: none; background: none;"><img alt="" src="https://upload.wikimedia.org/wikipedia/commons/thumb/d/d4/Bubble.folly.jpg/220px-Bubble.folly.jpg" decoding="async" width="220" height="261" class="thumbimage" srcset="//upload.wikimedia.org/wikipedia/commons/thumb/d/d4/Bubble.folly.jpg/330px-Bubble.folly.jpg 1.5x, //upload.wikimedia.org/wikipedia/commons/thumb/d/d4/Bubble.folly.jpg/440px-Bubble.folly.jpg 2x" data-file-width="597" data-file-height="707" style="border: 1px solid rgb(200, 204, 209); vertical-align: middle; background-color: rgb(255, 255, 255);" /></a><div class="thumbcaption" style="border: 0px; line-height: 1.4em; padding: 3px; text-align: left;"><div class="magnify" style="float: right; margin-left: 3px; margin-right: 0px;"><a href="https://en.wikipedia.org/wiki/File:Bubble.folly.jpg" class="internal" title="Enlarge" style="text-decoration-line: none; background: url("/w/resources/src/mediawiki.skinning/images/magnify-clip-ltr.svg?8330e"); display: block; text-indent: 15px; white-space: nowrap; overflow: hidden; width: 15px; height: 11px; user-select: none;" /></div>A bubble-era stock promoter, caricatured as a "night wind hawker" (The Great Picture of Folly, 1720)</div></div></div>The <a href="https://en.wikipedia.org/wiki/Royal_charter" title="Royal charter" style="text-decoration-line: none; background: none;">royal charter</a> for the company, based on that of the Bank of England, was drawn up by Blunt who was paid £3,846 for his services in setting up the company. Directors would be elected every three years and shareholders would meet twice a year. The Company employed a Cashier, Secretary and Accountant. The Governor was intended as an honorary position, and was later customarily held by the monarch. The charter allowed the full court of directors to nominate a smaller committee to act on any matter on its behalf. Directors of the Bank of England and of the <a href="https://en.wikipedia.org/wiki/British_East_India_Company" class="mw-redirect" title="British East India Company" style="text-decoration-line: none; background: none;">East India Company</a> were barred from being directors of the South Sea Company. Any ship of more than 500 tons owned by the Company was to have a Church of England clergyman on board....<a href="https://en.wikipedia.org/wiki/South_Sea_Company">Wikipedia</a><h1 class="name post-title entry-title" itemprop="itemReviewed" itemscope="" itemtype="http://schema.org/Thing" style="padding: 0px; margin: 0px 0px 10px; outline: 0px; list-style: none; border: 0px; box-sizing: border-box; font-weight: 400; background-color: rgb(255, 255, 255);">Throw bankers into sacks of snakes</h1><div class="entry" style="padding: 0px; margin: 0px; outline: 0px; list-style: none; border: 0px; box-sizing: border-box; word-wrap: break-word; line-height: 22px; background-color: rgb(255, 255, 255);">There's an interesting little story that's been picked up from a Vince Cable article back in <a href="http://www.newstatesman.com/business/2008/10/economic-nationalism-state" target="blank" style="padding: 0px; margin: 0px; outline: 0px; list-style: none; border: 0px; box-sizing: border-box; text-decoration-line: none; transition: all 0.2s ease-in-out;">October</a>, where he wrote:"One of the first recognisably modern financial crises was the South Sea Bubble in 1720. Many thousands of sane British citizens – including Sir Isaac Newton – invested their savings in a scam and were impoverished when it burst. There was much anger and parliament debated the proposition that the promoters should be sewn into a sack with poisonous snakes and thrown into the Thames."This is actually a variation of a Roman punishment called <a href="http://www.jstor.org/pss/295798" target="blank" style="padding: 0px; margin: 0px; outline: 0px; list-style: none; border: 0px; box-sizing: border-box; text-decoration-line: none; transition: all 0.2s ease-in-out;">Lex Pompeia</a>, and the punishment was meant to be that each director of the South Sea Company that caused the crisis was tied into a sack with a dog, a cock, a viper and an ape in each and then drowned in the River Thames.Today's modern equivalent is to throw bankers into congressional and treasury select committee hearings, a modern day room full of snakes, dogs, cocks and apes.</div><div>=</div><div>
</div><div><a href="https://theconversation.com/the-real-women-of-the-favourite-included-an-18th-century-warren-buffett-110345">https://theconversation.com/the-real-women-of-the-favourite-included-an-18th-century-warren-buffett-110345</a></div><div>
</div><div>
</div><div><strong style="margin: 0px; padding: 0px; border: 0px; outline: 0px; vertical-align: baseline; background-image: initial; background-position: initial; background-size: initial; background-repeat: initial; background-attachment: initial; background-origin: initial; background-clip: initial; left: -12px; position: relative;">The real women of ‘The Favourite’ included an <span class="nobr" style="margin: 0px; padding: 0px; border: 0px; outline: 0px; vertical-align: baseline; background-image: initial; background-position: initial; background-size: initial; background-repeat: initial; background-attachment: initial; background-origin: initial; background-clip: initial; white-space: nowrap;">18th-century Warren Buffett</div><div><strong style="margin: 0px; padding: 0px; border: 0px; outline: 0px; vertical-align: baseline; background-image: initial; background-position: initial; background-size: initial; background-repeat: initial; background-attachment: initial; background-origin: initial; background-clip: initial; left: -12px; position: relative;">
</div><div>One of the challengers at this year’s Oscars is “<a href="https://www.imdb.com/title/tt5083738/" style="outline: none; white-space: pre-wrap; overflow-wrap: break-word;">The Favourite</a>,” a film set in the early 18th-century court of British monarch Queen Anne.</div>Focusing on the political and sexual intrigues of a female-led state, the film has, at its center, not only the queen but also her two “favorites” – Sarah, Duchess of Marlborough, and Abigail, Baroness Masham. Much of the film focuses on how these two female courtiers vie for influence over Anne.These early 18th-century women are hardly household names, so a movie that introduces them to a wider audience is welcome. And it doesn’t hurt that some of today’s biggest Hollywood stars inhabit the main roles: Olivia Coleman stars as Queen Anne, Rachel Weisz plays Sarah Churchill, and Emma Stone appears as Abigail Masham.The film, as well as all three actresses, <a href="https://variety.com/2019/film/news/oscar-nominations-2019-list-1203112405/" style="outline: none; white-space: pre-wrap; overflow-wrap: break-word;">were nominated for Oscars</a>.But how does the portrayal of these women stack up against the historical reality? Might the fancy frocks, extravagant palaces and sexual triangles distract viewers from their true historical significance?<a href="https://history.umbc.edu/facultystaff/full-time/amy-froide/" style="outline: none; white-space: pre-wrap; overflow-wrap: break-word;">As a historian of women in early modern Britain</a>, I’ve built my career analyzing the roles that women played in the past despite living in male-dominated societies. In fact, Sarah Churchill is featured in my recent book, “<a href="https://global.oup.com/academic/product/silent-partners-9780198767985?cc=us&lang=en&" style="outline: none; white-space: pre-wrap; overflow-wrap: break-word;">Silent Partners: Women as Public Investors during England’s Financial Revolution, 1680-1750</a>.”While “The Favourite” introduces viewers to the women who were important political figures in early 18th-century Britain, it doesn’t quite capture just how much power these women – especially Sarah – actually wielded.<h2 style="margin: 0px 0px 12px; padding: 0px; border: 0px; outline: 0px; vertical-align: baseline; background: rgb(255, 255, 255); text-rendering: optimizelegibility;">Queen Anne and the birth of an empire</h2>The Queen Anne portrayed in “The Favourite” is physically and mentally a mess, which <a href="https://yalebooks.yale.edu/book/9780300090246/queen-anne" style="outline: none; white-space: pre-wrap; overflow-wrap: break-word;">isn’t entirely inaccurate</a>.
By watching the film, you wouldn’t learn that Queen Anne <a href="https://www.historyextra.com/period/stuart/queen-anne-the-favourite-last-stuart-monarch-olivia-colman/" style="font-family: " times="Times" new="New" roman="Roman" font-size="font-size" large="large" outline="outline" none="none" white-space="white-space" pre-wrap="pre-wrap" overflow-wrap="overflow-wrap" break-word="break-word">presided over the union</a> of Scotland and England into Great Britain in 1707, kept the Jacobite supporters of her Catholic half-brother at bay, successfully maintained a Protestant monarchy that has lasted into the present day, and furthered Britain’s rise to dominance on sea and land, ushering in the first century of Britain’s global empire.While it is true that she had bad eyesight, was overweight, suffered from gout and endured the loss of 17 children, this was only one side of her.<h2 style="margin: 0px 0px 12px; padding: 0px; border: 0px; outline: 0px; vertical-align: baseline; background: rgb(255, 255, 255); text-rendering: optimizelegibility;">Sarah pulls the (purse) strings</h2><p style="margin: 0px 0px 18px; padding: 0px; border: 0px; outline: 0px; vertical-align: baseline; background-image: initial; background-position: initial; background-size: initial; background-repeat: initial; background-attachment: initial; background-origin: initial; background-clip: initial;">The figure around whom the action pivots in “The Favourite,” however, is not Queen Anne but Sarah Churchill. The power behind Anne’s throne, Sarah possesses the political, economic and military vision for the country.<p style="margin: 0px 0px 18px; padding: 0px; border: 0px; outline: 0px; vertical-align: baseline; background-image: initial; background-position: initial; background-size: initial; background-repeat: initial; background-attachment: initial; background-origin: initial; background-clip: initial;">As Keeper of the Privy Purse, one of Sarah’s jobs was to manage the royal household’s financial accounts. And with her husband, General John Churchill, away much of the time leading the queen’s troops, Sarah also handled the finances and investments for her own family.<p style="margin: 0px 0px 18px; padding: 0px; border: 0px; outline: 0px; vertical-align: baseline; background-image: initial; background-position: initial; background-size: initial; background-repeat: initial; background-attachment: initial; background-origin: initial; background-clip: initial;">Her political adversaries <a href="https://catalog.hathitrust.org/Record/000313568" style="outline: none; white-space: pre-wrap; overflow-wrap: break-word;">accused both Churchills</a> of benefiting financially from their ties to Queen Anne. Sarah’s control over access to the queen and John’s role leading the army created opportunities for patronage, bribes and, in John’s case, <a href="https://catalog.hathitrust.org/Record/000313568" style="outline: none; white-space: pre-wrap; overflow-wrap: break-word;">some shady involvement in army supply contracts</a>.<p style="margin: 0px 0px 18px; padding: 0px; border: 0px; outline: 0px; vertical-align: baseline; background-image: initial; background-position: initial; background-size: initial; background-repeat: initial; background-attachment: initial; background-origin: initial; background-clip: initial;">In my book, I argue that while the Churchills may have been venal and dishonest, much of their money came from Sarah’s astute and underappreciated investing in the stock market. As an early adopter of stock investing, Sarah put her family’s funds into the national debt, the Bank of England and shares in private companies. In 1704, she had over 19,000 pounds of her own money in stocks, <a href="https://www.measuringworth.com/calculators/ukcompare/relativevalue.php" style="outline: none; white-space: pre-wrap; overflow-wrap: break-word;">or US$3.5 million today</a>.<p style="margin: 0px 0px 18px; padding: 0px; border: 0px; outline: 0px; vertical-align: baseline; background-image: initial; background-position: initial; background-size: initial; background-repeat: initial; background-attachment: initial; background-origin: initial; background-clip: initial;">Sarah became famous for avoiding the losses so many of her contemporaries incurred in the <a href="https://www.britannica.com/event/South-Sea-Bubble" style="outline: none; white-space: pre-wrap; overflow-wrap: break-word;">South Sea Bubble of 1720</a>, when investors poured money into the South Sea Company. She had wisely taken her family’s money out a few months before the crash because she realized the company’s stock was overvalued. In the process she made a cool 100,000 pounds.Unlike the male courtiers in “The Favourite” who foolishly wager on duck races, Sarah didn’t make unnecessary gambles. She was such a savvy and significant investor; like Warren Buffett today, her actions and decisions could single-handedly influence the market. When British Prime Minister Robert Walpole needed money to fund the government, <a href="https://global.oup.com/academic/product/silent-partners-9780198767985?cc=us&lang=en&" style="outline: none; white-space: pre-wrap; overflow-wrap: break-word;">it was Sarah Churchill whom he approached for a loan of 200,000 pounds</a>....<h1 style="text-transform: uppercase; margin: 0px 0px 0px 15px;">SOUTH SEA BUBBLE SHORT HISTORY</h1>The South Sea Bubble was a complex event, the product of intersecting financial, legal, political, and cultural factors. This short history is just an overview, intended to provide a context for research in the South Sea Bubble Collection. For additional resources, please see the related reading section on the <a href="http://www.library.hbs.edu/hc/ssb/whatis.html" id="inlinelink" style="font-weight: bold;">previous page</a> on this site.The South Sea Company was formed in 1711, supported by Robert Harley as a Tory competitor for the Whig Bank of England. The company was promised a monopoly of all trade to the Spanish colonies in South America in exchange for taking over and consolidating the national debt raised by the War of Spanish Succession (1701-1714). The value of this promise, however, was closely tied to the outcome of the war.<table cellpadding="0" cellspacing="0" border="0" width="198" align="left" style="margin: 0px 10px 10px 15px;"><tbody><tr><td style="margin-left: 15px;"><img src="http://www.library.hbs.edu/hc/ssb/images/dwarf2.gif" alt="" width="198" height="227" border="0" align="left" /></td></tr><tr><td class="what_caption" style="margin-left: 15px; padding: 5px 5px 0px 0px;">Figure from engraving in Het Groote Tafereel der Dwaasheid, 1720.