WHAT WAS THE SOUTH SEA BUBBLE?
It worked for a while and stock prices skyrocketed in 1720, until the bubble burst. Investors were ruined and an inquiry had to be held. While the South Sea Bubble went down in history as the cause of a total financial crash, that wasn't actually the case: it certainly had its losers, but it had its winners, too.
WHAT WAS THE STATE OF BRITAIN'S FINANCES BEFORE THE BUBBLE?
The Bank of England formed 26 years earlier had grown into a powerful institution as the sole lender to the government. It was, however, controlled by one of the two main political parties, the Whigs, so when Robert Harley became the new Tory chancellor of the Exchequer in 1710, he looked for other means of making money. With Britain engaged in expensive wars and the government debt at around £9m, funds were preciously needed.
Harley gave the job of organising the Bank of England's lotteries to John Blunt, the less-than scrupulous director of an unofficial bank (and sword manufacturer) called the Hollow Sword Blades Company. While the ironically named Blunt had great success selling lottery tickets, the two men devised a grander scheme to make serious money. That's where the South Sea Company came in.
SO, WHAT WAS THE SOUTH SEA COMPANY?
It formed in 1711 with the purpose of consolidating the government's debt. In return for taking on and paying off this debt, the company would be granted a monopoly on trade between Britain and Spain (particularly the sale of slaves) in the South Seas' around South America. This idea had a major problem, though: Britain was at war with Spain and in no position to dictate the trade there, unless favourable terms were reached in peace talks.
HOW SUCCESSFUL DID THE COMPANY GET?
This story is from the October 2022 edition of History Revealed.
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This story is from the October 2022 edition of History Revealed.
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