The South Sea Company (officially British Governor and Company traders, trading to the South Sea and other parts of America, and for fishing boost ) is a British joint-stock company established in 1711 , created as a public-private partnership to consolidate and reduce the cost of national debt. The company is also given a monopoly to trade with South America and its nearby islands, hence its name. (The modern use of the term "South Sea" to refer to the whole of the South Pacific was unknown in Britain at the time.) When the company was created, Britain was involved in the Spanish and Spanish Succession War over South America. There is no realistic prospect that trade will happen and the company has never realized any significant advantages of monopoly. Company shares rose enormously as it expanded its operations in government debt, peaking in 1720 before falling to slightly above the original flotation price; the economic bubble is known as South Sea Bubble .
The Bubble Act 1720 (6 Geo I, c 18), which forbids the creation of joint-stock companies without government charter, was promoted by South Sea's own company before its collapse.
In Great Britain, large numbers of people are destroyed by falling stocks, and the national economy is greatly reduced as a result. The founders of this scheme are involved in insider trading, using their knowledge of when national debt is consolidated to gain huge profits from buying upfront debt. Big bribes are given to politicians to support the Parliamentary Act needed for the scheme. Company money is used to deal with own shares, and the people who are selected to buy shares are given loans that are backed by the same stock to spend on buying more shares. Expectations of profits from trade with South America are used to encourage people to buy shares, but bubble prices reach far beyond the profitability of the slave trade.
A parliamentary inquiry was held after the accident to find the cause. A number of politicians are embarrassed, and those found to profit unlawfully from companies have seized assets comparable to their profits (most have become rich and remain rich in comfort). The company was restructured and continued to operate for more than a century after the Bubble. The head office is on Threadneedle Street in the center of London's financial district. At the time of this incident the Bank of England was also a private company dealing with national debt, and the collapse of its rivals consolidated its position as a banker to the British government.
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In August 1710 Robert Harley was appointed Minister of Finance in the government of the commission. The current government has become dependent on the Bank of England. This is a private company, hired 16 years previously, which acquired a monopoly as a lender to Westminster, in exchange for organizing and managing loans to the government. The government has become dissatisfied with the services it receives and Harley is actively seeking new ways to improve national finance.
The new Parliament met in November 1710 with a determination to take care of the national finances, which suffered significantly from two simultaneous wars: the war with France, which ended in 1713, and the Great North War, which would not end until 1721. The Harley was prepared, with detailed details about the national debt situation, which is usually a piecemeal affair, with different government departments arranging their own loans when the need arises. He released the information steadily, continuing to add new reports about the debt incurred and scandal spending, until in January 1711 the House of Commons agreed to appoint a committee to investigate all debts. The committee includes Harley himself; two Auditors of Imprests, whose duty is to investigate government expenditures; Brother Harley, Edward; and Paul Foley, his brother-in-law. Also included was the Secretary of Treasury, William Lowndes, who had significant responsibility for remedging all British currencies deposited in 1696; and John Aislabie representing the October Club, a group of about 200 MPs who have agreed to vote together.
Harley's first concern was to find Ã, Â £ 300,000 for next quarter payments for British troops operating in Europe under Marlborough. It is provided by a private consortium of Edward Gibbon, George Caswall and Hoare's Bank. The Bank of England has operated the state lottery on behalf of the government, but this has not been particularly successful in 1710, and others have started in 1711. It also performs poorly, so Harley is authorized to sell tickets to John Blunt, The Hollow Sword, which despite its name is an unofficial bank. With sales starting on March 3, 1711, tickets were sold out on the 7th. This is the first truly successful state lottery.
The success was soon followed by another, larger, lottery, "The Two Million Adventure" or "The Classis", with tickets costing Ã, Â £ 100, the highest prize Ã, Â £ 20,000 and each ticket winning prizes of at least Ã, Â £ 10. Although the prizes are advertised for the total amount, they are paid in the form of fixed annuities for several years, so the government effectively holds the prize money as a loan until it is paid to the winners. Marketing was handled by members of the Sword Blade syndicate, Gibbon sold Ã, Â £ 200,000 tickets and earned Ã, Â £ 4,500 commissions, and Blunt sold Ã, £ 993,000. Charles Blunt (a relative) was appointed a Paymaster Lottery at a cost of £ 5,000.