</td></tr></tbody></table>While the Treaty of Utrecht effectively ended the war in 1713, it curtailed the scope of trade opportunities for the South Sea Company by confirming Spain’s sovereignty over its new world colonies. The South Sea Company was left with limited options in the slave trade, the interest to be paid by the government on the loan from the South Sea Company, and narrowing trade opportunities in the Spanish colonies in South America. The South Sea Company did not even engage in its first trade voyage to the South Seas until 1717, and the potential for South Sea fortune slipped even further from grasp when the fragile relationship between Spain and Britain weakened in 1718.Although unsuccessful in South Sea trade, the company did effectively persuade the British government to approve the conversion of successive portions of the national debt into South Sea Company shares. Building on the war debt conversion of 1711, Parliament authorized the South Sea Company in 1719 to assume an additional portion of the national debt.In January of 1720, South Sea Company stock was trading at a modest £128. In an effort to stir up popular interest in the company’s stock, the directors circulated false claims of success and fanciful tales of South Sea riches. The share price rose to £175 in February. Interest in the company was furthered along in March when the government endorsed a proposal from the company to assume yet more of the national debt in exchange for shares of South Sea Company stock. The South Sea Company’s proposal was chosen over that of its chief competitor, the Bank of England. With investor confidence mounting, the share price climbed to approximately £330 by the end of March.The South Sea Bubble was not an isolated bubble event in 1720. As the South Sea Bubble was developing, a general interest in joint-stock investment opportunities was also picking up pace. By the middle of 1720, sometimes known as the “Bubble Year,” the market was flooded with a remarkable range of new ventures, each creating smaller bubbles as the speculative frenzy mounted. South Sea Company stock benefited from the investor mania and by May it was at £550.The Bubble Act was passed in June, requiring all joint-stock companies to receive a royal charter. The legislation had been introduced by the South Sea Company, presumably as a means of controlling competition in the burgeoning market. The South Sea Company received its charter, perceived as a vote of confidence in the company, and by the end of June its share price had spiked to a peak of £1050.Investor confidence began to wane, however. The sell-off began by early July and the collapse occurred quickly. By the end of August stock was valued at less than £800. By September the share price had plummeted to £175, devastating institutions and individuals alike. In 1721 formal investigations exposed a web of deceit, corruption, and bribery that led to the prosecution of many of the major players in the crisis, including both company and government officials.The South Sea Bubble was a speculative bubble in the early 18th century involving the shares of the South Sea Company, a British international trading company that was granted a monopoly in trade with Spain’s colonies in South America and the West Indies as part of a treaty made after the War of the Spanish Succession. In return for these exclusive trading rights, the company assumed England’s war debt. When investors recognized the potential profits to be made from trade with the gold and silver-rich South American colonies, they bid the South Sea Company’s shares <a href="http://www.thebubblebubble.com/wp-content/uploads/2012/05/South_Sea_Co_gross.jpg" style="border: 0px; font-style: inherit; font-weight: inherit; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;"><img src="http://www.thebubblebubble.com/wp-content/uploads/2012/05/South_Sea_Co_gross.jpg" alt="South Sea Bubble: South Sea Company Stock Certificate" title="South Sea Bubble: South Sea Company Stock Certificate" width="350" height="205" class="alignleft size-full wp-image-1599" srcset="http://www.thebubblebubble.com/wp-content/uploads/2012/05/South_Sea_Co_gross.jpg 350w, http://www.thebubblebubble.com/wp-content/uploads/2012/05/South_Sea_Co_gross-300x175.jpg 300w" sizes="(max-width: 350px) 100vw, 350px" style="border: 0px; display: inline; float: left; margin-right: 1.5em; max-width: 100%; height: auto;" /></a>and the shares of similar trading companies to incredible heights in a typical speculative bubble fashion. Not long after virtually all classes of British society were thoroughly engaged in wild stock speculation, the South Sea Bubble popped and stock prices violently collapsed, financially ruining their investors.<center style="line-height: 22.95px; background-color: rgb(255, 255, 255);">Events Leading Up to the South Sea Bubble</center>The South Sea Company was founded in 1711 by the Lord Treasurer Robert Harley and John Blunt, the former director of the Sword Blade Company. During this time, most of the Americas were being colonized and Europeans used the term "South Seas" to refer to South America and other lands located in the surrounding waters. Robert Harley was responsible for creating a mechanism used to fund the British government’s debt that was being incurred during the ongoing War of Spanish Succession of 1701-1713. Due to the fact that the Bank of England’s charter established itself as the only joint stock bank, Harley was unable to establish a bank. Undeterred, Harley established what appeared to be a trading company, but the company’s primary business activity was funding government debt (Melville, 1968).The British government believed that offering exclusive trading rights with Spain’s colonies would be an effective incentive to convince the private sector to assume the government’s war debts. The South Sea Company’s founders and the government were able to convince shareholders to assume a total of £10 million in short-term government debt in exchange for South Sea Company shares. In return, the government gave shareholders a continual annuity, paying a total of £576,534 each year, or a perpetual loan of £10 million at a 6% yield. This deal resulted in a steady stream of earnings for new shareholders. The government intended to fund interest payments by placing tariffs on goods that were imported from South America (Carruthers, 2005).When the peace Treaty of Utrecht was signed at the end of the War of Spanish Succession in 1713, the South Sea Company’s trading rights were finally put into writing: the right to supply the Spanish colonies with slaves and to send one trading ship per year. These formalized trading rights were a disappointment to Robert Harley as they were nowhere near as extensive as he had originally expected when he founded the company in 1711 (Harrison, 2001).By 1717, the South Sea Company had assumed an additional £2 million worth of government debt. By then, government spending for the United Kingdom had reached £64.4 million, which the government was able to afford by lowering the interest rate on its debt. During this time, South Sea Company shareholders continued to collect a reliable stream of earnings. In 1719, a proposal was made by the South Sea Company in which it would purchase over half of the British national debt with new shares alongside a promise to the government that the interest rate on the debt would be reduced to 5% until the year 1727 and 4% for every year after that. This refinancing scheme allowed illiquid high-interest debt to be converted into highly-liquid low-interest debt – a win-win for all parties involved. (Reading, 1933).As of 1719, the government was in debt by £50 million, £18.3 million of which was held by three of England’s largest corporations. The Bank of England was one of the three corporations and owned £3.4 million of that total debt, while the British East India Company owned £3.2 million and the South Sea Company owned £11.7 million.<center style="line-height: 22.95px; background-color: rgb(255, 255, 255);">The Mania Phase<a href="http://www.thebubblebubble.com/wp-content/uploads/2012/05/South-Sea-Company.png" style="border: 0px; font-style: inherit; font-weight: inherit; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;"><img src="http://www.thebubblebubble.com/wp-content/uploads/2012/05/South-Sea-Company.png" alt="South Sea Bubble Chart" title="South Sea Bubble Chart" width="275" height="311" class="aligncenter size-full wp-image-1601" srcset="http://www.thebubblebubble.com/wp-content/uploads/2012/05/South-Sea-Company.png 275w, http://www.thebubblebubble.com/wp-content/uploads/2012/05/South-Sea-Company-265x300.png 265w" sizes="(max-width: 275px) 100vw, 275px" style="border: 0px; clear: both; display: block; margin: 0px auto; max-width: 100%; height: auto;" /></a></center>Though the company’s trading rights with Spanish colonies were quite modest, its executives whet investors’ appetites with incredible tales and rumors of South American gold and silver just waiting to imported back to Europe. The company successfully sparked a speculative frenzy for its shares in 1720, with stock prices soaring from £128 in January, £175 in February, £330 in March and £550 in May. The company was able to support unusually high valuations thanks to a £70 million fund of credit that was granted by the King and Parliament for the purpose of commercial expansion (Dickson, 1963).Shares were offered to a myriad of politicians at market prices. However, these politicians did not purchase the shares in a conventional sense, but held on to their shares with the option sell them back to the South Sea Company at a later date, allowing them to keep all profits made. This purchasing arrangement enticed many government employees as well as the King’s mistress. High ranking shareholders helped to pump the value of South Sea Company shares in addition to lending an air of legitimacy to the scheme (Reading, 1933).As South Sea Company shares bubbled up to incredible new heights, numerous other joint-stock companies IPOd to take advantage of the booming investor demand for speculative investments. Many of these new companies made outrageous and often fraudulent claims about their business ventures for the purpose of raising capital and boosting their stock prices. Here are some examples of these companies’ business proposals (History House, 1997):<ul style="border: 0px; margin: 0px 0px 1.5em 3em; outline: 0px; padding: 0px; vertical-align: baseline; clear: left; line-height: 22.95px; background-color: rgb(255, 255, 255);"><li style="border: 0px; font-style: inherit; font-weight: inherit; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;">For supplying the town of Deal with fresh water.</li><li style="border: 0px; font-style: inherit; font-weight: inherit; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;">For trading in hair.</li><li style="border: 0px; font-style: inherit; font-weight: inherit; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;">For assuring of seamen’s wages.</li><li style="border: 0px; font-style: inherit; font-weight: inherit; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;">For importing pitch and tar, and other naval stores, from North Britain and America.</li><li style="border: 0px; font-style: inherit; font-weight: inherit; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;">For insuring of horses.</li><li style="border: 0px; font-style: inherit; font-weight: inherit; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;">For improving the art of making soap.</li><li style="border: 0px; font-style: inherit; font-weight: inherit; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;">For improving of gardens.</li><li style="border: 0px; font-style: inherit; font-weight: inherit; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;">For insuring and increasing children’s fortunes.</li><li style="border: 0px; font-style: inherit; font-weight: inherit; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;">For a wheel for perpetual motion.</li><li style="border: 0px; font-style: inherit; font-weight: inherit; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;">For importing walnut-trees from Virginia.</li><li style="border: 0px; font-style: inherit; font-weight: inherit; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;">For making of rape-oil.</li><li style="border: 0px; font-style: inherit; font-weight: inherit; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;">For paying pensions to widows and others, at a small discount. </li><li style="border: 0px; font-style: inherit; font-weight: inherit; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;">For making iron with pit coal.</li><li style="border: 0px; font-style: inherit; font-weight: inherit; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;">For the transmutation of quicksilver into a malleable fine metal.</li></ul>And the most outlandish (and cunningly clever!) of all:<ul style="border: 0px; margin: 0px 0px 1.5em 3em; outline: 0px; padding: 0px; vertical-align: baseline; clear: left; line-height: 22.95px; background-color: rgb(255, 255, 255);"><li style="border: 0px; font-style: inherit; font-weight: inherit; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;">For carrying on an undertaking of great advantage; but nobody to know what it is.</li></ul>These highly speculative companies were nicknamed "bubbles" and, in an attempt to control them, Parliament passed the “Bubble Act” in 1720 that required new joint-stock companies to be incorporated (Reading, 1933). Ironically, the passing of the “Bubble Act” caused South Sea Company shares to soar to £890 in June 1720. By this time, a full-blown speculative stock frenzy developed in virtually all “bubble” company shares, with all classes of British society taking part in the action. Paupers went from rags-to-riches practically overnight as share prices ballooned to astronomical levels.<center style="line-height: 22.95px; background-color: rgb(255, 255, 255);">The Crash</center>Though South Sea Company shares were skyrocketing, the company’s profitability was mediocre at best, despite abundant promises of future growth by company directors. Shares leaped to £1000 per share by August 1720 and finally peaked at this level before plunging and triggering an avalanche of selling. The selloff in Company shares was exacerbated by a plan that John Blunt had instituted earlier in the year for the purpose of boosting share prices. The plan entailed the South Sea Company lending investors money to buy its shares, which meant that many shareholders had to sell their shares to cover the plan’s first installment of payments that were due in August (Carswell, 1960).As South Sea Company and other “bubble” company share prices imploded, speculators who had purchased shares on credit went bankrupt in short order. The popping of the South Sea Bubble resulted in a contagion that popped a concurrent bubble in Amsterdam as well as France’s Mississippi Scheme bubble. When South Sea Company share prices hit a pitiful £150 per share in September 1720, banks and goldsmiths went bankrupt because they were unable to collect loans that they had made to both recently-bankrupted common folk and aristocrats alike. Even Sir Isaac Newton lost a £20,000 (equivalent to about £268 million in present day value) fortune in South Sea Company shares, causing him to remark, "I can calculate the movement of the stars, but not the madness of men" (Wikipedia, n.d.).Investor outrage led Parliament to open an investigation into the matter in December 1720, resulting in a report that revealed extensive fraud as well as corruption among members of the Cabinet. The Postmaster General was accused along with James Craggs the Elder, James Craggs the Younger, the Chancellor of the Exchequer, John Aislabie , Lord Sunderland and Lord Stanhope. Aislabie was imprisoned and the rest of the Cabinet members were impeached (Melville, 1968). A series of new measures were implemented in order to restore confidence and the estates of the company directors were confiscated in an attempt to remunerate South Sea Company investors. The remaining South Sea Company shares were allocated to the East India Company and the Bank of England. A proposal was even made in Parliament to place bankers in sacks filled with snakes and thrown into the Thames River!forbeshttp://www.thebubblebubble.com/south-sea-bubble/

