Jump to navigation Jump to search “South Sea Bubble” redirects here. An early trade label of the South Sea Company, for export of finest English serge cloth. South Sea company itself before its collapse. In Great Britain, a considerable number of people were ruined by the share forex platen wikipedia, and the national economy greatly reduced as a result.
The founders of the scheme engaged in insider trading, using their advance knowledge of when national debt was to be consolidated to make large profits from purchasing debt in advance. A parliamentary enquiry was held after the crash to discover its causes. The company was restructured and continued to operate for more than a century after the Bubble. In August 1710 Robert Harley was appointed Chancellor of the Exchequer in a government of commission.
The government at this time had become reliant on the Bank of England. 300,000 for the next quarter’s pay for the British army operating in Europe under Marlborough. 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. 9,000,000 was owed, without any allocated income to pay it off.
Edward Harley and John Blunt together had 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 on operating as a bank. At that time, when continental 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. Harley was rewarded for the scheme by being created Earl of Oxford on 23 May 1711, and was promoted to Lord High Treasurer. With a more secure position, he began secret peace negotiations with France. 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. The originators of the scheme knew that there was no money to invest in a trading venture, and no realistic expectation there would ever be a trade to exploit, but 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 which they could use to become wealthy, and which offered future scope for further government deals. The “night singer of shares” sold stock on the streets during the South Sea Bubble. The Charter for the company was drawn up by Blunt, based on that of the Bank of England. 3,846 for his services in setting up the company. Directors would be elected every three years while shareholders would meet twice a year. The company employed a Cashier, Secretary and Accountant.
The Governor was intended to be an honorary position, and the position was later customarily held by the ruling monarch. The exchange of government debt for stock was to occur in five separate lots. 75 million from about 200 large investors, had already been arranged before the company’s charter was issued on 10 September 1711. Seven sub-committees were created to handle its everyday business, the most important being the “Committee for the affairs of the company”. The Sword Blade company was retained as their banker and on the strength of its new government connections issued notes in its own right, notwithstanding the Bank of England monopoly. The Treaty of Utrecht of 1713 granted Britain an Asiento lasting 30 years to supply the Spanish colonies with 4,800 slaves per year.
By July the company had arranged contracts with the Royal African Company to supply the necessary African slaves to Jamaica. 8 for one under 16 but over 10. In 1714 the government announced that a quarter of profits would be reserved for the Queen and a further 7. Some Company board members refused to accept the contract on these terms, and the government was obliged to reverse its decision. 17, 13,000 more, but the trade continued to be unprofitable. In 1714 one of the directors who had been sponsored by Harley, Arthur Moore, had attempted to send 60 tons of private goods on board the company ship. He was dismissed as a director, but the result was the beginning of Harley’s fall from favour with the company.