South Sea Bubble

a speculative scheme, originating in England early in the eighteenth century. In 1711 a company of merchants, headed by the Earl of Oxford, agreed to advance the government 10,000,000 to pay off the floating debt. In return the government guaranteed the company six per cent interest on the loan and granted a monopoly of trade in the South Sea. The prospect of profitable trade with Brazil gave the stock of the South Sea Company an enormous market value. Investors were wild to buy shares. Prices of stock rose day by day to fabulous figures. Sixty per cent profits were assured. In 1720 Parliament, by vote of both houses, actually consented to have the company carry the entire national debt of $150,000,000. Stock rose to 890, nearly nine times its face value. Then a crash came. The stock became worthless. Thousands of people were ruined. Earls, duchesses, members of the House, and high officials were convicted of bribery. Millions of dollars' worth of stock had been exchanged for influence. Out of the amount owed the company by the government and through the collection of fines, it was found possible to pay honest investors one third of the face value of the stock. The scheme was very similar to the Louisiana Scheme organized in France by John Law at about the same time. See Law; Tontine