<a href="https://en.wikipedia.org/wiki/South_Sea_Company">https://en.wikipedia.org/wiki/South_Sea_Company</a>

The South Sea Company (officially The Governor and Company of the merchants of Great Britain, trading to the South Seas and other parts of America, and for the encouragement of fishing)<a href="https://en.wikipedia.org/wiki/South_Sea_Company#cite_note-1" style="text-decoration: none; white-space: nowrap; background: none;">[1]</a> was a British <a href="https://en.wikipedia.org/wiki/Joint-stock_company" title="Joint-stock company" style="text-decoration: none; background: none;">joint-stock company</a> founded in 1711, created as a <a href="https://en.wikipedia.org/wiki/Public-private_partnership" class="mw-redirect" title="Public-private partnership" style="text-decoration: none; background: none;">public-private partnership</a> to consolidate and reduce the cost of national debt. The company was also granted a monopoly to trade with South America, hence its name. At the time it was created, Britain was involved in the <a href="https://en.wikipedia.org/wiki/War_of_the_Spanish_Succession" title="War of the Spanish Succession" style="text-decoration: none; background: none;">War of the Spanish Succession</a> and Spain controlled South America. There was no realistic prospect that trade would take place and the company never realised any significant profit from its monopoly. Company stock rose greatly in value as it expanded its operations dealing in government debt, peaking in 1720 before collapsing to little above its original flotation price; this became known as the South Sea <a href="https://en.wikipedia.org/wiki/Economic_bubble" title="Economic bubble" style="text-decoration: none; background: none;">Bubble</a>.

