England: South Sea Bubble – The Bubble Pops – Extra History – #4

England: South Sea Bubble – The Bubble Pops – Extra History – #4

Last we left off, South Sea
shares were at an all time high. But under the surface, things were amiss. The company had burnt through
much of the money it made selling stock by giving people
ridiculous terms on shares and offering loans to anyone
wanting to buy into South Sea; legislating its rivals out of business had caused bankrupt business owners
to sell South Sea shares to cover their debt, and to cap it all the company still hadn’t made
a single cent selling goods in the South Sea. As August came to a close,
these cracks had started to show. the company had ceased its meteoric rise
and in fact was starting to go south and Blunt knew that if the shares began to fall people would start to take a
closer look at South Sea house and realize just how bad a shape it was in. So Blunt did the only thing Blunt could do: sell more shares at an even higher price.
This was Blunt at his Blunt-iest. He opened up a new round of stock
for purchase at the impossible price of 1000 pounds a share…
while, at the same time, quietly beginning to sell off what
stock he owned in his own company. He pushed that fresh batch
of stocks hard, though. This time, he offered even
more ridiculous incentives, asking for only 10% up front
and no payments for a year. I mean, at this point, that sounds more like
a late night TV ad than a stock sale. But, lucky for Blunt, the hype around the
South Sea company was still so strong that he was able to sell all of the new stock,
bringing in about a million more pounds. This was the last time, though. As Blunt
sold these absurdly expensive shares, he had to know that anyone buying
in was bound to lose their shirt. The South Sea cash reserves were just too low and the stock price too high for them to
conceivably continue to inflate the share value. He’d pushed this monster as far as it could go. And, ironically, the bump in share price that
Blunt created with this new inflated round of stock was just what some of the earlier investors
were looking for in order to get out. As those who had invested
early and taken advantage of the 20% down deal had the
rest of their payment come due, many found it to be a good time to walk away rather than reinvest their
profits back into the company. One such investor was Robert Walpole. Remember him? The great opponent
of the South Sea Company? The man Blunt got locked up way back
when they were first forming South Sea? Well despite the whole getting-locked-
in-the-tower-of-London incident, he had been making a tidy profit
off South Sea stock this whole time and was, in fact, planning to reinvest when
his friend and personal financial manager, Robert Jacomb interceded and stopped him
from putting money back into South Sea tThis not only saved Walpole his personal
fortune but, as we’ll see next week, cemented his reputation in days to come. As South Sea stock inevitably began to droop again, Blunt, having no cash left in the
reserves to prop up the share price, tried one last desperate gamble. He offered a dividend of 30% on the stock, with the dividend moving up
to 50% for the next ten years. This was meant to be too attractive to pass up, but instead it just made all of those
investors who were still dreaming the South Sea dream snap awake. Just to cover this dividend,
the company would have to make roughly 15 million pounds a year, or roughly a quarter of the gross
domestic product of Great Britain. At long last, the British population
thought to themselves: “that seems a little unrealistic…” With confidence in the company vanishing
and nothing left in its coffers, the stock began to plummet. It fell hundreds of pounds a week
and, by the middle of September, was barely over 150 pounds a share. This, down from Blunt’s 1000 pound
shares sale just some three weeks earlier. Anybody who had invested late, and especially
anybody who had taken out loans to do so, was ruined. Bankruptcies were rampant and
suicides only slightly less so. Soon, even the oldHollow Sword Blade Company
closed up shop with nothing more than a nice note on the door saying they would certainly cover any
of their existing obligations, so just, please, check back… uh… later… Unfortunately, no one informed the king,
who was on holiday in his native Hannover. So, as the South Sea Company fell
apart, so did the royal finances. Which leads us nicely to the final
chapter of this tale: the fallout. Do you remember how Walpole had
originally tried to convince the government to lock the shares that South Sea
could swap for debt to a fixed value? And remember earlier how his friend, Jacomb, had made him divest himself of all
of his stock before the collapse? Well, Walpole saw an opportunity in this. he presented himself as the righteous defender
of the public against the madness of markets, attempting to seize this chance
to get the public on his side and to finally get even with those who
had locked him up so many years ago But Walpole was a man of wheels within wheels, and beneath this new public persona
and only slightly-veiled chance for revenge, he was secretly playing
at a much greater opportunity: a chance to take over the government. It would be a dicey game,
because he’d have to make it look like he was helping his fellow
Whigs while, at the same time, making sure that the current
leaders of the Whig party got caught in the blast radius
from the South Sea scandal. He would also need to save the King from the fallout, because he would need the King’s
favor if he was going to take over. Besides, if the King went down
with the South Sea company, the Whigs might lose everything,
and that wouldn’t fit Walpole’s plans at all. Luckily for him, the Whig
leadership had only one real plan: to have the Bank of England
bail out their hated rival, South Sea. And, even more luckily, he still
had friends in the Bank of England from back when he first tried to have the government
give the debt to the Bank instead of South Sea. Walpole negotiated a much better deal with the
Bank than the rest of the leadership could, convincing them and theEast India Company
to offer to swap their stock for the now nearly worthless South Sea
stock people were stuck with. He also got all outstanding debt that
people owed the South Sea company for buying stock on credit canceled, which made him a public hero. Many people still lost their shirts, but at least
now they wouldn’t lose their whole wardrobe. The British public was still in a fervor though, and a parliamentary inquiry was demanded. This complicated Walpole’s plans somewhat. On the one hand, he needed
to appear to be all for rooting out the insidious corruption that had ruined so many. On the other hand, if anyone started
looking closely at what had really gone on, the Whigs, the King, and even perhaps
Walpole himself, would soon be implicated. This juggling act was about to get complicated. and it was all about to come
to a head around a man namedRobert Knightand his little green ledger. Join us next week for the
conclusion of the South Sea bubble as we dive into the fallout from the
collapse of the South Sea Company, find out the ultimate fate of all of our actors, and learn the wild tale of the small green book that had the power to take down the
most powerful government in the world.