Conception Company
The national debt investigation has concluded that a total of £ 9,000,000 is due, with no revenue being allocated to pay it off. Edward Harley and John Blunt jointly drafted a scheme to consolidate this debt in much the same way as the Bank of England has consolidated its previous debt, although the Bank still holds a monopoly to operate as a bank. All debt holders will be required to submit it to a new company, the South Sea Company, which in return will issue shares of the same amount. The government will pay the company for  £ 568,279 10s 0d (interest 6% plus fee) annually, which will be distributed as dividends to shareholders. The company was also given a monopoly to trade with South America, a potentially lucrative company, but which was controlled by Spain, with whom the British fought.
At that time, when the American continent was being explored and colonized, Europe applied the term "South Sea" only to South America and its surrounding waters. The concessions both prioritize the potential for future profits and encourage a desire to end the war, necessary if there are benefits to be made. The original suggestion for the South Sea scheme came from William Paterson, one of the founders of the Bank of England and The Fromen Scheme who suffered financially.
Harley was rewarded for the scheme by the Earl of Oxford on May 23, 1711, and promoted to Lord High Treasurer. With a safer position, he started a secret peace negotiation with France. Commercially, as the lottery is discredited, a portion of the debt intended to be consolidated under the scheme is available on the open market before the scheme is announced, at a discounted rate of £ 55 per face value of £ 100. This allows anyone with advance knowledge for buying debt at low prices and selling immediately, and allowing Harley to bring further financial supporters into the scheme, such as James Bateman and Theodore Janssen.
Daniel Defoe commented:
Unless the Spaniards have to let go of common sense, infatuation, and surrender, abandon their own trade, throw away the only valuable stock they have in the world, and in short, bow to their own destruction, we can not suggest that they will ever, by any consideration, or for any equivalent part, with such precious, even invaluable gems, as an exclusive trade for their own plantations.
The originator of this scheme knows that there is no money to invest in trading ventures, and there is no realistic expectation that there will be trade to be exploited, but the potential for great wealth is widely publicized at every opportunity, thus encouraging interest in the scheme. The goal for the founders is to create a company that they can use to become rich, and that offers the future scope for further government transactions.
Flotation
The charter for the company is prepared by Blunt, based on the Bank of England. Blunt paid £ 3,846 for his services in founding the company. Directors will be elected every three years while shareholders will meet twice a year. The company employs a Cashier, Secretary, and Accountant. The governor is meant to be a position of honor, and the position is then customarily held by the ruling monarch. The charter allows the full courts to appoint a smaller committee to act on behalf of anything in its name. Director of the Bank of England and the Company of East India was dismissed from becoming director of the South Sea Company. Any ship that has more than 500 tons owned by the company is to have an English Church pastor on board.
The exchange of government debt for shares will occur in five separate lots. The first two, a total Ã, £ 2.75 million of some 200 large investors, were set before the charter was issued on September 10, 1711. The government itself exchanged Ã, Â £ 0.75 million of its own debts held by different departments (at this time, each office holder is responsible for money in their responsibilities, and is free to invest it for their own benefit before it is required). Harley exchanged Ã, Â £ 8,000 of debt and was appointed as the new corporate governor. Blunt, Caswall and Sawbridge together provide Ã, Â £ 65,000, Janssen Ã, Â £ 25,000 of his own Ã, £ 250,000 from a foreign consortium, Decker Ã, £ 49,000, Sir Ambrose Crawley Ã, £ 36,791. The Company has a Sub-Governor, Bateman; a Deputy Governor, Ongley; and 30 regular directors. In total, nine of the directors are politicians, five are members of the Blade Sword consortium, and the other seven are financial figures who are interested in the scheme.
The company created a symbol with the motto of A Gadibus usque ad Auroram ("from Cadiz to dawn") and rented a large house in City as its headquarters. Seven sub-committees were formed to handle its day-to-day business, the most important being the "Corporate Affairs Committee". The Blade Sword Company is retained as their banker and on the strength of the new government connection issued a note in itself, regardless of the Bank of England monopoly. The task of the Corporate Secretary is to oversee trade activities; The accountant, Grigsby, is responsible for registering and issuing shares; and Cashier, Robert Knight, acting as Blunt's personal assistant with a salary of £ 200 per year.
