South Sea Bubble

South Sea Bubble, a series of financial hoaxes, or speculations, in stocks of the South Sea Company which in 1720 produced ruin for many investors. The company, founded by Robert Harley in 1711, was formed on the supposed possibility of a vast increase in the slave trade, particularly in the Pacific, once peace returned after the War of the Spanish Succession (1702–13). However, the Treaty of Utrecht, signed in 1713, provided only very limited possibilities for trade, an annual tax being imposed on imported slaves and the company being restricted to no more than one ship per year. Nevertheless, with the king becoming governor of the company in 1718, popular confidence was enhanced and a wild boom was engendered in which the value of the stock, issued at £100, rose to over £1,000 in the summer of 1719, and the directors even offered to take over part of the National Debt. However, by the end of the year the stock had dropped to £124, and six months later was virtually valueless. While a few holders of the stock had made vast fortunes, the great majority lost very heavily. Some holders fled the country because of their debts, many others committed suicide. A committee of inquiry found that three ministers of the crown had accepted bribes and speculated heavily in South Sea stock. The Chancellor of the Exchequer was sent to prison, the other two had their estates confiscated. The South Sea Company itself remained in existence until 1853, being mainly concerned, after selling its supposed trading right to Spain in 1750, with the Greenland whaling industry.