The engraving shows Rue Quinquempoix, Paris, with crowds gathering during the share mania of the Mississippi and South Sea Bubble, in the financial atmosphere crafted by John Law, portrayed in the medallion below. The engraving, made by Christoph Weigel is a German version, based on the French plate Rue Quinquempoix en l'Année 1720.
The South Sea Bubble
The bursting of the South Sea Bubble (1720) was one of the most infamous, catastrophic collapses of a speculative venture in history. It was precipitated by the rise and fall of the South Sea Company, a joint stock enterprise formed in 1711, that, on paper, possessed the rights to vastly lucrative trading privileges in Spanish America, most notably the Asiento, or privileged access the immense Spanish slave market. In theory, the South Sea Company had a virtual lock on one of the greatest business opportunities in modern history, and many of the good and great of Britain, from the royal family to the Exchequer to Sir Isaac Newton, invested heavily in the venture. However, due to serial bunging, bureaucracy and continual contretemps between Britain and Spain, the Company squandered all of its opportunities, and consistently lost money.
However, the Company’s politically powerful principals managed to not only withhold the truth, but to convince their investors that the company was quietly building ever grander schemes, which required even greater capital. The charade worked, and by August 1720, the Company’s shares rose to over £1,000.
Not long thereafter; however, a series of revelation caused the stock to plummet, erasing tens of millions of pounds in investments. The Company was soon revealed to be an astounding web of high-level deception and corruption – nothing better than what we would today call a Ponzi Scheme. Many wealthy Londoners were left penniless (having both invested in and borrowed against their shares!) and the Exchequer was left with a £9 million loss. The damage was astounding and it led to new legislation that promised greater oversight of joint stock companies (although, as we have recently seen, financial bubbles would reoccur!).
The South Sea Bubble spawned a great variety of contemporary satirical and moralizing prints and literature.
Following the Seven Years’ War (1756-63), today known as the French & Indian War in the United States, Britain acquired vast new territories in India, North America and the West Indies. London coffee houses and the salons of Whitehall were buzzing with all the millions that would be made on the many land speculation and commodity schemes in the colonies. While many of the good and great were enraptured by enthusiasm, others, recalling the South Sea Bubble, voiced caution. While some of these ventures would yield fine profits, many others proved to be toxic, although not nearly as much so as the 1720 bubble.