The <a href="https://en.wikipedia.org/wiki/Bubble_Act" title="Bubble Act" style="text-decoration: none; background: none;">Bubble Act</a> 1720 (<a href="https://en.wikipedia.org/wiki/6_Geo_I" class="mw-redirect" title="6 Geo I" style="text-decoration: none; background: none;">6 Geo I</a>, c 18), which forbade the creation of joint-stock companies without<a href="https://en.wikipedia.org/wiki/Royal_charter" title="Royal charter" style="text-decoration: none; background: none;">royal charter</a>, was promoted by the South Sea company itself before its collapse.

In Great Britain, a considerable number of people were ruined by the share collapse, and the national economy greatly reduced as a result. The founders of the scheme engaged in <a href="https://en.wikipedia.org/wiki/Insider_trading" title="Insider trading" style="text-decoration: none; background: none;">insider trading</a>, using their advance knowledge of when national debt was to be consolidated to make large profits from purchasing debt in advance. Huge bribes were given to politicians to support the <a href="https://en.wikipedia.org/wiki/Act_of_Parliament" title="Act of Parliament" style="text-decoration: none; background: none;">Acts of Parliament</a> necessary for the scheme.[<a href="https://en.wikipedia.org/wiki/Wikipedia:Citation_needed" title="Wikipedia:Citation needed" style="text-decoration: none; background: none;">citation needed</a>] Company money was used to deal in its own shares, and selected individuals purchasing shares were given loans backed by those same shares to spend on purchasing more shares. The expectation of vast wealth from trade with South America was used to encourage the public to purchase shares, despite the limited likelihood this would ever happen. The only significant trade that did take place was in <a href="https://en.wikipedia.org/wiki/Atlantic_slave_trade" title="Atlantic slave trade" style="text-decoration: none; background: none;">slaves</a>, but the company failed to manage this profitably.[<a href="https://en.wikipedia.org/wiki/Wikipedia:Citation_needed" title="Wikipedia:Citation needed" style="text-decoration: none; background: none;">citation needed</a>]

A parliamentary enquiry was held after the crash to discover its causes. A number of politicians were disgraced, and people found to have profited unlawfully from the company had assets confiscated proportionate to their gains (most had already been rich men and remained comfortably rich). The company was restructured and continued to operate for more than a century after the Bubble. The headquarters were in <a href="https://en.wikipedia.org/wiki/Threadneedle_Street" title="Threadneedle Street" style="text-decoration: none; background: none;">Threadneedle Street</a> at the centre of the financial district in London; today the<a href="https://en.wikipedia.org/wiki/Bank_of_England" title="Bank of England" style="text-decoration: none; background: none;">Bank of England</a> has headquarters on Threadneedle Street. At the time of these events the Bank of England also was a private company dealing in national debt, and the crash of its rival consolidated its position as banker to the British government.<a href="https://en.wikipedia.org/wiki/South_Sea_Company#cite_note-2" style="text-decoration: none; white-space: nowrap; background: none;">[2]</a>

<h2 style="font-weight: bold; margin: 1em 0px 0.25em; overflow: hidden; padding: 0px; border: none; display: inline; line-height: 1.3; background: none;">Contents</h2>

[<a href="https://en.wikipedia.org/wiki/South_Sea_Company#" id="togglelink" style="text-decoration: none; background: none;">hide</a>] </div>

