Building on a long tradition of catastrophic financial market crashes, the economic meltdown caused by the bursting of the housing bubble in is only the latest in a long line of epic stock market fails. This is the story of the South Sea Company Bubble.

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Different government departments arranged their own loans and expended money with little financial oversight. The Chancellor of the Exchequer, Robert Harley, convinced Parliament to look into straightening out this mess.

Harley granted permission for a different private enterprise, the Hollow Sword Blade Company, to conduct a lottery; its marketing was so successful that soon the Sword Blade Company was conducting lotteries regularly on behalf of the government.

Investors were lured into the plan, not only by the prospect of sharing in the interest, but in the profits of the company as well. In addition to financing government debt, the South Sea Company was intended to operate as a trading firm in South America; in fact, part of its charter from Parliament included a monopoly over trade in the South Seas actually, all of South America.

Although sounding like a sure thing, bythis monopoly portion of the business was worthless, as the Treaty of Utrecht eviscerated trade for England in the southern part of the New World. In order for insiders to reap the greatest profit, the founders of the South Sea Company began a two-pronged, ethically challenged campaign. To broker online penny stock trading canada fair, South Seas still had a significant slave trading operation, although this was not as lucrative as had been hoped.

Although the company lost some assets, the real loss forex widget windows 7 the seizures came from the bad publicity. Byperhaps seeing the writing on the wall, the South Seas Company began a campaign to protect its 1720 crash stock market. These few were sold options to purchase stock at the current price. Then, the company began another marketing campaign, again touting the high value of its South Seas monopoly.

Since prominent members of government held the options, they participated in spreading the rumor, and their cache gave credibility to it. After this one, even Parliament could no longer sit on its hands, and at the urging of South Sea Company insiders to protect their informal monopoly on duping the publicinthe Bubble Act was passed.

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This legislation prohibited the establishment of new companies that competed with existing charters, absent government permission. Individuals and companies went bankrupt, and an outraged nation demanded that Parliament act. The subsequent investigation identified a number of individuals who had engaged in fraud or other bad acts in furtherance of the scheme including King George I, two of his mistresses, the Postmaster General, a member of the cabinet, two ministry heads and the Chancellor of the Exchequer; the latter was jailed.

Despite all of this, the South Sea Company stuck around for some time, but rather than doing physical trading in the South Seas, primarily just dealt in Government debt until the midth century. Want to gain some daily interesting knowledge? Today I Found Out offers a free daily newsletter to help you feed your brain.

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