Slave trade
The Treaty of Utrecht 1713 gave Britain a 30-year-old Asiento to supply the Spanish colony with 4,800 slaves per year. Britain was allowed to open offices in Buenos Aires, Caracas, Cartagena, Havana, Panama, Portobello and Vera Cruz to regulate Atlantic slave trade. One ship of no more than 500 tons can be shipped to one of these places annually ( NavÃÆ'o de Permiso ) with general merchandise. A quarter of the profits should be reserved for the King of Spain. There are provisions for two additional shipping at the beginning of the contract. Asiento was given on behalf of Queen Anne and then contracted to the company.
In July, the company has arranged a contract with the Royal African Company to supply the necessary African slaves to Jamaica. Ten pounds paid for slaves aged over 16, Ã, Â £ 8 for one under 16 but over 10. Two-thirds are men, and 90% adults. The company sent 1,230 slaves from Jamaica to the United States in the first year, plus which may have been added (against standing instructions) by the ship's captains on their own behalf. Upon arrival of the first cargo, local authorities refused to accept the Asiento, which has still not been officially confirmed there by the Spanish authorities. The slaves were eventually sold with a loss in the West Indies.
In 1714 the government announced that a quarter of the profits would be reserved for the Queen and another 7.5 percent for financial advisor, Manasseh Gilligan. Several members of the Company's board refused to accept the contract with this requirement, and the government was obliged to reverse its decision.
Despite this setback, the company continued, having collected £ 200,000 to finance the operation. In 1714, 2,680 slaves were taken, and for 1716-17, 13,000 more, but trade remained unprofitable. The task of importing 33 pieces of eight is charged to each slave (though for this purpose some slaves may be counted only as a fraction of a slave, depending on the quality). One of the extra merchant ships sent to Cartagena in 1714 carried wool goods, despite warnings that there was no market for them there, and they remained unsold for two years.
Management changes
The company relies heavily on the goodwill of the government; when the government changes, so does the company board. In 1714 one of the Harley-sponsored directors, Arthur Moore, had attempted to send 60 tons of personal belongings aboard the company's vessel. He was dismissed as a director, but the result was the beginning of Harley's fall from goodness with the company. On July 27, 1714, Harley was replaced as Lord High Treasurer as a result of a dispute that broke out in the Tory faction in parliament. Queen Anne died on August 1, 1714; and at the election of the director in 1715, Prince Wales (nominee King George II) was elected as Governor of the Company. The new King George I and the Prince of Wales both have significant holdings in the company, as did some of the leading Whig politicians, including James Craggs the Elder, the Earl of Halifax and Sir Joseph Jekyll. James Craggs, as Postmaster General, is responsible for intercepting letters on behalf of the government to obtain political and financial information. All Tory politicians are removed from the council and replaced by employers. The Whigs Horatio Townshend, Robert Walpole's brother-in-law, and Duke of Argyll were elected directors.
The new government led to a resurgence in the value of the company's stock, which had fallen below its publishing price. The previous government has failed to make interest payments to the company over the past two years, as it is over Ã, Â £ 1 million. The new government insisted that the debt be abolished, but allowed the company to issue new shares to shareholders with the value of the missed payments. Around £ 10 million, this now represents half the share capital issued across the country. In 1714 the company had 2,000 to 3,000 shareholders, more than its competitors.
By the time of the next presidential election in 1718 politics had changed again, with a split within the Whig between the Walpole factions supporting the Prince of Wales and James Stanhope in favor of the King. Argyll and Townshend were dismissed as directors, such as Tory Sir Richard Hoare and George Pitt are still alive, and King George I became governor. Four members of parliament remain directors, as well as six people holding government finance offices. The Sword Blade Company remains a banker in the South Sea, and has even grown rapidly despite the company's dubious legal position. Blunt and Sawbridge remain directors of the South Sea, and they have joined Gibbon and Child. Caswall has retired as director of the South Sea to concentrate on Swordsmanship business. In November 1718, Bateman's Sub-Governor and Deputy Governor Shepheard both died. Setting aside the position of honor of the Governor, this makes the company suddenly without the two most senior and experienced directors. They were replaced by Sir John Fellowes as Sub-Governor and Charles Joye as Deputies.
War
In 1718 the war broke out with Spain once again, in the Quadruple Alliance War. The company's assets in South America were confiscated, which the company claimed cost about £ 300,000. Any prospect of profit from trading, where the company has purchased the vessel and has planned the next venture, disappears.