<li class="toclevel-1 tocsection-1" style=" margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/South_Sea_Company#Foundation" style="text-decoration: none; background: none;">1Foundation</a>

<li class="toclevel-2 tocsection-2" style=" margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/South_Sea_Company#Conception_of_the_Company" style="text-decoration: none; background: none;">1.1Conception of the Company</a></li>

<li class="toclevel-2 tocsection-3" style=" margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/South_Sea_Company#Flotation" style="text-decoration: none; background: none;">1.2Flotation</a></li>

<li class="toclevel-2 tocsection-4" style=" margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/South_Sea_Company#The_slave_trade" style="text-decoration: none; background: none;">1.3The slave trade</a></li>

<li class="toclevel-2 tocsection-5" style=" margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/South_Sea_Company#Changes_of_management" style="text-decoration: none; background: none;">1.4Changes of management</a></li>

</ul>

</li>

<li class="toclevel-1 tocsection-7" style=" margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/South_Sea_Company#Refinancing_government_debt" style="text-decoration: none; background: none;">2Refinancing government debt</a>

<li class="toclevel-2 tocsection-8" style=" margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/South_Sea_Company#Trading_more_debt_for_equity" style="text-decoration: none; background: none;">2.1Trading more debt for equity</a>

<li class="toclevel-3 tocsection-9" style=" margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/South_Sea_Company#Public_announcement" style="text-decoration: none; background: none;">2.1.1Public announcement</a></li>

</ul>

</li>

<li class="toclevel-2 tocsection-10" style=" margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/South_Sea_Company#Inflating_the_share_price" style="text-decoration: none; background: none;">2.2Inflating the share price</a></li>

<li class="toclevel-2 tocsection-11" style=" margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/South_Sea_Company#Bubble_Act" style="text-decoration: none; background: none;">2.3Bubble Act</a></li>

<li class="toclevel-2 tocsection-12" style=" margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/South_Sea_Company#Top_reached" style="text-decoration: none; background: none;">2.4Top reached</a></li>

<li class="toclevel-2 tocsection-13" style=" margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/South_Sea_Company#Recriminations" style="text-decoration: none; background: none;">2.5Recriminations</a></li>

<li class="toclevel-2 tocsection-14" style=" margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/South_Sea_Company#Quotations_prompted_by_the_collapse" style="text-decoration: none; background: none;">2.6Quotations prompted by the collapse</a></li>

</ul>

</li>

<li class="toclevel-1 tocsection-15" style=" margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/South_Sea_Company#A_trading_company" style="text-decoration: none; background: none;">3A trading company</a>

<li class="toclevel-2 tocsection-16" style=" margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/South_Sea_Company#Slave_trade_under_the_Asiento" style="text-decoration: none; background: none;">3.1Slave trade under the Asiento</a></li>

<li class="toclevel-2 tocsection-17" style=" margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/South_Sea_Company#The_annual_ship" style="text-decoration: none; background: none;">3.2The annual ship</a></li>

<li class="toclevel-2 tocsection-18" style=" margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/South_Sea_Company#Arctic_whaling" style="text-decoration: none; background: none;">3.3Arctic whaling</a></li>

</ul>

</li>

<li class="toclevel-1 tocsection-19" style=" margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/South_Sea_Company#Government_debt_after_the_Seven_Years.27_War" style="text-decoration: none; background: none;">4Government debt after the Seven Years' War</a></li>

<li class="toclevel-1 tocsection-20" style=" margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/South_Sea_Company#Officers_of_the_South_Sea_Company" style="text-decoration: none; background: none;">5Officers of the South Sea Company</a></li>

<li class="toclevel-1 tocsection-22" style=" margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/South_Sea_Company#Notes" style="text-decoration: none; background: none;">7Notes</a></li>

<li class="toclevel-1 tocsection-23" style=" margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/South_Sea_Company#References" style="text-decoration: none; background: none;">8References</a></li>

<li class="toclevel-1 tocsection-24" style=" margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/South_Sea_Company#External_links" style="text-decoration: none; background: none;">9External links</a></li>

</ul>

</div>

<h2 style="font-weight: normal; margin: 1em 0px 0.25em; overflow: hidden; padding: 0px; border-bottom: 1px solid rgb(170, 170, 170); line-height: 1.3; font-style: normal; font-variant-ligatures: normal; font-variant-caps: normal; letter-spacing: normal; orphans: 2; text-align: start; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px; -webkit-text-stroke-width: 0px; background: none rgb(255, 255, 255);">Foundation<span class="mw-editsection" style="-webkit-user-select: none; font-weight: normal; margin-left: 1em; vertical-align: baseline; line-height: 1em; display: inline-block; white-space: nowrap; unicode-bidi: isolate;">[<a href="https://en.wikipedia.org/w/index.php?title=South_Sea_Company&action=edit&section=1" title="Edit section: Foundation" style="text-decoration: none; background: none;">edit</a>]</h2>

A new Parliament met in November 1710 with a resolve to attend to national finances, which were suffering significantly from <a href="https://en.wikipedia.org/wiki/List_of_wars_involving_Great_Britain" class="mw-redirect" title="List of wars involving Great Britain" style="text-decoration: none; background: none;">two simultaneous wars</a>: the <a href="https://en.wikipedia.org/wiki/War_of_the_Spanish_Succession" title="War of the Spanish Succession" style="text-decoration: none; background: none;">war with France</a>, which was not to end until the 1713 <a href="https://en.wikipedia.org/wiki/Treaty_of_Utrecht" title="Treaty of Utrecht" style="text-decoration: none; background: none;">Treaty of Utrecht</a>, and the <a href="https://en.wikipedia.org/wiki/Great_Northern_War" title="Great Northern War" style="text-decoration: none; background: none;">Great Northern War</a>, which was not to end until 1721. Harley came prepared, with detailed accounts of the situation of the national debt, which was customarily a piecemeal affair, with different government departments arranging their own loans as the need arose. He released the information steadily, continually adding new reports of debts incurred and scandalous expenditure, until in January 1711 the House of Commons agreed to appoint a committee to investigate the entire debt. The committee included Harley himself; the two <a href="https://en.wikipedia.org/wiki/Auditor_of_the_Imprests" class="mw-redirect" title="Auditor of the Imprests" style="text-decoration: none; background: none;">Auditors of the Imprests</a>, whose task was to investigate government spending; Harley's brother <a href="https://en.wikipedia.org/wiki/Edward_Harley(1664%E2%80%931735)" title="Edward Harley (1664–1735)" style="text-decoration: none; background: none;">Edward</a>; and Paul Foley, his brother-in-law. Also included were the <a href="https://en.wikipedia.org/wiki/Secretary_of_the_Treasury" class="mw-redirect" title="Secretary of the Treasury" style="text-decoration: none; background: none;">Secretary of the Treasury</a>, <a href="https://en.wikipedia.org/wiki/William_Lowndes(British_politician)" class="mw-redirect" title="William Lowndes (British politician)" style="text-decoration: none; background: none;">William Lowndes</a>, who had had significant responsibility for reminting the entire debased British coinage in 1696; and <a href="https://en.wikipedia.org/wiki/John_Aislabie" title="John Aislabie" style="text-decoration: none; background: none;">John Aislabie</a> who represented the <a href="https://en.wikipedia.org/wiki/October_Club" title="October Club" style="text-decoration: none; background: none;">October Club</a>, a group of around 200 MPs who had agreed to vote together.<a href="https://en.wikipedia.org/wiki/South_Sea_Company#cite_note-3" style="text-decoration: none; white-space: nowrap; background: none;">[3]</a>

