The South Sea Bubble: Part 1
This will be a 3 part series about the South Sea Bubble, one of the most interesting economic schemes ever.
It all starts in 1707 and a it was a good week for John Aislabie. He had just been elected as Chancellor of the Exchequer and was very happy. He came in on his first day of his job and opened the spreadsheet his assistant had prepared for him. What he saw in there shocked him. In the treasury there was about £5000. But in big red letters was how much debt the country had. £9,000,000. He needed to make a lot of money and quick.
He quickly found the man he needed. John Blunt. A ironic name for someone in charge of the Honourable Swords Company, a organization specialising in the creation of fine blades. Now, John Blunt was an ambitious man with money signs in his eyes. So he created a scheme so convoluted, so complex, so absurd that its hard to explain in writing form, although Ill try.
So there was this huge gap in the property market in Ireland because the government had confiscated lots of Catholic land. So John Blunt wanted to buy all the land that they could. But he didn't have enough money. So to fundraise he traded stock for the Honourable Swords Company for army stocks, which were practically worthless since the army rarely paid back investors. But since Blunt knew that the cost of army stocks would rise when he announced this offer, he secretly bought up thousands of these stocks secretly then announced his offer. He made over £200,ooo, which in todays terms would be worth £23,084,226.00. He was then able to fund the buying of most of the Irish housing market and make even more.
Tomorrow Ill post Part 2 of this series.