The South Sea Company was formed by Harley, the chancellor of the exchequer, and Blunt, a principal operative of the Hollow Sword Blade Company, as a way to manage Britain's government debt. The company was given a monopoly on trading in the South Seas (Central and South America), despite Britain being at war with Spain, which controlled the region. To make the venture more appealing, the company was granted the right to trade slaves and send one ship per year to Spanish ports. However, this was not enough to generate significant profits.
To gain support for the company, Harley and Blunt created hype around its potential, enlisting the help of writers like Daniel Defoe. The company's stock was offered to those holding government debt, with a lower interest rate than the government had previously been paying. The company's value increased, and it became a major player in the British economy, with the government allowing it to issue more stock to offset its debt.
John Blunt, one of the company's founders, managed to maintain his influence despite a change in government, and the company's stock continued to rise. The King himself became the company's royal figurehead, giving it a level of trust and prestige it had not earned. The company's valuation increased, and it became "too big to fail." As the company's stock price rose, it was able to pay off its debt and sell excess shares for a profit, leading to even bigger ideas for its future.
Here are the key facts extracted from the text:
1. The South Sea Company was founded by Harley and Blunt as a trading company to assume the British government's debt.
2. The company was given a monopoly on trading in the South Seas, which referred to Central and South America.
3. The company was initially supposed to trade in the South Seas, but the ports in the region were owned by Spain, with whom Britain was at war.
4. To make the company's offer enticing, the government and the company's directors hyped the potential riches that could be obtained from the South Seas.
5. The company's sole business was managing the government debt, and it was not a successful trading company.
6. In 1714, Queen Anne died without an heir, and George I was chosen by Parliament to succeed her.
7. With the new king came a new government, and Harley fell out of favor, while the Whigs regained dominance.
8. Blunt replaced most of the Tory board members in the South Sea Company with Whigs and got the King's son, George II, to replace Harley as the company's Governor.
9. The company issued more stock, and the government allowed it to do so in exchange for handling the government's debt from the 1710 lottery.
10. The company's stock value increased, and it was able to pay for the debt it was picking up at a higher rate than initially agreed upon.
11. The company sold extra shares that it no longer needed to cover the debt and pocketed the profit.
12. In 1717, the King and his son George II got into a fight, and the King removed his son as Governor of the South Sea Company and replaced him with himself.
13. The company's stock value increased again after a failed attempt to overthrow the King by the Jacobites, and the company's stock price rose to £114 a share.
14. The company's valuation became higher than all the currency currently in circulation in England.