In 1711, the ninth year of queen Anne’s reign, a charter of
incorporation was granted to a company trading to the South Seas; and
the South Sea company’s affairs appeared so prosperous, that, in 1718,
king George I. being chosen governor, and a bill enabling him to accept
the office having passed both houses, on the 3d of February, his majesty
in person attended the house of lords, and gave the royal assent to the
act. A brief history of the company’s subsequent progress is interesting
at any time, and more especially at a period when excess of speculation
may endanger private happiness, and disturb the public welfare.
On the 27th of _January_, 1719, the South Sea company proposed a scheme
to parliament for paying off the national debt, by taking into its funds
all the debt which the nation had incurred before the year 1716, whether
redeemable or irredeemable, amounting in the whole to the sum of
31,664,551_l._ 1_s._ 1¼_d._ For this the company undertook to pay to the
use of the public the sum of 4,156,306_l._; besides four years and a
half’s purchase for all the annuities that should be subscribed into
its fund, and which, if all subscribed, would have amounted to the sum
of 3,567,503_l._; amounting, with the above-mentioned sum, to
7,723,809_l._: in case all the annuities were not subscribed, the
company agreed to pay one per cent, for such unsubscribed annuities.
To this arrangement parliament acceded, and an act was passed to ratify
this contract, and containing full powers to the company accordingly. In
_March_ following South Sea stock rose from 130 to 300, gradually
advanced to 400, declined to 330, and on the 7th of _April_ was at 340.
This so encouraged the directors, that on the 12th they opened books at
the South Sea house for taking in a subscription for a portion of their
stock to the amount of 2,250,000_l._ every 100_l._ of which they offered
at 300_l._: it was immediately subscribed for at that price, to be paid
for by nine instalments within twelve months. On the 21st, a general
court of the company resolved, that the Midsummer dividend should be 10
per cent., and that the aforesaid subscription, and all other additions
to their capital before that time, should be entitled to the said
dividend. This gave so favourable a view to the speculation, that on the
28th the directors opened a second subscription for another million of
stock, which was presently taken at 400_l._ for every 100_l._, and the
subscribers had three years allowed them for payment. On the 20th of
_May_, South Sea stock rose to 550. So amazing a price created a general
infatuation. Even the more prudent, who had laughed at the folly and
madness of others, were seized with the mania; they borrowed, mortgaged,
and sold, to raise all the money they could, in order to hold the
favourite stock; while a few quietly sold out and enriched themselves.
Prodigious numbers of people resorted daily from all parts of the
kingdom to ’Change-alley, where the assembled speculators, by their
excessive noise and hurry, seemed like so many madmen just escaped from
cells and chains. All thoughts of commerce were laid aside for the
buying and selling of estates, and traffic in South Sea stock. Some, who
had effected sales at high premiums, were willing to pay out the money
on real property, which consequently advanced beyond its actual value:
cautious landowners justly concluded that this was the time to get money
without risk, and therefore sold their property; shortly afterwards
they had an opportunity of purchasing more, at less than half the price
they had obtained for their own.
On the 2d of _June_, South Sea stock rose to 890. On the 15th, many
persons who accompanied the king on his foreign journey, sold their
stock, which suddenly fell; but the directors promising larger
dividends, it got up higher than ever. On the 18th they opened books for
a third subscription of four millions more stock, at 1000_l._ for each
100_l._, and before the end of the month it had advanced to 1100_l._,
between which and 1000_l._ it fluctuated throughout the month of _July_.
On the 3d of _August_ they proposed to receive subscriptions for all the
unsubscribed annuities, and opened books for the purpose during the
ensuing week, upon terms which greatly dissatisfied the annuitants, who,
confiding in the honour of the directors, had left their orders at the
South Sea House, without any previous contract, not doubting but they
should be allowed the same terms with the first subscribers. Finding, to
their great surprise and disappointment, that, by the directors’
arrangements, they were only to have about half what they expected, many
repaired to the South Sea House to get their orders returned; but these
being withheld, their incessant applications and reflections greatly
affected the stock, insomuch that, on the 22d of the month, at the
opening of the books, it fell to 820. The directors then came to the
desperate resolution of ordering the books to be shut; and on the 24th
they caused others to be opened for a fourth money subscription for
another million of their stock, at 1000_l._ for each 100_l._, payable by
five instalments within two years: this million was subscribed in less
than three hours, and bore a premium the same afternoon of 40 per cent.
On the 26th the stock, instead of advancing, fell below 830. The
directors then thought fit to lend their proprietors 4,000_l._ upon
every 1000_l._ stock, for six months, at 4 per cent.; but the annuitants
becoming very clamorous and uneasy, the directors resolved that 30 per
cent. in money should be the half-year’s dividend due at the next
Christmas, and that from thence, for twelve years, not less than 50 per
cent. in money should be the yearly dividend on their stock. Though this
resolution raised the stock to about 800 for the opening of the books,
it soon sunk again.
