|
The South Sea Company (1711 – c1850s) was an English company granted a monopoly to trade with South America under a treaty with Spain. Following the South Sea Company Act of 1720, it became better known for the "South Sea Bubble", an economic bubble that occurred through overheated speculation in the company shares. The stock price collapsed after reaching a peak in September 1720. Hogarthian image of the South Sea Bubble by EM Ward, Tate Gallery File links The following pages link to this file: The South Sea Company Edward Matthew Ward Categories: Public domain art ...
Hogarthian image of the South Sea Bubble by EM Ward, Tate Gallery File links The following pages link to this file: The South Sea Company Edward Matthew Ward Categories: Public domain art ...
E.M. Ward, The South Sea Bubble (1846), a Hogarthian subject in the Tate Gallery Edward Matthew Ward (1816-1879) was a Victorian narrative painter best known for his murals in the Palace of Westminster depicting episodes in British history from the English Civil War to the Glorious Revolution. ...
The Tate Gallery in the United Kingdom is a network of four galleries: Tate Britain (opened 1897), Tate Liverpool (1988), Tate St Ives (1993), Tate Modern (2000), with a complementary website Tate Online (1998). ...
For other uses, see England (disambiguation). ...
This article is about the economics of markets dominated by a single seller. ...
bubbles are things that you make out of soap. ...
Speculation involves the buying, holding, and selling of stocks, bonds, commodities, currencies, collectibles, real estate, derivatives or any valuable financial instrument to profit from fluctuations in its price as opposed to buying it for use or for income via methods such as dividends or interest. ...
See stock (disambiguation) for other meanings of the term stock A stock, also referred to as a share, is commonly a share of ownership in a corporation. ...
Initial stages The company, established in 1711 by the Lord Treasurer, Robert Harley, was granted exclusive trading rights in Spanish South America. The trading rights were pre-supposed on the successful conclusion of the War of the Spanish Succession, which did not end until 1713, and the actual granted treaty rights were not as comprehensive as Harley had originally hoped. The Lord High Treasurer bears a white staff as his symbol of office. ...
Robert Harley, 1st Earl of Oxford and Mortimer (5 December 1661 – 21 May 1724), was an English statesman of the Stuart and early Georgian periods. ...
South America South America is a continent crossed by the equator, with most of its area in the Southern Hemisphere. ...
Combatants Habsburg Empire England (1701-6) Great Britain (1707-14)[1] Dutch Republic Kingdom of Portugal Crown of Aragon Duchy of Savoy [2] Kingdom of France Kingdom of Spain Electorate of Bavaria Hungarian Rebels [3] Commanders Eugene of Savoy Margrave of Baden Count Starhemberg Duke of Marlborough Marquis de Ruvigny...
Year 1713 (MDCCXIII) was a common year starting on Sunday (link will display the full calendar) of the Gregorian calendar (or a common year starting on Wednesday of the 11-day slower Julian calendar). ...
Harley needed to provide a mechanism for funding government debt incurred in the course of that war. However, he could not establish a bank, because the charter of the Bank of England made it the only joint stock bank. He therefore established what, on its face, was a trading company, though its main activity was in fact the funding of government debt. Headquarters Coordinates , , Governor Mervyn King Central Bank of United Kingdom Currency Pound sterling ISO 4217 Code GBP Base borrowing rate 5. ...
In return for its exclusive trading rights the government saw an opportunity for a profitable trade-off. The government and the company convinced the holders of around £10 million of short-term government debt to exchange it with a new issue of stock in the company. In exchange, the government granted the company a perpetual annuity from the government paying £576,534 annually on the company's books, or a perpetual loan of £10 million paying 6%. This guaranteed the new equity owners a steady stream of earnings to this new venture. The government thought it was in a win-win situation because it would fund the interest payment by placing a tarrif on the goods brought from South America
The Treaty of Utrecht of 1713 granted the company the right to send one trading ship per year (though this was in practice accompanied by two 'tenders') and the 'Asiento', the contract to supply the Spanish colonies with slaves. A map depicting the major changes in Western Europes borders as a result of the Treaties of Utrecht and Rastatt. ...
The company did not undertake a trading voyage to South America until 1717 and made little actual profit. Furthermore, when ties between Spain and Britain deteriorated in 1718 the short-term prospects of the company were very poor. Nonetheless, the company continued to argue that its longer-term future would be extremely profitable.
