and afterward a four per cent. one, to the stockholders by Government. For this privilege, the Company agreed to pay outright a bonus of more than seventeen million dollars. This plan is said to have been originated and principally carried through by Sir John Blunt, one of the Company’s directors. Parliament adopted it after two months’ discussion—the Bubble having, however, been swelling monstrously all the time.
It must be remembered that the wonderful profits expected from the Company were to come from their monopoly of the South Sea trade. Tremendous stories were told by Blunt and his friends, who can hardly have believed more than one half of their own talk, about a free trade with all the Spanish Pacific colonies, the importation of silver and gold from Peru and Mexico in return for dry goods, etc., etc.; all which fine things were going to produce two or three times the amount of the Company’s stock every year. When the bill authorizing the arrangement passed, South Sea stock had already reached a price of four hundred per cent. The bill was stoutly opposed in Parliament by Mr.—afterwards Sir—Robert Walpole, and a few others but in vain. Under the operation of the beautiful stories of the speculative Blunt and his friends, South Sea stock, after a short lull in April, began to rise again, and the bubble swelled and swelled to a size so monstrous, and with colors so gay, that it filled the whole horizon of poor foolish John Bull:—perfectly turned his bull-headed brain, and made him for the time absolutely crazy. The directors opened books on April 12th for £5,000,000 new stock, charging, however, £300 for each share of £100, or three hundred per cent. to begin with. Double the amount was subscribed in a few days; that is, John Bull subscribed thirty million dollars for ten millions of stock, where only five millions were to be had. In a few days more, these subscribers were selling at double what they paid. April 21st, a ten per cent. dividend was voted for midsummer. In a day or two, another five million subscription was opened at four hundred per cent. to begin with. The whole, and half as much more, was taken in a few hours. In the end of May, South Sea stock was worth five hundred to one. On the 28th, it was five hundred and fifty. In four days more, for some reason or other, it jumped up to eight hundred and ninety. The speculating Blunt kept all this time blowing and blowing at his bubble. All summer, he and his friends blew and blew; and all summer the bubble swelled and floated, and shone; and high and low, men and women, lords and ladies, clergymen, princesses and duchesses, merchants, gamblers, tradesmen, dressmakers, footmen, bought and sold. In the beginning of August, South Sea stock stood at one thousand per cent! It was really worth about twenty-five per cent. The crowding in Exchange Alley, the Wall street of the day, was tremendous. So noisy, and unmanageable and excited was this mob of greedy fools, that the very same stock was sometimes selling ten per cent. higher at one end of the Alley than at the other.
The growth of this monstrous, noxious bubble hatched out a multitude of young cockatrices. Not only was the stock of the India Company, the Bank of England, and other sound concerns, much increased in price by sympathy with this fury of speculation, but a great number of utterly ridiculous schemes and barefaced swindles were advertised and successfully imposed on the public. Any piece of paper purporting to be stock could be sold for money. Not the least thought of investigating the solvency of advertisers seems to have occurred to anybody. Nor was any rank free from the poison. Almost a hundred projects were before the public at once, some of them incredibly brazen humbugs. There were schemes for a wheel for perpetual motion—capital, $5,000,000; for trading in hair (for wigs), in those days “a big thing;” for furnishing funerals to any part of Britain; for “improving the art of making soap;” for importing walnut-trees from Virginia—capital, $10,000,000; for insuring against losses by servants—capital, $15,000,000; for making quicksilver malleable; “Puckle’s Machine Company,” for discharging cannon-balls and bullets, both round and square, and so on. One colossal genius in humbugging actually advertised in these words: “A company for carrying on an undertaking of great advantage, but nobody to know what it is.” The capital he called for was $2,500,000, in shares of $500 each; deposit on subscribing, $10 per share. Each subscriber was promised $500 per share per annum, and full particulars were to be given in a month, when the rest of the subscription was to be paid. This great financier, having put forth his prospectus, opened his office in Cornhill next morning at nine o’clock. Crowds pressed upon him. At three P. M., John Bull had paid this immense humbug $10,000, being deposits on a thousand shares subscribed for. That night, the financier—a shrewd man!—modestly retired to an unknown place upon the Continent, and was never heard of again. Another humbug almost as preposterous, was that of the “Globe Permits.” These were square pieces of playing-cards with a seal on them, having the picture of the Globe Tavern, and with the words, “Sailcloth Permits.” What they “permitted” was a subscription at some future period to a sailcloth-factory, projected by a certain capitalist. These “permits” sold at one time for $300 each.
