SOUTH SEA BUBBLE, the name given to a series of finan cial projects which originated with the incorporation of the South Sea Company. In 1711 the South Sea Company was formed, and was granted a monopoly of the British trade with South America and the Pacific islands. It was highly successful, and early in 1718 the king became its governor. Towards the end of 1719 the di rectors of the company put before the Government, the head of which was Charles Spencer, 3rd earl of Sunderland, a more am bitious scheme. In return for further concessions the company offered to take over the whole of the national debt (L51,300.000) and to pay £3,500,000 for this privilege. The aim of the directors was to persuade the annuitants of the State (the bulk of the debt was thus held ) to exchange their annuities for South Sea stock; the stock would be issued at a high premium and thus a large amount of annuities would be purchased and extinguished by the issue of a comparatively small amount of stock. Moreover, when this process had been carried out the company would still receive from the Government a sum of something like .f1,5oo.000 a year in interest. The offer was accepted in 1720, the company having raised its bid to £7,567,000 in competition with the directors of the Bank of England.
In a few weeks the company had persuaded over one-half of the Government annuitants to become shareholders in the company.
Meanwhile the stock of the company had been appreciating stead ily in value, and when the new scheme was launched the public began to purchase it eagerly. From at the beginning of the year the price had risen by June to 89o, and in July it touched 1,000. At this tremendous premium the directors sold five mil lions of stock. The extraordinary success of the company pro duced a crowd of imitations—many of them audacious hoaxes— and the wild speculation which followed involved the numerous honest companies in disaster. In August the fall in the price of
South Sea stock began. By November it had fallen to 135, and in four months the stock of the Bank of England fell from 263 to 145. Thousands were ruined, and many who were committed to heavy payments fled from the country. A committee of secrecy of the House of Commons reported in February 1721. The company's books contained fictitious entries, and it was shown that favours secured from the State had been purchased by gifts to ministers, some of whom had also made large sums of money by speculating in the stock. The chief persons implicated were John Aislabie (167o-1742), chancellor of the exchequer; James Craggs, joint postmaster-general; his son James Craggs, secretary of state; and to a lesser degree the earl of Sunderland and Charles Stanhope, a commissioner of the Treasury. Aislabie resigned his office in January, and being found guilty of the "most notorious, dangerous and infamous corruption," was expelled from the house and imprisoned. Both the elder and the younger Craggs died in March, while, owing to the efforts of Walpole, both Sunderland and Stanhope were acquitted, the latter by the narrow majority of three. By act of Parliament the estates of the directors were con fiscated; these were valued at £2,014,123, of which £354,600 was returned to them for their maintenance, the balance being devoted to the relief of the sufferers. The South Sea Company continued to exist, without any great prosperity, until the 19th century.