Debt for equity In 1717 the company took on a further £2 million of public debt. The rationale in all these transactions was to the This page is a candidate to be copied to Wiktionary. ...
- Government: lower interest rate on its debt
- South Sea Company (owners): a steady stream of earnings
- Government Debt Holder: upside potential in a promising enterprise
Slave trading Most commentary on the South Sea Company focuses on the money lost by English investors. The primary trading business of the company was the forced transportation of people purchased in West Africa and then selling them into slavery in the Americas. In fact, the most important aspect of the company's monopoly trading rights to the Spanish empire was the 1713 Treaty of Utrecht's slave trading 'Asiento' which granted the exclusive right to sell slaves in all of Spain's American colonies. Western Africa (UN subregion) Maghreb[1] West Africa or Western Africa is the westernmost region of the African continent. ...
Slave redirects here. ...
A map depicting the major changes in Western Europes borders as a result of the Treaties of Utrecht and Rastatt. ...
In the history of slavery, asiento (or assiento, meaning assent ) refers to the permission given by the Spanish government to other countries to sell slaves to the Spanish colonies, from the years 1543-1834. ...
This article refers to a colony in politics and history. ...
The Asiento set a quota of selling 4800 people into slavery a year. Despite its problems with speculation, the South Sea Company was relatively successful in this task (it was unusual for other, similarly chartered companies to fulfill their quotas). According to records compiled by David Eltis et al, during the course of 96 voyages in twenty-five years, 34,000 slaves were purchased of whom 30,000 survived the voyages across the Atlantic.
The mortality rate of about 15% was not unusual for ships participating in the middle passage and indicates that the organization was not only strongly interested, but also relatively efficient as a slave trader. Employees, directors and investors overcame major obstacles in order to pursue the slave trade, including two wars with Spain and the 1720 bubble. Indeed, the company's most successful slave trading year was in 1725, five years after the bubble burst. Crude death rate by country Mortality rate is a measure of the number of deaths (in general, or due to a specific cause) in some population, scaled to the size of that population, per unit time. ...
The Middle Passage refers to the forced transportation of African people from Africa to the New World as part of the Atlantic slave trade[1] and was the middle portion of the triangular trade voyage. ...
It has been suggested that Impact of Slave Trade on Africa be merged into this article or section. ...
This is a disambiguation page — a navigational aid which lists other pages that might otherwise share the same title. ...
Trading more debt for equity In 1719 the company proposed a scheme by which it would buy more than half the national debt of Britain (£30,981,712), again with new shares, and a promise to the government that the debt would be converted to a lower interest rate, 5% until 1727 and 4% per year thereafter.
The purpose of this conversion was similar to the old one: it would allow a conversion of high interest, but difficult to trade debt, into low interest, readily marketable debt/shares of the South Sea Company. All parties could gain.
For a clarification of the situation the total government debt in 1719 was £50 million:
- £18.3m was held by three large corporations:
- Privately held redeemable debt amounted to £16.5m.
- £15m consisted of irredeemable annuities, long fixed-term annuities of 72-87 years and short annuities of 22 years remaining maturity.
The Bank of England proposed a similar competing offer, which did not prevail when the South Sea raised its bid to £7.5m (plus approximately £1.3m in bribes). The proposal was accepted in a slightly altered form in April 1720. The Chancellor of the Exchequer, John Aislabie, was a strong supporter of the scheme. Headquarters Coordinates , , Governor Mervyn King Central Bank of United Kingdom Currency Pound sterling ISO 4217 Code GBP Base borrowing rate 5. ...
The British East India Company, sometimes referred to as John Company, was the first joint-stock company (the Dutch East India Company was the first to issue public stock). ...
The Chancellor of the Exchequer is the title held by the British Cabinet minister responsible for all economic and financial matters. ...
John Aislabie (December 4, 1670- June 18, 1742) was a British politician, notable for his involvement in the South Sea Bubble and for creating the water garden at Studley Royal. ...
Crucial in this conversion was the proportion of holders of irredeemable annuities that could be tempted to convert their securities at a high price for the new shares. (Holders of redeemable debt had effectively no other choice but to subscribe.) The South Sea Company could set the conversion price but could obviously not diverge a lot from the market price of its shares.
The company ultimately acquired 85% of the redeemables and 80% of the irredeemables.