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Restructure government debt
Events in France are now coming to affect the future of the company. A Scottish economist and financier, John Law, exiled after killing a man in a duel, has traveled Europe before settling in France. There he founded a bank, which in December 1718 became Banque Royale, a French national bank, while Law himself was given great power to control the French economy, which was largely operated by a royal decree. The tremendous success in law is well known in finance across Europe, and now comes to inspire Blunt and his colleagues to make even greater efforts to cultivate their own concerns.
In February 1719 Craggs explained to the House of Commons a new scheme to increase the national debt by converting annuities issued after the 1710 draw to the South Sea stock. With the Act of Parliament, the company was granted the right to issue Ã, Â £ 1,150 new shares for each Ã, Â £ 100 per annuity year submitted. The government will pay 5% per annum for the stocks made, which will halve their annual bills. The conversion is voluntary, for Ã, Â £ 2.5 million of new shares if all are converted. The company will extend additional new loans to the government pro rata up to Ã, £ 750,000, again by 5%.
The South Sea Company presented an offer to the public in July 1719. In March there was a failed attempt to restore Old Pretender, James Edward Stuart, to the British throne, with a small army landing in Scotland. They were defeated at the Battle of Glen Shiel on June 10. The Blade Blade Company spread rumors that Pretender had been arrested, and the general euphoria pushed the South Sea stock price up from Ã, Â £ 100, where it was in the spring, up to Ã, Â £ 114. The annuitant is still paid on the value of money equals of the stock, the company keeps profits from the increase in value before it is issued. About two-thirds of the benefits are already exchanged.
Trade more debt for equity
The 1719 scheme is a success different from the government's perspective, and they try to repeat it. The negotiations took place between Aislabie and Craggs for the government and Blunt, Cashier Knight and his assistants and Caswell. Janssen, the Governor and Vice Governor were also consulted but negotiations remain secret from most companies. News from France is a fortune that made an investment in Law's bank, whose shares have risen sharply. Money moves across Europe, and other flotations threaten to absorb the available capital (two insurance schemes in December 1719 each trying to earn  £ 3 million).
Plans were made for the new scheme to take over most of the UK's unconsolidated national debt (£ 30,981,712) in exchange for the company's shares. Annuities are valued as the sums at once necessary to generate an annual income over the original period with an assumed interest of 5%, which is advantageous for those with shorter periods of time to keep it running. The government agreed to pay the same amount to the company for all debts payable in the fixed period as previously paid, but after seven years, the 5% interest rate would fall to 4% on both new annuity debts as well as those previously taken over. After the first year, the company will provide the government  £ 3 million in four quarterly installments. New shares will be made at face value equal to debt, but stock prices are still rising and the sale of the remaining stock, ie the excess total value of the stock market on the amount of debt, will be used to raise government costs plus profits for the company. The more prices go up before the conversion, the more companies will make. Prior to the scheme, payments have burdened the government for £ 1.5 million annually.
In summary, the total government debt in 1719 was Ã, Â £ 50 million:
- Ã, Â £ 18.3 million is held by three major companies:
- Ã, Â £ 3.4 million by the Bank of England
- Ã, Â £ 3.2 million by the British East India Company
- Ã, Â £ 11.7m by the South Sea Company
- Debts that can be personally billed for Ã, Â £ 16.5 million
- Ã, Â £ 15m consists of non-exchangeable benefits, long-term benefits with a 72-87 year term, and a short annuity of 22 years remaining for expiration.
The purpose of this conversion is similar to the old one: debt and annuitant holders may receive less returns, but illiquid investments are converted into shares that can be easily traded. Stocks supported by national debt are considered a safe investment and a convenient way to hold and move money: much easier and safer than metal coins. The only alternative safe asset, land, is much harder to sell and legally far more complicated to transfer ownership.
The government accepts cash payments and lowers the overall interest on the debt. Importantly, it also gets control when the debt has to be repaid, which is not before seven years but then at its discretion. This avoids the risk that debt can be repaid at some point in the future when the government needs to borrow more, and can be forced to pay higher interest. Payments to the government will be used to buy in any debt that is not subscribed to the scheme, which although it helps the government also helps the company by removing any securities that may compete from the market, including large holdings by the Bank of England.
