Who Launched the South Sea Bubble?
The South Sea Bubble of 1720, which ruined thousands of families in England and brought disgrace to government ministers, had its origin in an enterprise launched nine years earlier by Robert Harley, Earl of Oxford, and the Lord Treasurer of Queen Anne.
This was the formation of the South Sea Company to take over the Government’s floating debt of about £ 10 million in exchange for a monopoly of trade to the South Seas. It was also hoped that the profits from trade with Spanish America, including the supply of slaves, would help still further to pay off the debt of £ 54 million owing for wars since 1789.
Although the trading results were disappointing, the company advanced more money to the Government in 1717 and 1719. John Blount who was then in control of the company, also put forward a plan for taking over a large part of the national debt and receiving a guaranteed rate of interest as well as special trading concessions.
In the first three months of 1720 the company’s stock trebled in price. The nation was seized with a mania for speculation that led to a deluge of new companies, including one for importing “jackasses from Spain”. Still the price of South Sea stock rose as holders of government annuities rushed to exchange them for a share in the company. By the end of June the price of stock had increased eightfold.
Then the bubble burst. It was discovered that some directors had sold their shares. Legal action taken by the company against other bubble companies attracted suspicions about its own financial soundness. There was a stampede to sell and the price of the stock plunged to its January figure, bringing ruin to thousands of investors.
John Aislabie, Chancellor of the Exchequer, was imprisoned in the Tower of London, the Post-Master-General poisoned himself, two ministers were killed by the strain and others found their reputations gone for ever. It was left to Walpole to restore public credit. The company itself survived until 1853.