South Sea Bubble

[In the early 1700's] the demon of gambling was rampant, every one wanted to find a short road to wealth; naturally, there were plenty of rogues to ease them of their money, but the most colossal stroke of gambling was the South Sea Bubble, the only parallel to which, in modern times, is the Railway Mania, in 1846.

The South Sea Company was started in 1711, to have the monopoly of trade to the South Seas, or South Coast of America, a region which was, even then, believed to be an El Dorado. As a trading company it was not successful, but, having a large capital, it dealt with finance. On 22nd Jan. 1720, a proposal was laid before Parliament that the Company should take upon themselves the National Debt, of £30,981,712, 6s. 6-1/2d. at 5 per cent. per annum, secured until 1727, when the whole was to be redeemable, if Parliament so chose, and the interest to be reduced to 4 per cent., and “That for the liberty of increasing their Capital Stock, as aforesaid, the Company will give, and pay into his Majesty's Exchequer, for the purpose of the Public, and to be applied for paying off the public debt provided for by Parliament, before Christmas, 1716, the sum of three millions and a half, by four equal quarterly payments, whereof the first payment to be at Lady Day 1721.” On April 7, the South Sea Company's Bill received the Royal Assent, the £100 shares being then about £300.

On April 12, the directors opened their books for a subscription of a Million, at the rate of £300 for every £100 Capital, which was immediately taken up, twice over. It was to be repaid in five instalments of £60. Up went the shares with a bound; yet, to raise them still higher, the Midsummer dividend was to be declared at 10 per cent., and all subscriptions were to be entitled to the same. This plan answered so well, that another million was at once raised at 400 per cent.; and, in a few hours, a million and a half was subscribed at that rate. The Stock went up higher and higher, until, on the 2nd of June, it reached £890. Then, so many wanted to sell, that, on the same afternoon, it dropped to £640. The Company set their Agents to work, and, when evening came, the Stock had been driven up to £750, at about which price it continued until the bank closed on the 22nd June.

Very soon, a third Subscription was started, at the rate of £1000 for every £100, to be paid in ten equal payments, one in hand, the other nine, quarterly. The lists were so full that the directors enlarged it to four millions Stock, which, at that price amounted to £40,000,000. These last subscriptions were, before the end of June, sold at about £2000 premium; and, after the closing of the transfer books, the original Stock rose to over £1000 per cent. At the same time, the first subscriptions were at 560, and the second at 610 per cent. advance.

This set every one crazy, and innumerable “bubble,” or cheating, companies were floated, or attempts made thereat. Speculation became so rampant that, on June 11, the King published a Proclamation declaring that all these unlawful projects should be deemed as common nuisances, and prosecuted as such, with the penalty of £500 for any broker buying or selling any shares in them. Among these companies was one “for carrying on an undertaking of great advantage, but nobody to know what it is.” Another was “for a wheel for perpetual motion, one million”; and another “for the transmutation of quick silver into a malleable fine metal.” Society was, for a brief time, uprooted.

The apogee of the Company had been reached: from this time its downfall was rapid. The Stock fell, and fell. The aid of the Bank of England was invoked, but it came too late; goldsmiths and brokers began to abscond. On December 12, the House of Commons ordered that the Directors of the South Sea Company should, forthwith, lay before the House an account of all their proceedings; and, on Jan. 4, 1721, a Secret Committee of the House was ordered to report upon the Company. Then Knight, the cashier of the Company, absconded; and a reward of £2000 was offered for his apprehension. On Feb. 15, the Parliamentary Committee made their first report—and a pretty one it was—bribery all over the place, and especially among the members of the Government. The bubble was pricked and thousands were ruined. Certainly, the fortunes of those directors, who had any, were seized for the benefit of the swindled, and only a small percentage of their wealth was allowed them for their subsistence. Finally, it was settled that the £7,000,000 which the Company stood pledged to pay over to the Government, should be remitted, and every Shareholder should receive £33, 6s. 8d. on £100 Stock: all else being irretrievably lost. Over the misery entailed on the avaricious public who were gulled, it is best to draw a veil, and use the episode as a warning.