The company's shares are now trading at £ 123, so the problem amounts to an injection of £ 5 million in new money into a booming economy just as interest rates fall. Gross Domestic Product (GDP) for the UK at this point is estimated at Ã, Â £ 64.4 million. [2]
Public announcement
On January 21st the plan was presented to the South Sea Company council, and on January 22, United Kingdom Finance Minister John Aislabie handed it to Parliament. The house was stunned in silence, but on recovery proposed that the Bank of England should be invited to make a better offer. In response, the South Sea increased its cash payments to 3.5 million pounds, while the Bank proposed to convert a payment of  £ 5.5 million and a fixed conversion price of £ 170 per Ã,  £ 100 par value of the Bank's shares. On Feb. 1, the company's negotiators led by Blunt raised their offer to Ã,  £ 4 million plus a proportion of Ã,  £ 3.5 million depending on how much debt was converted. They also agreed that the interest rate would be reduced after four years, instead of seven years, and agreed to sell on behalf of the government for  £ 1 million of the Exchequer bill (previously handled by the Bank). The house accepts the offer of the South Sea. Bank shares fell sharply.
Perhaps the first sign of trouble came when the South Sea Company announced that the Christmas dividend of 1719 would be suspended for 12 months. The company is now beginning to show gratitude to his friends. Select individuals who are sold a parcel of the company's shares at current prices. Such transactions are recorded by Knight in the name of an intermediary, but no payment is received and no stock is issued - indeed no company needs to be issued until the debt conversion begins. Individuals receive the option to sell their shares back to the company in the future whenever the market price applies. Stock goes to Craggs: Elder and the Younger; Lord Gower; Mr. Lansdowne; and four other MPs. Lord Sunderland will get £ 500 for each pound whose stock is rising; Mrs George I, their sons and Countess Platen Ã, £ 120 per pound rose, Aislabie Ã, £ 200 per pound, Lord Stanhope Ã, Â £ 600 per pound. Others invested money, including Treasurer to the Navy, Hampden, who invested $ 25,000 in government money for his own benefit.
The proposal was accepted in a slightly altered form in April 1720. What is important in this conversion is the proportion of annulable annuity holders who can be tempted to change their securities at high prices for new shares. (The redeemed holder has no choice but to subscribe.) The South Sea Company can set the conversion price but can not deviate far from its stock market price. The Company has finally obtained 85% of the redemption and 80% of non-refundable.
The company then began to discuss its shares with the "most extraordinary rumor" about the value of its potential trade in the New World; this is followed by a wave of "speculating speculation". The share price has increased since the proposed scheme: from Ã, Â £ 128 in January 1720, to Ã, Â £ 175 in February, Ã, Â £ 330 in March and, after receipt of the scheme, Ã, Â £ 550 on end of May.
What might have contributed to the company's high increment (its P/E ratio) is the Ã, Â £ 70 million (known to market) credit line available for commercial expansion provided through substantial support, apparently, by Parliament and Kings.
Company shares are "sold" to politicians at current market prices; However, rather than paying for shares, these recipients simply hold on to shares what they have to offer, with the option to sell them back to the company when and when they choose, accepting as a "profit" of market price increases. This method, while winning the head of government, the lady of the King, et al., Also has the advantage to bind their interests to the interests of the Company: to secure their own profits, they must help raise the stock. Meanwhile, by publishing the names of their elite shareholders, the Company managed to impose an aura of legitimacy, which attracts and retains other buyers.
Bubble Act
The South Sea Company was not the only company that sought to raise money from investors in 1720. A large number of other joint-stock companies have been made making exaggerated (sometimes fraudulent) claims about foreign business or other ventures or weird schemes. The others represented potentially good, although novel, schemes, such as to establish an insurance company. It's dubbed "Bubbles". Some companies have no legal basis, while others, such as the Hollow Sword Blade company that acts as South Sea bankers, use existing charter companies for a completely different purpose from their creations. The York Buildings Company was established to provide water to London, but it was bought by Case Billingsley who used it to buy the confiscated Jacobite property in Scotland, which then formed the assets of the insurance company.
On February 22, 1720, John Hungerford asked questions about the bubble company in the House of Commons, and persuaded the House to form a committee, chaired, to investigate. He identified a number of companies that among them sought to raise  £ 40 million in capital. The committee investigates the company, establishing the principle that the company should not operate outside the objects specified in their charter. The potential embarrassment for the South Sea was spared when questions from the Hollow Blade Sword Company emerged. Difficulties were avoided by flooding the committee with MPs supporting the South Sea, and voting on proposals to investigate Hollow Sword 75 to 25. (At present, House committees are 'Open' or 'secret' A secret committee is one with a group of permanent members who can vote for the proceedings, on the contrary, every MP may join an 'open' committee and vote on the process.) Stanhope, who is a committee member, receives Ã,  £ 50,000 of South Sea stock 'resale' from Sawbridge, a director of the Hollow Sword, around this time. Hungerford had previously been expelled from the Commons for accepting bribes.
