The South Sea Bubble

The South Sea Bubble was a period of speculation frenzy and collapse on the British stock market, revolving around the fate of a single company. For years, the South Sea Company had been at the centre of a complex and tangled web of financial manoeuvrings; deliberately obfuscated dealings around selling shares and government debt; the exploitation of publicity and hype to inflate stock prices; as well as bribery, corruption and the slave trade.

- Jonny Wilkes

WHAT WAS THE SOUTH SEA BUBBLE? 

It worked for a while and stock prices skyrocketed in 1720, until the bubble burst. Investors were ruined and an inquiry had to be held. While the South Sea Bubble went down in history as the cause of a total financial crash, that wasn't actually the case: it certainly had its losers, but it had its winners, too.

WHAT WAS THE STATE OF BRITAIN'S FINANCES BEFORE THE BUBBLE?

The Bank of England formed 26 years earlier had grown into a powerful institution as the sole lender to the government. It was, however, controlled by one of the two main political parties, the Whigs, so when Robert Harley became the new Tory chancellor of the Exchequer in 1710, he looked for other means of making money. With Britain engaged in expensive wars and the government debt at around £9m, funds were preciously needed.

Harley gave the job of organising the Bank of England's lotteries to John Blunt, the less-than scrupulous director of an unofficial bank (and sword manufacturer) called the Hollow Sword Blades Company. While the ironically named Blunt had great success selling lottery tickets, the two men devised a grander scheme to make serious money. That's where the South Sea Company came in. 

SO, WHAT WAS THE SOUTH SEA COMPANY?