Buoying the share price The company then set to talking up its stock with "the most extravagant rumours" of the value of its potential trade in the New World which was followed by a wave of "speculating frenzy". The share price had risen from the time the scheme was proposed: from £128 in January 1720, to £175 in February, £330 in March and, following the scheme's acceptance, to £550 at the end of May. Image File history File links Download high resolution version (850x784, 49 KB) Summary South Sea share. ...
Image File history File links Download high resolution version (850x784, 49 KB) Summary South Sea share. ...
What may have supported the company's high multiples (its P/E ratio) was a fund of credit (known to the market) of £70 million available for commercial expansion which had been made available through substantial support, apparently, by Parliament and the King. The P/E ratio (price-to-earnings ratio) of a stock (also called its earnings multiple, or simply multiple, P/E, or PE) is used to measure how cheap or expensive its share price is. ...
Shares in the company were "sold" to politicians at the current market price; however, rather than paying for the shares, these lucky recipients simply held on to what shares they had been offered, "sold" them back to the company when and as they chose, and received as ‘profit’ the increase in market price. This method, while winning over the heads of government, the King's mistress, etc., also had the advantage of binding their interests to the interests of the Company: in order to secure their own profits, they had to help drive up the stock. Meanwhile, by publicizing the names of their elite stockholders, the Company managed to clothe itself in an aura of legitimacy, which attracted and kept other buyers.
Bubble Act A number of other joint-stock companies then joined the market, making usually fraudulent claims about other foreign ventures or bizarre schemes, and were nicknamed "bubbles".
In June, 1720, the Bubble Act (repealed in 1825) required all joint-stock companies to have a Royal Charter. The South Seas Company held a charter providing exclusive access to all of Middle and South America. However, the areas in question were Spanish colonies, and Great Britain was then at war with Spain. Even once a peace treaty had been signed, relations between the two countries were not good. The best terms that the South Sea Company was able to obtain allowed them to send only one ship per year to Spain’s American colonies (not one ship per colony; exactly one ship), carrying a cargo of not more than 500 tons. Additional wrangling won the company the right to transport slaves, although steep import duties made the slave trade entirely unprofitable. The Bubble Act of 1720 was an English act that forbade all joint-stock companies not authorised by royal charter. ...
For the ship of the same name, see Royal Charter (ship). ...
The grant of a charter to the South Sea Company was an added boost, its shares leaping to £890 in early June. This peak encouraged people to start to sell; to counterbalance this the company's directors ordered their agents to buy, which succeeded in propping the price up at around £750.
Top reached
 Tree caricature from Bubble Cards The price of the stock went up over the course of a single year from one hundred pounds a share to over one thousand pounds per share. Its success caused a country-wide frenzy as citizens of all stripes – from peasants to lords – developed a feverish interest in investing; in South Seas primarily, but in stocks generally. Among the many companies, more or less legitimate, to go public in 1720 is – famously – one that advertised itself as "a company for carrying out an undertaking of great advantage, but nobody to know what it is".[1] Image File history File links Size of this preview: 383 × 600 pixelsFull resolution (2328 × 3645 pixel, file size: 262 KB, MIME type: image/png) Faithful reproductions of two-dimensional original works cannot attract copyright in the U.S. according to the rule in Bridgeman Art Library v. ...
Image File history File links Size of this preview: 383 × 600 pixelsFull resolution (2328 × 3645 pixel, file size: 262 KB, MIME type: image/png) Faithful reproductions of two-dimensional original works cannot attract copyright in the U.S. according to the rule in Bridgeman Art Library v. ...
The price finally reached £1,000 in early August and the level of selling was such that the price started to fall, dropping back to one hundred pounds per share before the year was out, triggering bankruptcies amongst those who had bought on credit, and increasing selling, even short selling - selling borrowed shares in the hope of buying them back at a profit if the price falls. Notice of closure stuck on the door of a computer store the day after its parent company, Granville Technology Group Ltd, declared bankruptcy (strictly, put into administration—see text) in the United Kingdom. ...
It has been suggested that Short (finance) be merged into this article or section. ...
Also, in August 1720 the first of the installment payments of the first and second money subscriptions on new issues of South Sea stock were due. Earlier in the year Blunt had come up with a brilliant idea to prop up the share price — the company would lend people money to buy its shares. As a result, a lot of shareholders could not pay for their shares other than by selling them.
Furthermore, the scramble for liquidity appeared internationally as "bubbles" were also ending in Amsterdam and Paris. The collapse coincided with the fall of the Mississippi Scheme of John Law in France. As a result, the price of South Sea shares began to decline. For other uses, see Amsterdam (disambiguation). ...