Among the investigated bubble companies are the two backed by Lords Onslow and Chetwynd respectively, to insure shipping. This is highly criticized, and questionable transactions from the Attorney General and the Public Defenders in trying to obtain a charter for companies cause both to be replaced. However, the scheme has the support of Walpole and Craggs, so the greater part of the Bubble Act (which eventually resulted in June 1720 of the committee's inquiry) was devoted to making the charter for the Royal Exchange Assurance Corporation and the London Assurance Corporation. Companies are required to pay £ 300,000 for privileges. The law requires that joint-stock companies be incorporated only by the Act of Parliament or Royal charter. The ban on unauthorized joint ventures was not lifted until 1825.
The passage of the Act gave a boost to the South Sea Company, its shares jumping to Ã, Â £ 890 in early June. This peak drives people to start selling; to compensate for this, the company directors ordered their agents to buy, which managed to raise the price to around Ã, Â £ 750.
Top reached
Stock prices rose for a year from around Ã, Â £ 100 to nearly Ã, Â £ 1000 per share. Its success led to frenzy behavior across the country - like all kinds of people, from peasants to nobles, developing an interest to invest: especially in the South Sea, but in general. Among many companies to go public in 1720 is - famous - one that advertises itself as "a company to do a business with big profits, but no one knows what it is".
Prices eventually reached Ã, 1,000 pounds in early August, and sales levels were such that prices began to fall, falling back to Ã,  £ 100 per share before the year came out, sparking bankruptcy among those who bought on credit, and boosting sales , even short sales (ie, selling shares borrowed in the hope of buying them back profitably if the price falls).
Also, in August 1720, the first installment payment of the first and second money subscriptions on new issues of South Sea supplies was due. Earlier in the year John Blunt had come up with the idea to prop up stock prices: the company would lend money to people to buy its shares. As a result, many shareholders can not pay for their shares except by selling them.
In addition, the seizure of liquidity emerged internationally because the "bubble" also ended in Amsterdam and Paris. The collapse coincided with the fall of the John Law Company in France. As a result, South Sea stock prices began to decline.
Disclaimer
By the end of September, stocks had fallen to Ã, Â £ 150. Failure companies now extends to banks and goldsmiths as they can not collect loans made on shares, and thousands of people are undermined, including many members of the aristocracy. With angry investors, Parliament was withdrawn in December and investigations began. Reporting in 1721, it revealed the widespread fraud among the company's directors and corruption in the Cabinet. Among those involved were John Aislabie (Minister of Finance), James Craggs the Elder (General of Leadership), James Craggs the Younger (Southern Secretary), and even Lord Stanhope and Lord Sunderland (head of the Ministry). Craggs the Elder and Craggs the Younger both died of disgrace; the rest were dismissed for their corruption. The Commons found Aislabie guilty of "the most famous, dangerous and famous corruption", and he was imprisoned.
The newly appointed Lord of Treasury, Robert Walpole, managed to restore public confidence in the financial system. However, public opinion, as established by many prominent people who lost money, demanded revenge. Walpole oversaw the process that ousted all 33 directors of the company and disarmed them, on average, 82% of their wealth. The money was given to the victims and the shares of the South Sea Company were shared between the Bank of England and the East India Company. Walpole ensured that King George and his girlfriend were protected, and by a margin of three votes he managed to rescue some of the government's top officials from impeachment. In the process, Walpole won praise as a savior of the financial system while establishing himself as a dominant figure in British politics; historians appreciate him for saving the Whig government, and indeed the Hanover Dynasty, from total disgrace.
Quotations requested by the collapse
Joseph Spence wrote that Lord Radnor reported to him "When Sir Isaac Newton was asked about the continuing increase in South Sea stocks... He replied 'that he can not count the man's madness'." He was also quoted as stating, "I can calculate the movement of the stars, but not the madness of man". Newton alone had nearly 22,000 pounds in South Sea stocks in 1722, but it is unknown how many were lost, if any.