Harley's first concern was to find £300,000 for the next quarter's pay for the British army operating in Europe under <a href="https://en.wikipedia.org/wiki/John_Churchill,1st_Duke_of_Marlborough" title="John Churchill, 1st Duke of Marlborough" style="text-decoration: none; background: none;">Marlborough</a>. This was provided by a private consortium of <a href="https://en.wikipedia.org/wiki/Edward_Gibbon#Early_life:1737.E2.80.931752" title="Edward Gibbon" style="text-decoration: none; background: none;">Edward Gibbon</a>,<a href="https://en.wikipedia.org/wiki/South_Sea_Company#cite_note-4" style="text-decoration: none; white-space: nowrap; background: none;">[4]</a> <a href="https://en.wikipedia.org/wiki/George_Caswall" title="George Caswall" style="text-decoration: none; background: none;">George Caswall</a> and <a href="https://en.wikipedia.org/wiki/C.Hoare%26_Co" title="C. Hoare & Co" style="text-decoration: none; background: none;">Hoare's Bank</a>. The Bank of England had been operating a state lottery on behalf of the government, but this had not been particularly successful in 1710, and another had already begun in 1711. This too was performing poorly, so Harley granted authority to sell tickets to <a href="https://en.wikipedia.org/wiki/Sir_John_Blunt,_1st_Baronet" class="mw-redirect" title="Sir John Blunt, 1st Baronet" style="text-decoration: none; background: none;">John Blunt</a>, a director of the <a href="https://en.wikipedia.org/wiki/Hollow_Sword_Blade_Company" title="Hollow Sword Blade Company" style="text-decoration: none; background: none;">Hollow Sword Blade Company</a>, which despite its name was an unofficial bank. With sales commencing on 3 March 1711, tickets had completely sold out by the 7th. This was the first truly successful English state lottery.<a href="https://en.wikipedia.org/wiki/South_Sea_Company#cite_note-5" style="text-decoration: none; white-space: nowrap; background: none;">[5]</a>

The success was shortly followed by another, larger, lottery, "The Two Million Adventure" or "The Classis", with tickets costing £100, a top prize of £20,000 and every ticket winning a prize of at least £10. Although prizes were advertised by their total amount, they were paid in the form of a fixed annuity over a period of years, so that the government effectively held the prize money as a loan until it was paid out to the winners. Marketing was handled by members of the Sword Blade syndicate, Gibbon selling £200,000 of tickets and earning £4,500 commission, and Blunt selling £993,000. Charles Blunt (a relative) was made Paymaster of the lottery with expenses of £5,000.

<h3 style="font-weight: bold; margin: 0.3em 0px 0px; overflow: hidden; padding-top: 0.5em; padding-bottom: 0px; border-bottom: none; line-height: 1.6; font-style: normal; font-variant-ligatures: normal; font-variant-caps: normal; letter-spacing: normal; orphans: 2; text-align: start; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px; -webkit-text-stroke-width: 0px; background: none rgb(255, 255, 255);">Conception of the Company<span class="mw-editsection" style="-webkit-user-select: none; font-weight: normal; margin-left: 1em; vertical-align: baseline; line-height: 1em; display: inline-block; white-space: nowrap; unicode-bidi: isolate;">[<a href="https://en.wikipedia.org/w/index.php?title=South_Sea_Company&action=edit&section=2" title="Edit section: Conception of the Company" style="text-decoration: none; background: none;">edit</a>]</h3>

At that time, when continental America was being explored and colonized, Europeans applied the term "South Seas" only to South America and surrounding waters, not to any other ocean. The concession both held out the potential for future profits and encouraged a desire for an end to the war, necessary if any profits were to be made. The original suggestion for the South Sea scheme has sometimes been credited to <a href="https://en.wikipedia.org/wiki/Daniel_Defoe" title="Daniel Defoe" style="text-decoration: none; background: none;">Daniel Defoe</a>, but it is more likely the idea originated with <a href="https://en.wikipedia.org/wiki/William_Paterson_(banker)" title="William Paterson (banker)" style="text-decoration: none; background: none;">William Paterson</a>, one of the founders of the Bank of England and the <a href="https://en.wikipedia.org/wiki/Darien_Scheme" class="mw-redirect" title="Darien Scheme" style="text-decoration: none; background: none;">Darien Scheme</a>, the disastrous failure of which contributed to Scotland's agreement to unite with England in 1707.<a href="https://en.wikipedia.org/wiki/South_Sea_Company#cite_note-7" style="text-decoration: none; white-space: nowrap; background: none;">[7]</a>

Harley was rewarded for the scheme by being created Earl of Oxford on 23 May 1711, and was promoted to <a href="https://en.wikipedia.org/wiki/Lord_High_Treasurer" title="Lord High Treasurer" style="text-decoration: none; background: none;">Lord High Treasurer</a>. With a more secure position, he began secret peace negotiations with France. Commercially, since the lotteries were discredited, some of the debt intended to be consolidated under the scheme was available in the open market before the scheme was announced, at a discounted rate of £55 per £100 nominal value. This allowed anyone with advance knowledge to buy debt cheap and sell at an immediate profit, and made it possible for Harley to bring further financial supporters into the scheme, such as James Bateman and<a href="https://en.wikipedia.org/wiki/Sir_Theodore_Janssen,_1st_Baronet" class="mw-redirect" title="Sir Theodore Janssen, 1st Baronet" style="text-decoration: none; background: none;">Theodore Janssen</a>.<a href="https://en.wikipedia.org/wiki/South_Sea_Company#cite_note-8" style="text-decoration: none; white-space: nowrap; background: none;">[8]</a>

<a href="https://en.wikipedia.org/wiki/Daniel_Defoe" title="Daniel Defoe" style="text-decoration: none; background: none;">Daniel Defoe</a> commented:<a href="https://en.wikipedia.org/wiki/South_Sea_Company#cite_note-9" style="text-decoration: none; white-space: nowrap; background: none;">[9]</a>

Unless the Spaniards are to be divested of common sense, infatuate, and given up, abandoning their own commerce, throwing away the only valuable stake they have left in the world, and in short, bent on their own ruin, we cannot suggest that they will ever, on any consideration, or for any equivalent, part with so valuable, indeed so inestimable a jewel, as the exclusive trade to their own plantations.

</blockquote>

<h3 style="font-weight: bold; margin: 0.3em 0px 0px; overflow: hidden; padding-top: 0.5em; padding-bottom: 0px; border-bottom: none; line-height: 1.6; font-style: normal; font-variant-ligatures: normal; font-variant-caps: normal; letter-spacing: normal; orphans: 2; text-align: start; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px; -webkit-text-stroke-width: 0px; background: none rgb(255, 255, 255);">Flotation<span class="mw-editsection" style="-webkit-user-select: none; font-weight: normal; margin-left: 1em; vertical-align: baseline; line-height: 1em; display: inline-block; white-space: nowrap; unicode-bidi: isolate;">[<a href="https://en.wikipedia.org/w/index.php?title=South_Sea_Company&action=edit&section=3" title="Edit section: Flotation" style="text-decoration: none; background: none;">edit</a>]</h3>

<h3 style="font-weight: bold; margin: 0.3em 0px 0px; overflow: hidden; padding-top: 0.5em; padding-bottom: 0px; border-bottom: none; line-height: 1.6; font-style: normal; font-variant-ligatures: normal; font-variant-caps: normal; letter-spacing: normal; orphans: 2; text-align: start; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px; -webkit-text-stroke-width: 0px; background: none rgb(255, 255, 255);">Bubble Act<span class="mw-editsection" style="-webkit-user-select: none; font-weight: normal; margin-left: 1em; vertical-align: baseline; line-height: 1em; display: inline-block; white-space: nowrap; unicode-bidi: isolate;">[<a href="https://en.wikipedia.org/w/index.php?title=South_Sea_Company&action=edit&section=11" title="Edit section: Bubble Act" style="text-decoration: none; background: none;">edit</a>]</h3>

<div role="note" class="hatnote" style="font-style: italic; padding-left: 1.6em; margin-bottom: 0.5em; font-variant-ligatures: normal; font-variant-caps: normal; font-weight: normal; letter-spacing: normal; line-height: 22.4px; orphans: 2; text-align: start; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255);">Main article: <a href="https://en.wikipedia.org/wiki/Bubble_Act" title="Bubble Act" style="text-decoration: none; background: none;">Bubble Act</a></div>