Swift wrote a poem 60 verses long, on The South Sea Project, 1721, from which I extract the following:

“There is a gulf, where thousands fell,

Here all the bold adventurers came,

A narrow sound, though deep as Hell,—

'Change Alley  is the dreadful name.

Nine times a day it ebbs and flows,

Yet he that on the surface lies,

Without a pilot, seldom knows

The time it falls, or when ‘twill rise.

Subscribers, here, by thousands float,

And jostle one another down;

Each paddling in his leaky boat,

And here they fish for gold, and drown.

·······

Meantime, secure on Garraway cliffs,

A savage race, by shipwrecks fed,

Lie waiting for the foundered skiffs,

And strip the bodies of the dead.”

There were street ballads, of course, such as The Hubble Bubbles, A Ballad, by Mr D'Urfey, and one which I give in extenso. A South-Sea  Ballad: or, Merry Remarks upon Exchange Alley  Bubbles. To a new tune, call'd The Grand Elixir : or The Philosopher's Stone discovered :

In London  stands a famous Pile,

And near that Pile, an Alley,

Where Merry Crowds for Riches toil,

And Wisdom stoops to Folly:

Here, Sad and Joyful, High and Low,

Court Fortune for her Graces,

And, as she Smiles, or Frowns, they show

Their Gestures and Grimaces.

Here Stars and Garters do appear,

Among our Lords, the Rabble,

To buy and sell, to see and hear,

The Jews  and Gentiles  squabble.

Here crafty Courtiers are too wise

For those who trust to Fortune,

They see the Cheat with clearer Eyes,

Who peep behind the Curtain.

Our greatest Ladies hither come,

And ply in Chariots daily,

Oft pawn their Jewels for a Sum,

To venture't in the Alley.

Young Harlots, too, from Drury Lane,

Approach the 'Change  in coaches,

To fool away the Gold they gain

By their obscene Debauches.

Long Heads may thrive by sober Rules,

Because they think and drink not;

But Headlongs are our thriving Fools,

Who only drink and think not:

The lucky Rogues, like Spaniel Dogs,

Leap into South Sea  Water,

And, there, they fish for golden Frogs,

Not caring what comes a'ter.

‘Tis said that Alchimists of old,

Could turn a brazen kettle,

Or leaden Cistern into Gold,

That noble, tempting Mettle:

But, if it here may be allowed

To bring in great with small things

Our cunning South Sea, like a God,

Turns nothing into all things.

What need have we of Indian  Wealth,

Or Commerce with our Neighbours,

Our Constitution is in Health,

And Riches crown our Labours:

Our South Sea  Ships have golden Shrouds

They bring us Wealth, ‘tis granted,

But lodge their Treasure in the clouds,

To hide it ‘till it's wanted.

O, Britain ! bless thy present State,

Thou only happy Nation,

So oddly rich, so madly Great,

Since Bubbles came in Fashion:

Successful Rakes exert their Pride,

And count their airy Millions;

Whilst homely Drabs in Coaches ride,

Brought up to Town on Pillions.

Few Men, who follow Reason's Rules,

Grow Fat with South Sea  Diet;

Young Rattles, and unthinking Fools,

Are those that flourish by it.

Old musty Jades, and pushing Blades,

Who've least Consideration,

Grow rich apace, whilst wiser Heads

Are struck with Admiration.

A Race of Men, who, t'other Day

Lay crush'd beneath Disasters,

Are now, by Stock brought into Play,

And made our Lords and Masters:

But should our South Sea Babel  fall,

What Numbers would be frowning,

The Losers, then, must ease their Gall

By Hanging, or by Drowning.

Five Hundred Millions, Notes and Bonds,

Our Stocks are worth in Value,

But neither lye in Goods, or Lands,

Or Money, let me tell ye.

Yet, tho' our Foreign Trade is lost,

Of mighty Wealth we vapour,

When all the Riches that we boast,

Consists in Scraps of Paper.