This article is about the capital of France. ...
In August 1717 Scottish businessman John Law acquired a controlling interest in the then derelict Mississippi Company and renamed it the Compagnie d’Occident (or Compagnie du Mississippi). ...
Jean Law John Law (bap. ...
By the end of September the stock had fallen to £150. The company failures now extended to banks and goldsmiths as they could not collect loans made on the stock, and thousands of individuals were ruined (including many members of the aristocracy). With investors outraged, Parliament was recalled in December and an investigation began. Reporting in 1721, it revealed widespread fraud amongst the company directors. The newly appointed First Lord of the Treasury Robert Walpole, who had argued against the scheme from the beginning, was forced to introduce a series of measures to restore public confidence. For other uses, see Bank (disambiguation). ...
A goldsmith creating a new ring A goldsmith is a metalworker who specializes in working with precious metals, usually to make jewelry. ...
Forms of government Part of the Politics series Politics Portal This box: The term aristocracy refers to a form of government where power is held by a small number of individuals from an elite or from noble families. ...
Type Bicameral Houses House of Commons House of Lords Speaker of the House of Commons Michael Martin MP Lord Speaker Hélène Hayman, PC Members 1377 (646 Commons, 731 Peers) Political groups Labour Party Conservative Party Liberal Democrats Scottish National Party Plaid Cymru Democratic Unionist Party Sinn Féin...
The First Lord of the Treasury is the head of the commission exercising the ancient office of Lord High Treasurer in the United Kingdom, usually but not always the Prime Minister. ...
Robert Walpole, 1st Earl of Orford, (commonly known as Robert Walpole, or Sir Robert Walpole) KG, KB, PC (26 August 1676 – 18 March 1745) was a British statesman who is generally regarded as having been the first Prime Minister of Great Britain. ...
Restructuring The company continued its trade (when not interrupted by war) until the end of the Seven Years' War. However, its main function was always managing government debt, rather than trading with the Spanish colonies. The South Sea Company continued its management of the part of the National Debt until it was abolished in the 1850s. Combatants Kingdom of Prussia Kingdom of Great Britain and its American Colonies Electorate of Hanover Iroquois Confederacy Kingdom of Portugal Electorate of Brunswick Electorate of Hesse-Kassel Philippines Archduchy of Austria Kingdom of France Empire of Russia Kingdom of Sweden Kingdom of Spain Electorate of Saxony Kingdom of Naples and...
Government debt (public debt, national debt) is money owed by government, at any level (central government, federal government, national government, municipal government, local government, regional government). ...
Quotes on the bubble - "I can calculate the movement of the stars, but NOT the madness of men." — Sir Isaac Newton, after losing a fortune (£20,000) in the bubble, over £2 Million as of 2006.
Sir Isaac Newton FRS (4 January 1643 – 31 March 1727) [ OS: 25 December 1642 – 20 March 1727][1] was an English physicist, mathematician, astronomer, natural philosopher, and alchemist. ...
References - ^ Charles Mackay, Extraordinary Popular Delusions and the Madness of Crowds (Harriman House Classics 2003), p. 65 & 71.
Charles Mackay (1814 – 1889) was a British poet, journalist, and song writer. ...
Further reading - J. Carswell, The South Sea Bubble (Cresset Press, London 1960).
- Virginia Cowles, The Great Swindle : The Story of the South Sea Bubble (First published 1960, reprinted by Hindsight Books in 2002 with a new introduction by Dr. Marc Faber).
- D. Liss, A Conspiracy of Paper (Ballantine Books, 2000). Fictional novel set around the South Sea Company bubble.
See also The following is a list of notable business failures, known either for marking the end of a well-known brand, for criminal proceedings associated with their demise (often fraud or other corporate crime), or for causing significant financial problems (or suffering from them). ...
This is a list of stock market crashes. ...
In August 1717 Scottish businessman John Law acquired a controlling interest in the then derelict Mississippi Company and renamed it the Compagnie d’Occident (or Compagnie du Mississippi). ...
Extraordinary Popular Delusions and the Madness of Crowds is a popular history of popular folly by Charles Mackay, first published in 1841. ...
The Atlantic slave trade was the trade of African slaves by Europeans that occurred in and around the Atlantic Ocean. ...
External links |
Feeds |
Contact