South Sea Bubble. The South Sea Company was a British joint-stock company founded in 1711, created as a public-private partnership to consolidate and reduce the cost of national debt.
The company was also granted a monopoly to trade with South America and nearby islands, hence its name. When the company was created, Britain was involved in the War of the Spanish Succession.
Spain and Portugal controlled most of South America. There was no realistic prospect that trade would take place, and the company never realised any significant profit from its monopoly.
Company stock rose greatly in value as it expanded its operations dealing in government debt, peaking in 1720 before collapsing to little above its original flotation price; the economic bubble became known as the South Sea Bubble. The Bubble Act 1720, which forbade the creation of joint-stock companies without royal charter, was promoted by the South Sea company itself before its collapse.
In Great Britain, a considerable number of people were ruined by the share collapse, 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. Huge bribes were given to politicians to support the Acts of Parliament necessary for the scheme. Company money was used to deal in its
The company was also granted a monopoly to trade with South America and nearby islands, hence its name. When the company was created, Britain was involved in the War of the Spanish Succession.
Spain and Portugal controlled most of South America. There was no realistic prospect that trade would take place, and the company never realised any significant profit from its monopoly.
Company stock rose greatly in value as it expanded its operations dealing in government debt, peaking in 1720 before collapsing to little above its original flotation price; the economic bubble became known as the South Sea Bubble. The Bubble Act 1720, which forbade the creation of joint-stock companies without royal charter, was promoted by the South Sea company itself before its collapse.
In Great Britain, a considerable number of people were ruined by the share collapse, 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. Huge bribes were given to politicians to support the Acts of Parliament necessary for the scheme. Company money was used to deal in its
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