I've seen a lot of people talk lately that global inflation is coming. Worried about this and that. I myself am shallow and incapable of predicting anything. But as a troll, I found some information to show the history of the South China Sea bubble to the readers to understand the situation. Trading companies that used to be backed by government guarantees go bankrupt.
Hello everyone, I'm the Angry Red Rabbit, an author who makes someone angry with a blood mouth spray, forehead, blood mouth spray person? Spray your face, so called red rabbit (vomiting blood)
First of all, the South China Sea bubble refers to the bubble caused by the stock of the South Sea company and has little to do with our South China Sea. This is a just right economic crisis, there are some unsentified views and even believe that because of this South Sea bubble, the next 100 years of British short selling, futures and options trading illegal, financial opportunities to make a lot of money became difficult, British capital has a lingering feeling about this, looking more at industry, this is the real background of the first industrial revolution in Britain. I agree with this biased view.
The famous physicist Newton, who also lost 20,000 pounds on this event, sighed and said: "I can calculate the movement of celestial bodies, but I can't predict the madness of human beings", and then immersed himself in research.
background:
At that time, stocks were just emerging, and britain's long-term economic prosperity led to the accumulation of private capital, the continuous expansion of social savings, the corresponding shortage of investment opportunities, and a large number of temporarily idle funds were eager to find a way out. And the amount of shares issued is very small. There was no concept of an economic bubble at the time. The South Sea Company was very active in june 1695. At that time, the competition between England and Scotland, this company with a Scottish background, was very active at the beginning because of the national sentiment.
The gambling and gaming industry is very prosperous in the UK. For example, in 1694, in order to raise military funds against France, the then William government, with the help of the Bank of England, issued the first government lottery "Million Dollar Adventure". The winner can get £1,000 a year for 16 consecutive years, and those who don't win can get a pound a year, and a £10 ticket is quickly snapped up. At that time, among those who had a little money, gambling was very popular. Gambling for public private bets for something abounds.
The South Sea Company has several businesses that are very profitable, of course, the risk is very high, such as the salvage, the sheep herding baby captain William Phipps brought back the Spanish shipwreck, found 32 tons of gold and a lot of jewelry, so that the South Sea Company's stock soared.
Rise:
In 1711, the South Sea Company was reorganized, and there are many sources saying that the South Sea Company was established that year. But the information I saw was not, there was originally this company, it was because this company was strong, so it had the ability to lend money to the British government. In order to repay the £10 million war debt, the British government reached an agreement with the South Sea Company: the South Sea Company provided loans to the British government, and at the same time obtained the power from the government to monopolize British trade in South America and the Pacific Islands, and permanent tax rebates on goods such as tobacco, vinegar and alcohol. In 1713, he was also granted the privilege of selling black slaves from Africa to the Americas. The company's stock skyrocketed.
At that time, the British, both men and women, were deeply involved in this stock boom, in January 1720, the stock was issued for a few hours, sold 1.5 million shares, by August, the stock price has risen by 800%, the price has changed for a while, the speed of change of hands, and even an exaggerated situation. On Erre Street, on the same day, the same stock, at both ends of the street, the price difference is 10%.
erupt:
In 1717, the French Mississippi Company introduced a stock-for-treasury program to finance the French government. Although the directors of the South Sea Company had long believed that the Mississippi plan would not succeed, they were quite interested in the contents of the plan, decided to imitate it, and believed that it would be successful. As a result, at the end of 1719, the South Sea Company proposed to the British government a large share exchange plan called the South Sea Scheme in exchange for greater benefits.
At the time, the Uk government issued a total of around £50 million in long-term government bonds. Among them, the Bank of England holds £3.4 million in government bonds, the East India Company holds 3.2 million pounds in government bonds, and the South Sea Company holds 11.7 million pounds in government bonds. Even the South Sea Company wanted to buy all the stocks, but was finally stopped because of the resistance to buying the government bonds of the Bank of England and the East India Company.
In this transaction, for the South China Sea Company, because the purchase of treasury bonds was highly sought after at the time, the company could take the opportunity to exchange shares much higher than the par value for stable returns of treasury bonds, disguised as a huge profit; in addition, the company could also earn stable debt interest from the government every year. Stock prices soared.
In fact, the South China Sea Company's own trade business is very bad, it was established for many years, but it was not until 1717 that it really carried out long-distance trade, the hegemon at that time was Spain, under its regulations, the South China Sea Company could only send three ships a year to South America to trade, and a year later the trade itself was interrupted by the hostility between Britain and The West. The south sea company's stock is so sought after by the public because of its close cooperation with the government, so that the public can rest assured of the south sea company, while on the other hand, the company lied to the public when promoting the South China Sea plan that the company will make extremely rich profits in South American trade, and the stock holders will receive a considerable dividend in the future, which makes everyone convinced.
All speculators firmly believe that after themselves, there will be fools who will come out to take over. Until he found out he was that fool
Burst:
Although the Mississippi Company of France planned to fail in 1720, the British public remained confident in the South China Sea plan. In January 1720, the south sea company's share price was 128 pounds, and by March it rose to 330 pounds. By April, the directors of the South Sea Company had sold 2.25 million shares for up to £300 per share. By May, South Sea shares had risen to £500, June to £890 and in July to £1,000 per share.
At this time, a large number of leather bag companies took advantage of the fire and robbery, and the open and just fraud issued a large number of junk stocks to defraud money. The selling point is bizarre, really eye-opening, installing an air pump on the brain, turning mercury into gold, and even having a slogan that reads "A company that operates and contracts great benefits, but no one knows what it is", and even companies with such slogans can make money! These joint-stock companies, which came to be called "bubble companies," basically imitated the propaganda tactics of the South China Sea Company, publishing false news in the market and claiming that they were engaged in large business, thus attracting citizens to buy shares.
In order to regulate the chaos of the market and protect the South Sea Company from the "Bubble Company", the British Parliament passed the Bubble Act on June 9, 1720. By June 11, George I issued an announcement warning that "bubble companies" were illegal and prosecutable; a large number of bubble companies were banned, and people woke up. These joint-stock companies were extremely frightened, and the South Sea Company was one of them.
So the south sea company's stock price began to fall, from more than 1,000 pounds to 900 pounds on August 25, and people familiar with the matter got out. But the uninformed populace is tragic. The directors of the Middle South China Sea Company had a way to do it, but they could not stop the decline. By September 28, South Sea shares had plummeted to £190, and by December they had fallen to £124.
Later, the misconduct of the South Sea Company was exposed, and the British were furious to the extreme, and in 1721, the British Parliament confiscated a large amount of property of the 33 directors of the South Sea Company. After the crash, countless people died of lynching to force debts.
The South China Sea Bubble of 1720, the Mississippi Company of France in 1720 and the Dutch Tulip Mania of 1637 were the three major bubble economic events that erupted in the early days of Western history. Among them, the South China Sea stock price in the South China Sea bubble incident, such as the rapid rise and fall of the bubble, was developed by later generations as the term "bubble economy", which is used to describe the phenomenon of overheating and contraction of the economy.
This, in my opinion, has left England with a physicist who has worked hard since then, and the "pragmatization" of capital before the first industrial revolution. Personally, I still think it's very profitable.