On the 8th of _September_, the stock fell to 640, on the 9th to 550, and
by the 19th it came to 400. On the 23d the Bank of England agreed with
the South Sea company to circulate their bonds, &c. and to take their
stock at 400 per cent., in lieu of 3,775,000_l._, which the company was
to pay them. When the books were opened at the Bank for taking in a
subscription for supporting the public credit, the concourse was at
first so great, that it was judged the whole subscription, which was
intended for 3,000,000_l._, would have been filled that day. But the
fall of South Sea stock, and the discredit of the company’s bonds,
occasioned a run upon the most eminent goldsmiths and bankers, some of
whom, having lent great sums upon the stock and other public securities,
were obliged to shut up their shops. The Sword-blade company also, who
had been hitherto the chief cash-keepers of the South Sea company, being
almost drawn of their ready money, were forced to stop payment. All this
occasioned a great run upon the Bank. On the 30th South Sea stock fell
to 150, and then to 86.
“It is very surprising,” says Maitland, “that this wicked scheme, of
French extraction, should have met with encouragement here, seeing that
the Mississippi scheme had just before nearly ruined that nation. It is
still more surprising, that the people of divers other countries,
notwithstanding the direful effects of this destructive scheme before
their eyes, yet, as it were, tainted with our frenzy, began to court
their destruction, by setting on foot the like projects: which gives
room to suspect,” says Maitland, “that those destructive and fatal
transactions were rather the result of an epidemical distemper, than
that of choice; seeing that the wisest and best of men were the greatest
sufferers; many of the nobility, and persons of the greatest
distinction, were undone, and obliged to walk on foot; while others, who
the year before could hardly purchase a dinner, were exalted in their
coaches and fine equipages, and possessed of enormous estates. Such a
scene of misery appeared among traders, that it was almost unfashionable
not to be a bankrupt: and the dire catastrophe was attended with such a
number of self-murders, as no age can parallel.”
* * * * *
Hooke, the historian of Rome, was a severe sufferer by the South Sea
bubble. He thus addresses lord Oxford, in a letter dated the 17th of
October 1722: “I cannot be said at present to be in any form of life,
but rather to live _extempore_. The late epidemical (South Sea)
distemper seized me: I endeavoured to be rich, imagined for a while that
I was, and am in some measure happy to find myself at this instant but
just worth nothing. If your lordship, or any of your numerous friends,
have need of a servant, with the bare qualifications of being able to
read and write, and to be honest, I shall gladly undertake any
employments your lordship shall not think me unworthy of.”
* * * * *
In 1720, soon after the bursting of the South Sea bubble, a gentleman
called late in the evening at the banking-house of Messrs. Hankey and
Co. He was in a coach, but refused to get out, and desired that one of
the partners of the house would come to him. Having ascertained that it
was really one of the principals, and not a clerk, who appeared, he put
into his hands a parcel, very carefully sealed up, and desired that it
might be laid on one side till he should call again, which would be in
the course of a few days. A few days passed away--a few weeks, a few
months, but the stranger never returned. At the end of the second or
third year, the partners agreed to open this mysterious parcel, in the
presence of each other. They found it to contain 30,000_l._, with a
letter, stating that it was obtained by the South Sea speculation, and
directing that it should be vested in the hands of three trustees, whose
names were mentioned, and the interest appropriated to the relief of the
poor, which was accordingly done.
It has been calculated, that the rise on the original South-sea stock of
ten millions, and the subsequent advance of the company’s four
subscriptions, inflated their capital to nearly three hundred millions.
This unnatural procedure raised bank stock from 100_l._ to 260_l._
India, from 100_l._ to 405_l._ African, from 100_l._ to 200_l._
York-buildings’ shares, from 10_l._ to 305_l._ Lustring, from 5_l._
2_s._ 6_d._ to 105_l._ English copper, from 5_l._ to 105_l._ Welch
copper, from 4_l._ 2_s._ 6_d._ to 95_l._ The Royal Exchange Assurance,
from 5_l._ 5_s._ to 250_l._ The London Assurance, from 5_l._ to 175_l._,
to the great injury of the various purchasers at such prices.
* * * * *
The South Sea scheme terminated in the sudden downfall of the directors,
whose estates were confiscated by parliament, and the proceeds applied
to the relief of many thousands of families, who had been wholly ruined
by the speculation. These dupes of overweening folly and misplaced
confidence, were further benefited by a remission in their favour of the
national claims on certain of the South Sea company’s real assets. The
extent of these donations to the sufferers amounted to 40_l._ per cent.
upon the stock standing in their names.