Trading company
The South Sea Company was established in 1711 to reduce the amount of public debt, but was granted commercial rights to exclusive trade rights to the Indies of Spain, based on a trade agreement signed by the British and Archduke Charles, a candidate for the Spanish throne during the Spanish War of Succession. Since Philip V became King of Spain, England obtained the 1713 Utrecht Treaty of the right to trade slaves to the Indies of Spain (or Asiento) for 30 years. These rights were previously held by the Compagnie de GuinÃÆ'Â © e et de l'Assiente du Royaume de la France.
The South Sea Company's Council opposes the slave trade which has shown little profitability when chartered companies are involved in it, but that is the only legal type of trade with the Spanish Colonies as they are a closed market. To improve profitability, Asiento's contract includes the right to ship one 500 tonnes per year to an exhibition at Portobello and Veracruz loaded with duty free merchandise, called NavÃÆ'o de Permiso . The British Crown and King of Spain are each entitled to 25% of the profits, in accordance with the terms of the contract, it is a copy of the French Asiento contract, but Queen Anne immediately releases his share. The King of Spain did not receive any payment because of him, and this is one source of feud between the Kingdom of Spain and the South Sea Company.
Like the previous holders of Asiento, Portuguese and French, the profits are not in the slave trade but in smuggled illegal goods smuggled in slave ships and on annual vessels. They are sold in Spanish colonies at very high prices because they are in high demand and are unhealthy competition with taxable goods, proving an important depletion on Spanish Crown's trade revenues. The relationship between the South Sea Company and the Spanish Government has always been bad, and has worsened over time. The company complained about search and seizure of goods, lack of profit, and confiscation of property during the war between England and Spain 1718-1723 and 1727-1729, where the Company's operations were suspended. The Spanish government complained of illegal trade, the failure of the company to present its accounts as determined by the contract, and not pay part of the King's profits. These claims were a major cause of the worsening relations between the two countries in 1738; and although the Prime Minister Walpole is against the war, there is strong support for him from the King, the House of Representatives, and a faction in his own Cabinet. Walpole was able to negotiate an agreement with the King of Spain at the Pardo Convention in January 1739 stipulating that Spain would pay British merchants Ã, £ 95,000 in compensation to capture and seize the goods while the South Sea Company would pay Spanish Crown Ã, £ 68,000 in proceeds due from Asiento. The South Sea Company refused to pay the proceeds and the King of Spain withdrew the payment of compensation until payment from the South Sea Company was secured. The breakup of links between the South Sea Company and the Government of Spain is a prelude to Guerra del Asiento, as the first Royal Navy fleet departed in July 1739 for the Caribbean, before the declaration of war, which lasted from October 1739 to 1748. This war known as the Jenkins' War Ear.
Slave trade under Asiento
Under the Treaty of Tordesillas, Spain is the only European power that can not build factories in Africa to buy slaves. The slaves for Spanish Americans are provided by companies that are granted exclusive rights to their trade. This monopoly contract is called Asiento slave. Between 1701 and 1713 the Asiento contract was awarded to France. In 1711 the British had created the South Sea Company to reduce debts and trade with Spanish Americans, but the trade was illegal without the permission of Spain, and the only permit available was Asiento for the slave trade, so in the Utrecht Treaty in 1713 England obtained Asiento from French to British hands over the next 30 years. The board of directors was reluctant to take a slave trade that was not an object of the company and had shown little profitability when it was done by chartered companies, but they finally agreed on March 26, 1714. Asiento set a sales quota of 4800 slave units per year. An adult male slave is counted as a unit; women and children are counted as a fractional unit. Initially the slaves were given by the Royal African Company.
The South Sea Company established a slave admissions factory in Cartagena, Colombia, Veracruz, Mexico, Panama, Portobello, La Guaira, Buenos Aires, La Havana and Santiago de Cuba, and slave deposits in Jamaica and Barbados. Despite the problems with speculation, the South Sea Company was relatively successful in the slave trade and fulfilled the quota (it's not unusual for other companies, same charter to meet their quota). According to records compiled by David Eltis and others, during 96 trips in 25 years, the South Sea Company purchased 34,000 slaves, of whom 30,000 survived the voyages across the Atlantic. (So, about 11% of slaves died on the way: relatively low mortality rates for Middle Crossing.) The company survived the slave trade through two wars with Spain and the fatal 1720 commercial bubble. The company's trade in human slavery peaked during the trading year of 1725, five years after the bubble burst. Between 1715 and 1739, the slave trade was the main legal commercial activity of the South Sea Company.