On 22 February 1720 John Hungerford raised the question of bubble companies in the House of Commons, and persuaded the House to set up a committee, which he chaired, to investigate. He identified a number of companies which between them sought to raise £40 million in capital. The committee investigated the companies, establishing a principle that companies should not be operating outside the objects specified in their charters. A potential embarrassment for the South Sea was avoided when the question of the Hollow Sword Blade Company arose. Difficulty was avoided by flooding the committee with MPs who were supporters of the South Sea, and voting down the proposal to investigate the Hollow Sword by 75 to 25. (At this time, committees of the House were either 'Open' or 'secret'. A secret committee was one with a fixed set of members who could vote on its proceedings. By contrast, any MP could join in with an 'open' committee and vote on its proceedings.) Stanhope, who was a member of the committee, received £50,000 of the 'resaleable' South Sea stock from Sawbridge, a director of the Hollow Sword, at about this time. Hungerford had previously been expelled from the Commons for accepting a bribe.<a href="https://en.wikipedia.org/wiki/South_Sea_Company#cite_note-28" style="text-decoration: none; white-space: nowrap; background: none;">[28]</a>

Amongst the bubble companies investigated were two supported by Lords Onslow and Chetwynd respectively, for insuring shipping. These were criticised heavily, and the questionable dealings of the Attorney-General and Solicitor-General in trying to obtain charters for the companies led to both being replaced. However, the schemes had the support of Walpole and Craggs, so that the larger part of the Bubble Act (which finally resulted in June 1720 from the committee's investigations) was devoted to creating charters for the <a href="https://en.wikipedia.org/wiki/Royal_Exchange_Assurance_Corporation" title="Royal Exchange Assurance Corporation" style="text-decoration: none; background: none;">Royal Exchange Assurance Corporation</a> and the <a href="https://en.wikipedia.org/w/index.php?title=London_Assurance_Corporation&action=edit&redlink=1" class="new" title="London Assurance Corporation (page does not exist)" style="text-decoration: none; background: none;">London Assurance Corporation</a>. The companies were required to pay £300,000 for the privilege. The Act required that a joint stock company could only be incorporated by Act of Parliament or <a href="https://en.wikipedia.org/wiki/Royal_charter" title="Royal charter" style="text-decoration: none; background: none;">Royal charter</a>. The prohibition on unauthorised joint stock ventures was not repealed until 1825.<a href="https://en.wikipedia.org/wiki/South_Sea_Company#cite_note-29" style="text-decoration: none; white-space: nowrap; background: none;">[29]</a>

The passing of the Act gave a boost to the South Sea Company, its shares leaping to £890 in early June. This peak encouraged people to start to sell; to counterbalance this the company's directors ordered their agents to buy, which succeeded in propping the price up at around £750.

<h3 style="font-weight: bold; margin: 0.3em 0px 0px; overflow: hidden; padding-top: 0.5em; padding-bottom: 0px; border-bottom: none; line-height: 1.6; font-style: normal; font-variant-ligatures: normal; font-variant-caps: normal; letter-spacing: normal; orphans: 2; text-align: start; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px; -webkit-text-stroke-width: 0px; background: none rgb(255, 255, 255);">Top reached<span class="mw-editsection" style="-webkit-user-select: none; font-weight: normal; margin-left: 1em; vertical-align: baseline; line-height: 1em; display: inline-block; white-space: nowrap; unicode-bidi: isolate;">[<a href="https://en.wikipedia.org/w/index.php?title=South_Sea_Company&action=edit&section=12" title="Edit section: Top reached" style="text-decoration: none; background: none;">edit</a>]</h3>

The price finally reached £1,000 in early August and the level of selling was such that the price started to fall, dropping back to £100 per share before the year was out, triggering <a href="https://en.wikipedia.org/wiki/Bankruptcy" title="Bankruptcy" style="text-decoration: none; background: none;">bankruptcies</a> amongst those who had bought on credit, and increasing selling, even <a href="https://en.wikipedia.org/wiki/Short_selling" class="mw-redirect" title="Short selling" style="text-decoration: none; background: none;">short selling</a>—selling borrowed shares in the hope of buying them back at a profit if the price fell.

Also, in August 1720 the first of the installment payments of the first and second money subscriptions on new issues of South Sea stock were due. Earlier in the year John Blunt had come up with an idea to prop up the share price: the company would lend people money to buy its shares. As a result, many shareholders could not pay for their shares except by selling them.

Furthermore, a scramble for liquidity appeared internationally as "bubbles" were also ending in Amsterdam and Paris. The collapse coincided with the fall of the <a href="https://en.wikipedia.org/wiki/Mississippi_Company" title="Mississippi Company" style="text-decoration: none; background: none;">Mississippi Company</a> of <a href="https://en.wikipedia.org/wiki/John_Law_(economist)" title="John Law (economist)" style="text-decoration: none; background: none;">John Law</a> in France. As a result, the price of South Sea shares began to decline.

<h3 style="font-weight: bold; margin: 0.3em 0px 0px; overflow: hidden; padding-top: 0.5em; padding-bottom: 0px; border-bottom: none; line-height: 1.6; font-style: normal; font-variant-ligatures: normal; font-variant-caps: normal; letter-spacing: normal; orphans: 2; text-align: start; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px; -webkit-text-stroke-width: 0px; background: none rgb(255, 255, 255);">Recriminations<span class="mw-editsection" style="-webkit-user-select: none; font-weight: normal; margin-left: 1em; vertical-align: baseline; line-height: 1em; display: inline-block; white-space: nowrap; unicode-bidi: isolate;">[<a href="https://en.wikipedia.org/w/index.php?title=South_Sea_Company&action=edit&section=13" title="Edit section: Recriminations" style="text-decoration: none; background: none;">edit</a>]</h3>

<p style="margin: 0.5em 0px; line-height: 22.4px; font-style: normal; font-variant-ligatures: normal; font-variant-caps: normal; font-weight: normal; letter-spacing: normal; orphans: 2; text-align: start; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255);">By the end of September the stock had fallen to £150. Company failures now extended to <a href="https://en.wikipedia.org/wiki/Bank" title="Bank" style="text-decoration: none; background: none;">banks</a> and <a href="https://en.wikipedia.org/wiki/Goldsmith" title="Goldsmith" style="text-decoration: none; background: none;">goldsmiths</a> as they could not collect loans made on the stock, and thousands of individuals were ruined, including many members of the <a href="https://en.wikipedia.org/wiki/Aristocracy" title="Aristocracy" style="text-decoration: none; background: none;">aristocracy</a>. With investors outraged, <a href="https://en.wikipedia.org/wiki/Parliament_of_the_United_Kingdom" title="Parliament of the United Kingdom" style="text-decoration: none; background: none;">Parliament</a> was recalled in December and an investigation began. Reporting in 1721, it revealed widespread <a href="https://en.wikipedia.org/wiki/Fraud" title="Fraud" style="text-decoration: none; background: none;">fraud</a> amongst the company directors and corruption in the Cabinet. Among those implicated were <a href="https://en.wikipedia.org/wiki/John_Aislabie" title="John Aislabie" style="text-decoration: none; background: none;">John Aislabie</a> (the Chancellor of the Exchequer), <a href="https://en.wikipedia.org/wiki/James_Craggs_the_Elder" title="James Craggs the Elder" style="text-decoration: none; background: none;">James Craggs the Elder</a> (the <a href="https://en.wikipedia.org/wiki/Postmaster_General_of_the_United_Kingdom" title="Postmaster General of the United Kingdom" style="text-decoration: none; background: none;">Postmaster General</a>), <a href="https://en.wikipedia.org/wiki/James_Craggs_the_Younger" title="James Craggs the Younger" style="text-decoration: none; background: none;">James Craggs the Younger</a> (the <a href="https://en.wikipedia.org/wiki/Secretary_of_State_for_the_Southern_Department" title="Secretary of State for the Southern Department" style="text-decoration: none; background: none;">Southern Secretary</a>), and even <a href="https://en.wikipedia.org/wiki/James_Stanhope,1st_Earl_Stanhope" title="James Stanhope, 1st Earl Stanhope" style="text-decoration: none; background: none;">Lord Stanhope</a> and <a href="https://en.wikipedia.org/wiki/Charles_Spencer,3rd_Earl_of_Sunderland" title="Charles Spencer, 3rd Earl of Sunderland" style="text-decoration: none; background: none;">Lord Sunderland</a> (the heads of the Ministry). Craggs the Elder and Craggs the Younger both died in disgrace; the remainder were <a href="https://en.wikipedia.org/wiki/Impeached" class="mw-redirect" title="Impeached" style="text-decoration: none; background: none;">impeached</a> for their corruption. The Commons found Aislabie guilty of the "most notorious, dangerous and infamous corruption", and he was imprisoned.