Comments (37)

  1. The history of the south sea's bubble can make for a good dark comedy movie, it could fit well in the style of the "wolf of wall street"
    or "the death of stalin"

  2. Blunt is pretty blunt


  4. "Welcome to the ground"

  5. So it was the biggest pyramid scheme of all time?

  6. This was the point where the South Sea Company went South XD

  7. This sounds exactly like a Netflix/Amazon series adaptation
    ….but it's not< Mind Blown >

    Keep up the good work!

  8. But Walpole had a plan…

    Walpole always has a plan…

  9. hold'er gang hold'er gang hold'er gang

  10. It's amazing that similar shit still happens today- albeit on a much smaller scale.

  11. Dude, time to get outta Dodge!

  12. Now, finally, I'm getting close to the origin of the Extra History Running Gag.
    I'll find out tomorrow. Approximately.

  13. And this is exactly what happens when government starts to intervene with free trade. If it wasn't for the Bank of England and the Parliament, nothing like this would have ever happened.

  14. Turns out a small Green Book can take down the Academy of Film, too.

  15. You know I think merca is smarter just never pay back the debt and just have a bigger army

  16. The final chapter of this tale: Chapter 11

  17. Safe to say, the compony suffered, Blunt-force trauma.

  18. Man, the South Sea company was so fyre

  19. So, you talk more slowly and then speed up the recording, right? That is an INCREDIBLY good match with the style of this series.

  20. okay if anyone sees this comment is it okay if I ask? I made it this far in the South Sea episodes. but with my lack of knowledge about banking and how they work I do not understand the majority of this? Can anyone mind explaining to me about this stuff so I can get a basic understanding of why blunt was……erm being absurd or brilliant and all that?

  21. I've been watching extra history episodes for 12 hours straight. I'm a huge history nerd so I get to nerd up and laugh at the animations. Kids can learn from these!

  22. 0:58 Today this practice is called "pump and dump" and as it is shown in this video is usually a tell tale sign of a collapse of some sort in the enterprise's near future.

  23. What’s the end credit music

  24. thank you sharing this useful data ! Greatly appreciated.

  25. This is Hype at its finest

  26. Lol “blunt at his bluntiest”

  27. Having recently watched Valley of the Boom about the tech boom and bust of the 1990s, it's amazing how much the hype bubbles of the two resemble each other.

  28. Social Security is in debt all the money collected in the past has been paid out and the money young people pay in now is gone as soon as (or before) it’s paid in. Government Ponzi schemes/bubbles just keep happening.

  29. Someone give this man a medal for this briliant scheme

  30. Okay, I got so annoyed by your emphasis of Walpole.

  31. Maybe am weird but this series is one of the most fascinating things I have learned from the Internet Massive thank you to the guys at extra for making this. And all your history videos. Top drawer stuff

  32. WOOOOOOOOOOOO FALLOUT!!!!!!!!!!!!!!!!!!!!!!

  33. "Little Green Ledger"
    Oh that aged well

  34. Just think if the money they are was used to pay off the debt like the law should have said? And his family are still fucking barons. Wtf. And the government is still paying on this. Why does the government allow that?? Eyh

  35. so he was the wolf of wallstreet England version.

  36. Very late here, but at 2:28 their drawing of Walpole, in my mind, looks like a crazy eyed red-nosed smiley face.

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