Annual ship
Asiento slave contract in 1713 granted permission to ship one ship of 500 tons per year, filled with duty-free merchandise to be sold at New Spain, Cartagena and Portobello fairs. This is an unprecedented concession that broke two centuries of strict exclusion from foreign merchants from the Spanish Empire.
The first ship to America, the Kingdom Prince, was scheduled for 1714 but was postponed until August 1716. Considering the three annual vessels lost since the Asiento date, the allowed tonnage of the next ten vessels was raised to 650. In fact only seven annual ships that sailed during the Asiento, the last being Royal Caroline in 1732. The failure of the company to produce accounts for all annual vessels but the first, and the lack of payment of proceeds to the Spanish Crown from profits for all annual vessels, resulted in no more licenses granted to the Company's ships after the Royal Caroline journey from 1732 to 1734.
Unlike the legitimate trade of slaves, regular annual ship trade produces a healthy profit, in some cases earnings of more than 100%. The account for the voyage of Royal Prince was not presented until 1733, following a continuous request by Spanish officials. They reported that a gain of Ã, Â £ 43,607. Since the King of Spain is entitled to 25% of the profits, after deducting interest on the loan, he claims Ã, £ 8,678. The South Sea Company never paid the amount to be paid for the first annual vessel to the Spanish Crown, nor paid any amount for the other six trips.
Arctic whaling
Greenland Company was founded by the Act of Parliament in 1693 with the aim of capturing whales in the Arctic. Their "whale-fishing" products must be customs-free and other tasks. Partly due to maritime disruptions caused by the war with France, the Greenland Company failed financially in a few years. In 1722 Henry Elking published a proposal, addressed to the governor of the South Sea Company, that they should continue "Green Land Trade" and send ships to capture whales in the Arctic. He made very detailed suggestions on how the ship should be destroyed and equipped.
The British Parliament confirmed that the British Arctic "whale fishery" would continue to benefit from freedom from customs, and in 1724, the South Sea Company decided to start whaling. They have 12 whale ships built on the River Thames and this went to the Greenland sea in 1725. Further ships were built in later years, but the effort was unsuccessful. There were hardly any remaining whales left in England, and the Company had to involve Dutch and Danish whales for key posts on their ships: for example, all commanding officers and traitors were recruited from the Frisian FÃÆ'¶hr island in the North. Other costs are highly uncontrolled and the catch still disappoints some, even though the Company ships up to 25 ships to the Davis Strait and Greenland seas within a few years. In 1732, the Company had collected a net loss of £ 177,782 from their eight years of Arctic whaling.
The directors of the South Sea Company appealed to the British government for further support. Parliament has passed a law in 1732 that extends duty-free concessions for the next nine years. In 1733, a law was passed which also provided government subsidies to the British Arctic whalers, the first in a long series of such Acts which continued and modified the whaling subsidies of the 18th century. This, and the next Story, requires whalers to meet the requirements of the crew and equip whalers very similar to the conditions advocated by Elking in 1722. Regardless of the extended duty-free concessions, and the prospect of real subsidies as well, the Court and the Directors of the Company The South Sea decided that they could not expect to benefit from the capture of the Arctic whales. They sent no more whales after the devastating 1732 season.
Government debt after the Seven Years' War
The company continued its trade (when not bothered by war) until the end of the Seven Years' War (1756-1763). However, its main function is always to manage government debt, rather than trading with Spanish colonies. The South Sea Company continued to manage the portion of the National Debt until it was dissolved in 1853, at which point the debt was consolidated. The debt was not repaid by World War I, at which point it was consolidated again, under conditions that allowed the government to avoid principal payments.
Firearms
The armorials of the South Sea Company according to the arms granting of 31 October 1711 are: Azure, the globe where represented by the Strait of Magellan and Cape Horn are all precise and at the head point creepy of two forbidden fish in the argument of saltire or, in a canton, united arm of Great Britain. Crest: A ship with three full masts . Supporters, Dexter: The figure of the Britannia symbol, with shields, spears, etc. is all right ; sinister: A fisherman fully dressed, with a shoe hat, fishing nets, etc. and in his hand is a piece of fish string, all right .
Company Officer of the South Sea
The South Sea Company has a governor (generally a position of honor); a sub-governor; a vice governor and 30 directors (reduced in 1753 to 21).
In fiction
Source of the article : Wikipedia
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