But the more sensible members of Government soon exerted their influence against these lesser and more palpable humbugs. Some accounts say that the South Sea Company itself grew jealous, for it was reckoned that these “side-shows” called for a total amount of $1,500,000,000, and itself took legal means against them. At any rate, an “order in council” was published, peremptorily dismissing and dissolving them all.
During August, it leaked out that Sir John Blunt and some other “insiders” had sold out their South Sea stock. There was also some charges of unfairness in managing subscriptions. After so long and so intense an excitement, the time for reaction and collapse was come. The price of stock began to fall in spite of all that the directors could do. September 2, it was down to 700.
A general meeting of the company was held to try to whitewash matters, but in vain. The stock fell, fell, fell. The great humbug had received its death-blow. Thousands of families saw beggary staring them in the face, grasping them with its iron hand. The consternation was inexpressible. Out of it a great popular rage began to flame up, just as fires often break out among the prostrate houses of a city ruined by an earthquake. Efforts were meanwhile vainly made to stay the ruin by help from the Bank of England. Bankers and goldsmiths (then often doing a banking business) absconded daily. Business corporations failed. Credit was almost paralyzed. In the end of September, the stock fell to 175, 150, 135.
Meanwhile violent riots were feared. South Sea directors could not be seen in the streets without being insulted. The King, then in Hanover, was imperatively sent for home, and had to come. So extensive was the misfortune and the wrath of the people, so numerous the public meetings and petitions from all over the kingdom, that Parliament found it necessary to grant the public demand, and to initiate a formal inquiry into the whole enterprise. This was done; and the foolish, swindled, disappointed, angry nation, through this proceeding, vented all the wrath it could upon the persons and estates of the managers and officers of the South Sea Company. They were forbidden to leave the kingdom, their property was sequestrated, they were placed in custody and examined. Those of them in Parliament were insulted there to their faces, several of them expelled, the most violent charges made against them all. A secret investigating committee was set to rip up the whole affair. Knight, the treasurer, who possessed all the dangerous secrets of the concern, ran away to Calais and the Continent, and so escaped.
The books were found to have been either destroyed, secreted, or mutilated and garbled. Stock bribes of $250,000, $150,000, $50,000 had been paid to the Earl of Sunderland, the Duchess of Kendal (the King’s favorite,) Mr. Craggs (one of the Secretaries of State,) and others. Mr. Aislabie, the Chancellor of the Exchequer, had accumulated $4,250,000 and more out of the business. Many other noblemen, gentlemen, and reputable merchants were disgracefully involved.
The trials that were had resulted in the imprisonment, expulsion or degradation of Aislabie, Craggs, Sir George Caswell (a banker and member of the House,) and others. Blunt, a Mr. Stanhope, and a number more of the chief criminals were stripped of their wealth, amounting to from $135,000 to $1,200,000 each, and the proceeds used for the partial relief of the ruined, except amounts left to the culprits to begin the world anew. Blunt, the chief of all the swindlers, was stripped of about $925,000, and allowed only $5,000. By this means and by the use of such actual property as the Company did possess, about one-third of the money lost by its means was ultimately paid to the losers. It was a long time, however, before the tone of public credit was thoroughly restored.
The history of the South Sea bubble should always stand as a beacon to warn us that reckless speculation