Sunday, January 22, 2012

The South Sea Bubble

 On this day, January 22, was, in

South Sea Bubble, 17201720 The beginning of the infamous South Sea Bubblethe name given to the economic bubble which occurred due to overheated speculation in and subsequent disastrous collapse of the South Sea Company.
In 1717, in England, a group of speculative merchants (including the English statesman Robert Harley, 1st Earl of Oxford, and Edward Gibbon, the grandfather of the famous historian), who had formed a huge corporation called the South Sea Company, proposed to the government that they should take on the national debt of 30,981,712 pounds. The public had confidence in the scheme and stock rose from 130 per cent to 300. Only soon-to-be Prime Minister Robert Walpole opposed the scheme, and he warned the country of the likely consequences, but was ignored.
The speculators spread rumours about their prospects in places such as Mexico and Peru, and stock went to 400, then settled at 330. Soon after the bill was passed by parliament, the stocks went up to 340. Crafty speculators made huge profits with sham or 'bubble' companies. The Prince of Wales (later King George I) was said to have reaped 40,000 pounds. Such investors merely put money in to raise the public hope, only to pull it out again as stocks rose. One of the schemes was "A company for carrying on an undertaking of great advantage, but nobody to know what it is" ...


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