The government had become dissatisfied with the service it was receiving and Harley was actively seeking new ways to improve the national finances.Ī new Parliament met in November 1710 resolved to attend to national finances, which were suffering from the pressures of two simultaneous wars: the War of the Spanish Succession with France, which ended in 1713, and the Great Northern War, which was not to end until 1721. When in August 1710 Robert Harley was appointed Chancellor of the Exchequer, the government had already become reliant on the Bank of England, a privately owned company chartered 16 years previously, which had obtained a monopoly as the lender to the government. At the time of these events, the Bank of England was also a private company dealing in national debt, and the crash of its rival confirmed its position as banker to the British government. The headquarters were in Threadneedle Street, at the centre of the City of London, the financial district of the capital. Finally, the Company was restructured and continued to operate for more than a century after the Bubble. 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). Ī parliamentary inquiry was held after the bursting of the bubble to discover its causes. 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. 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. Huge bribes were given to politicians to support the Acts of Parliament necessary for the scheme. The founders of the scheme engaged in insider trading, by using their advance knowledge of the timings of national debt consolidations to make large profits from purchasing debt in advance. In Great Britain, many investors were ruined by the share-price collapse, and as a result, the national economy diminished substantially. 18), which forbade the creation of joint-stock companies without royal charter, was promoted by the South Sea Company itself before its collapse. The notorious economic bubble thus created, which ruined thousands of investors, became known as the South Sea Bubble. 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 flotation price. 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. When the company was created, Britain was involved in the War of the Spanish Succession and Spain and Portugal controlled most of South America. To generate income, in 1713 the company was granted a monopoly (the Asiento de Negros) to supply African slaves to the islands in the " South Seas" and South America. 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) was a British joint-stock company founded in January 1711, created as a public-private partnership to consolidate and reduce the cost of the national debt. The letters circumscribing the seal below should read "SS&FC", for "South Sea and Fishery Company" 1723 pro-forma power of attorney signed by a shareholder of the South Sea Company showing the Company's coat of arms and the Latin motto A Gadibus usque Auroram ("From Cadiz to Dawn", Juvenal, Satires, 10) Hogarthian image of the 1720 "South Sea Bubble" from the mid-19th century, by Edward Matthew Ward, Tate Gallery 1754 engraving of Old South Sea House, the headquarters of the South Sea Company, which burned down in 1826, on the corner of Bishopsgate Street and Threadneedle Street in the City of London The Dividend Hall of South Sea House, 1810 Heraldic grouping above main entrance to the surviving South Sea House, Threadneedle Street, rebuilt after the fire of 1826 An early trade label of the South Sea Company, for export of finest English serge cloth.
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