When the South Sea Company had been set up in 1711, it was hoped that it would one day challenge the financial strength of the Bank of England and the East India Company when it came to providing loans for the government to support the national debt. The company had a monopoly on trade with all Spanish territories, South America and the west coast of North America.In 1713, the Company received the right to supply slaves to the Spanish colonies. In 1720, the government encouraged investors to trade governments stocks for South Sea Company shares and as these boomed, more and more people speculated in them (forcing the share price higher). In July 1720, with company shares at a vastly inflated, unrealistic and unsustainable level, confidence collapsed (as did the share price).Investors lost considerable amounts and some even committed suicide.
Despite the Bubble bursting, the company survived into the 1850s.
|