![]() ![]() The expectation of profits from trade with South America was talked up to encourage the public to purchase shares, but the bubble prices reached far beyond what the actual profits of the business (namely the slave trade) could justify. Company money was used to deal in its own shares, and selected individuals purchasing shares were given cash loans backed by those same shares to spend on purchasing more shares. Huge bribes were given to politicians to support the Acts of Parliament necessary for the scheme. The founders of the scheme engaged in insider trading, by using their advance knowledge of the timings of national debt consolidations to make large profits from purchasing debt in advance. In Great Britain, many investors were ruined by the share-price collapse, and as a result, the national economy diminished substantially. 18), which forbade the creation of joint-stock companies without royal charter, was promoted by the South Sea Company itself before its collapse. The notorious economic bubble thus created, which ruined thousands of investors, became known as the South Sea Bubble. However, Company stock rose greatly in value as it expanded its operations dealing in government debt, and peaked in 1720 before suddenly collapsing to little above its original flotation price. There was thus no realistic prospect that trade would take place, and as it turned out, the Company never realised any significant profit from its monopoly. When the company was created, Britain was involved in the War of the Spanish Succession and Spain and Portugal controlled most of South America. ![]() To generate income, in 1713 the company was granted a monopoly (the Asiento de Negros) to supply African slaves to the islands in the " South Seas" and South America. ![]() The South Sea Company (officially: The Governor and Company of the merchants of Great Britain, trading to the South Seas and other parts of America, and for the encouragement of the Fishery) was a British joint-stock company founded in January 1711, created as a public-private partnership to consolidate and reduce the cost of the national debt. Hogarthian image of the 1720 "South Sea Bubble" from the mid-19th century, by Edward Matthew Ward, Tate Gallery ![]()
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