Back to the Mainly The Georgians calendar
By 1720 Britain had become the fastest growing economy in the world and much of it was built on trade, To give you some idea of this, 20% of all Londoners earned their wages by working in the docks. Tea, coffee and sugar were no longer luxuries.
The South Sea Company was set up in 1711 to trade with the Spanish colonies in South America. A lot of their trade was involved in transporting and selling slaves. In 1720 the company offered to take over the national debt in return for a monopoly on the slave trade. They hoped to repay the debt by profits from trading but also from people buying shares in their company. At first this went well. Shares which had cost £128 were soon selling for over £1,000. This happened in a very short time from January until August.
Suddenly everyone wanted to buy shares and soon there were none left to buy. Then something weird happened and people were encouraged to buy shares in other ventures. Many of these were totally dishonest. There was one company set up to build a gun to fire square cannon balls and another, believe it or not, to carry out something of great advantage but no one was to know what it was. £2000 was invested in this company. It seems strange that people would be taken in by this but it could be seen that others were making big money from investing in the South Sea Company so why not try something else.
Then the bubble burst. People began to sell and the price of shares in the South Sea Company, which wasn't actually making a profit at all, fell to way below what many people had paid for the shares. Thousands of people lost money, lost their life savings. Huge fortunes were lost. Sir Isaac Newton, the man who discovered gravity, bought shares, sold them at a profit, watched shares rise more, bought some more and then lost almost his life savings. Suicides were happening everywhere. 462 MP's and 112 members of the House of Lords were involved in the losses. Worse still, the ordinary people, who had clamoured for shares, began to riot.
Everywhere was chaos. Bankers stormed the House Of Commons and they had to be read the Riot Act. There was then a parliamentary inquiry and the Chancellor of the Exchequer, who looked after the nation's finances, was expelled. The company directors were disgraced.
Forward to 1721AD
