Fraudstorytelling | Weekly filmtips | March 17, 2022
Title: South Seas Bubble of 1720: the First Major Manipulation of Financial Markets
Producer: Video Economist
Tagging: #financialfraud, #insidertrading, #financialcrisis
The first major manipulation of financial markets. Today we look at the South Seas bubble of 1720. The South Sea Company was a British investment company that collapsed in 1720 due to a speculative bubble, the South Sea Bubble. The company was focused on buying up British government debt and trade with the Spanish colonies in South America. The Lord Treasurer, Robert Harley and John Blunt, a former director of the Sword Blade Company, created the South Sea Company in 1711. Many of the Americas were being colonized at the time, and Europeans came up with the name “South Seas” to refer to South America and the surrounding lands. Robert Harley was in charge of developing a method to fund the British government’s debts accrued during the continuing War of Spanish Succession, which lasted from 1701 to 1713. In that time, The Bank of England Charter established itself as a sole stock bank. This made it impossible for Harley to set up a bank. But Harley was not discouraged, he founded a supposedly trading company, but the company’s main activity was to finance government’s debt. The company was a startup firm with no sales and no earnings, only with great prospects. The real prospects centered on market manipulation and insider trading. Video Economist summarizes and analyzes the events in this bubble.
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