The newly appointed <a href="https://en.wikipedia.org/wiki/First_Lord_of_the_Treasury" title="First Lord of the Treasury" style="text-decoration: none; background: none;">First Lord of the Treasury</a> <a href="https://en.wikipedia.org/wiki/Robert_Walpole" title="Robert Walpole" style="text-decoration: none; background: none;">Robert Walpole</a> was forced to introduce a series of measures to restore public confidence. Under the guidance of Walpole, Parliament attempted to deal with the financial crisis. The estates of the directors of the company were confiscated and used to relieve the suffering of the victims, and the stock of the South Sea Company was divided between the Bank of England and the <a href="https://en.wikipedia.org/wiki/East_India_Company" title="East India Company" style="text-decoration: none; background: none;">East India Company</a>. The crisis had significantly damaged the credibility of <a href="https://en.wikipedia.org/wiki/George_I_of_Great_Britain" title="George I of Great Britain" style="text-decoration: none; background: none;">King George I</a> and of the Whig Party.

<h3 style="font-weight: bold; margin: 0.3em 0px 0px; overflow: hidden; padding-top: 0.5em; padding-bottom: 0px; border-bottom: none; line-height: 1.6; font-style: normal; font-variant-ligatures: normal; font-variant-caps: normal; letter-spacing: normal; orphans: 2; text-align: start; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px; -webkit-text-stroke-width: 0px; background: none rgb(255, 255, 255);">Quotations prompted by the collapse<span class="mw-editsection" style="-webkit-user-select: none; font-weight: normal; margin-left: 1em; vertical-align: baseline; line-height: 1em; display: inline-block; white-space: nowrap; unicode-bidi: isolate;">[<a href="https://en.wikipedia.org/w/index.php?title=South_Sea_Company&action=edit&section=14" title="Edit section: Quotations prompted by the collapse" style="text-decoration: none; background: none;">edit</a>]</h3>

<p style="margin: 0.5em 0px; line-height: 22.4px; font-style: normal; font-variant-ligatures: normal; font-variant-caps: normal; font-weight: normal; letter-spacing: normal; orphans: 2; text-align: start; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px; -webkit-text-stroke-width: 0px; background-color: rgb(255, 255, 255);">Joseph Spence wrote that <a href="https://en.wikipedia.org/wiki/Earl_of_Radnor" title="Earl of Radnor" style="text-decoration: none; background: none;">Lord Radnor</a> reported to him "When Sir <a href="https://en.wikipedia.org/wiki/Isaac_Newton" title="Isaac Newton" style="text-decoration: none; background: none;">Isaac Newton</a> was asked about the continuance of the rising of South Sea stock... He answered 'that he could not calculate the madness of people'."<a href="https://en.wikipedia.org/wiki/South_Sea_Company#cite_note-32" style="text-decoration: none; white-space: nowrap; background: none;">[32]</a> He is also quoted as stating, "I can calculate the movement of the stars, but not the madness of men".<a href="https://en.wikipedia.org/wiki/South_Sea_Company#cite_note-33" style="text-decoration: none; white-space: nowrap; background: none;">[33]</a> Newton's niece <a href="https://en.wikipedia.org/wiki/Catherine_Conduitt" class="mw-redirect" title="Catherine Conduitt" style="text-decoration: none; background: none;">Catherine Conduitt</a> reported that he "lost twenty thousand pounds. Of this, however, he never much liked to hear..."<a href="https://en.wikipedia.org/wiki/South_Sea_Company#cite_note-34" style="text-decoration: none; white-space: nowrap; background: none;">[34]</a> This was a fortune at the time (equivalent to about £2.4 million in present-day terms<a href="https://en.wikipedia.org/wiki/South_Sea_Company#cite_note-35" style="text-decoration: none; white-space: nowrap; background: none;">[35]</a>), but it is not clear whether it was a monetary loss or an <a href="https://en.wikipedia.org/wiki/Opportunity_cost" title="Opportunity cost" style="text-decoration: none; background: none;">opportunity cost</a> loss....

===

<a href="https://www.youtube.com/watch?v=k1kndKWJKB8">https://www.youtube.com/watch?v=k1kndKWJKB8</a>

still paying off debt 300 yrs later?!

polarized tory whig

bank of england (to bail out gov't)?

harley tory

John Blunt monopoly on swords; rel estate in ireland confiscated; swap army debentures

20k lent ot gov't; lottery hyped

part 2:

<a href="https://www.youtube.com/watch?v=Fsk6oZm1EEA">https://www.youtube.com/watch?v=Fsk6oZm1EEA</a>

monop on trade; daniel dafoe hyped

cental andf so, = port = spain (at war w/ uk)

swift PR, walpole, churchill locked up

house of lords, 12 new peers wanted peace (1st so lost leverage)

1 shop/yr per port?

anne died, whigs took over; harley dumped

geo son gov of co

20 million shares? dump more gov't debt on/in it

issue even nore stock, run the debt from lottery

1717 son removed, king in charge of co, too big to fail

1719 jabobite rebellion (fail); hyped win, riased price of stock;

part 3 of 5:

<a href="https://www.youtube.com/watch?v=1vcF5rebN20">https://www.youtube.com/watch?v=1vcF5rebN20</a>

move wd make biggest financil org in world?

bribe to allow consolidation of debt (1 mill per vote)

easier cheaper to buy  off by giving/selling stock, plus good PR

(even Walpole bought gov't debt on qt?)

sell stock w/ down payment (if astoc up, just sell some to cover nut)

nost of parl and king making $ (so rule not enforced)

price waver, so lent $ to buy stock

machine to take vapors from brain, flying machine

gov't started to shut down other startups b/c compet for $

co have few reserves, new HQ, baronet?

would be owed more than $ in country?

85 billion equiv.

pt 4:

<a href="https://www.youtube.com/watch?v=SIlnsP6AjP8">https://www.youtube.com/watch?v=SIlnsP6AjP8</a>

co made no $ selling stuff in s sea

new round of stock 1k lb/share, started selling his own; only 10% down, but sold all

early round ppl bailled (b/c $ due) incl walpole (b/c of advise from advisor,Jakom sp helped his vred later)

wd need to make 1/4of gdp, plummet, no one told king on vac in hanover;

take over govty, but tough b/c had to sell out whigs and save king; bank if e (reval of ssc) but bailled it out, cancleled debt; parl inquiry tricky

robert knight ledger (secret list of transactions and bribes)

pt 5:

<a href="https://www.youtube.com/watch?v=a_1IpUCUuVc">https://www.youtube.com/watch?v=a_1IpUCUuVc</a>

but time to vook books and hide it; testified and fled to Fr (lavish spending); walpole tipped so ran but caught

(ledger not )

chaos : walpole foes named; king sent pal of walpole to say never to send knight back, blank check; prevented parl inq

knight vanish 20 yrs

whigs trying themselves; walp --> 1st lord of treas --> MP

blunt came out w 5K, still baronet

generations of MC to foot bill

lies = appendix; <a href="https://www.youtube.com/watch?v=NqeXXzKTzRU">https://www.youtube.com/watch?v=NqeXXzKTzRU</a>

lost $ on jamacian slaves? wool cartajena

==