WEBVTT 00:00:00.000 --> 00:00:03.100 Welcome back to the Deep Dive. Today we are opening 00:00:03.100 --> 00:00:05.639 a file that sits right at the intersection of 00:00:05.639 --> 00:00:09.720 high finance, political corruption, war, and 00:00:09.720 --> 00:00:13.339 frankly, the absolute darkest sides of human 00:00:13.339 --> 00:00:15.580 nature. It really is an incredible story. It 00:00:15.580 --> 00:00:19.559 has everything you could want. It's got a mania 00:00:19.559 --> 00:00:21.940 that gripped an entire nation. It involves the 00:00:21.940 --> 00:00:24.460 most famous scientist in history losing his shirt. 00:00:24.730 --> 00:00:27.890 And it's about a company that became, for a time, 00:00:27.929 --> 00:00:30.269 the most valuable entity in Britain. Despite, 00:00:30.370 --> 00:00:32.829 and this is the key part, isn't it? Despite having 00:00:32.829 --> 00:00:35.750 almost no realistic prospect of doing the business 00:00:35.750 --> 00:00:38.270 it was supposedly famous for. Exactly. That's 00:00:38.270 --> 00:00:40.630 the core paradox of the whole affair. We're talking, 00:00:40.670 --> 00:00:42.630 of course, about the South Sea Company and the 00:00:42.630 --> 00:00:45.429 infamous South Sea Bubble of 1720. The Bubble 00:00:45.429 --> 00:00:48.509 of 1720, yes. A moment that, you know, completely 00:00:48.509 --> 00:00:50.289 changed British history. And I think for most 00:00:50.289 --> 00:00:51.869 people, when they hear South Sea Bubble, they 00:00:51.869 --> 00:00:53.850 think, OK, a bunch of people in wigs bought some 00:00:53.850 --> 00:00:55.810 stuff. The price went up. The price went down. 00:00:55.890 --> 00:00:58.149 People lost money. It sounds like a pretty standard 00:00:58.149 --> 00:01:00.729 stock market crash. Right. It gets lumped in 00:01:00.729 --> 00:01:02.229 with tulip mania. You know, it's one of those 00:01:02.229 --> 00:01:04.510 crazy things people did in the past. It's almost 00:01:04.510 --> 00:01:07.010 treated like a historical curiosity. But looking 00:01:07.010 --> 00:01:09.290 at the sources we have today, which is this really 00:01:09.290 --> 00:01:12.170 deep dive into the company's history, its founding, 00:01:12.269 --> 00:01:14.109 the actual trading records and the parliamentary 00:01:14.109 --> 00:01:16.650 inquiries that followed. This isn't just a financial 00:01:16.650 --> 00:01:19.870 story. Not by a long shot. Not at all. I mean, 00:01:19.890 --> 00:01:22.530 the finance is just the engine. The story is 00:01:22.530 --> 00:01:24.469 about what that engine was running on. It's a 00:01:24.469 --> 00:01:26.900 story about the slave trade. It's a story about 00:01:26.900 --> 00:01:29.760 bribery that went all the way up to the king's 00:01:29.760 --> 00:01:33.099 inner circle, even his mistresses. And it's a 00:01:33.099 --> 00:01:35.280 story that actually reshaped the British government 00:01:35.280 --> 00:01:38.239 for a century. It really did. And to understand 00:01:38.239 --> 00:01:40.579 the scale of this, you have to realize that this 00:01:40.579 --> 00:01:42.760 wasn't just a bad day on the market. This was 00:01:42.760 --> 00:01:45.200 a national trauma. It was an event that ruined 00:01:45.200 --> 00:01:48.540 thousands and thousands of families from, you 00:01:48.540 --> 00:01:50.640 know, aristocrats down to their servants. And 00:01:50.640 --> 00:01:52.579 it implicated the highest levels of government. 00:01:52.700 --> 00:01:54.640 It brought down the chancellor, the exchequer. 00:01:54.920 --> 00:01:58.140 And it led Isaac Newton, the man who literally 00:01:58.140 --> 00:02:00.840 discovered gravity, the smartest person of his 00:02:00.840 --> 00:02:04.340 age, to say that famous line, I can calculate 00:02:04.340 --> 00:02:07.400 the movement of the stars, but not the madness 00:02:07.400 --> 00:02:10.219 of men. Which is just so telling, isn't it? If 00:02:10.219 --> 00:02:12.300 Newton can get swept up in it, what chance did 00:02:12.300 --> 00:02:15.620 anyone else have? None at all. So our mission 00:02:15.620 --> 00:02:19.099 today is to unpack this. How did a company with 00:02:19.099 --> 00:02:21.300 no real business become the most valuable thing 00:02:21.300 --> 00:02:23.419 in Britain? Why did the government not only let 00:02:23.419 --> 00:02:25.919 it happen, but actively help it happen? Right. 00:02:26.000 --> 00:02:28.300 And this was the part that surprised me when 00:02:28.300 --> 00:02:30.479 I first looked into it. How on earth did this 00:02:30.479 --> 00:02:32.280 company survive for another hundred years after 00:02:32.280 --> 00:02:34.780 the crash? That's the crazy part. I always assumed 00:02:34.780 --> 00:02:37.539 it just vanished. Poof. Gone. No, it didn't. 00:02:37.560 --> 00:02:39.780 It stuck around like a ghost, haunting the London 00:02:39.780 --> 00:02:42.159 markets for over a century. A zombie company. 00:02:42.300 --> 00:02:44.979 A zombie company. I like that. So let's rewind. 00:02:45.120 --> 00:02:46.939 Let's set the stage. We are in the early 18th 00:02:46.939 --> 00:02:49.099 century. What is the vibe in Britain? What's 00:02:49.099 --> 00:02:52.349 going on? The vibe is expensive. To put it mildly, 00:02:52.389 --> 00:02:56.009 we need to go back to about 1710, 1711. Britain 00:02:56.009 --> 00:02:58.789 is a rising power, no doubt, but it is under 00:02:58.789 --> 00:03:01.389 immense, and I mean immense, financial strain. 00:03:01.590 --> 00:03:05.110 Wars are not cheap. No. And Britain was fighting 00:03:05.110 --> 00:03:07.810 two of them at the same time. You had the War 00:03:07.810 --> 00:03:09.849 of the Spanish Succession, which was basically 00:03:09.849 --> 00:03:13.009 a world war of its time. It dragged in France, 00:03:13.370 --> 00:03:18.060 Spain, the Holy Roman Empire. Everyone. A massive 00:03:18.060 --> 00:03:20.539 continent spanning conflict. And at the same 00:03:20.539 --> 00:03:23.479 time, you had the Great Northern War simmering 00:03:23.479 --> 00:03:25.960 away in the background, which tied up resources 00:03:25.960 --> 00:03:28.599 and attention. So the government is just hemorrhaging 00:03:28.599 --> 00:03:31.539 money. To pay for soldiers, ships, supplies. 00:03:32.349 --> 00:03:34.050 All of it. Exactly. And the way they had been 00:03:34.050 --> 00:03:38.050 paying for it was a complete mess. The sources 00:03:38.050 --> 00:03:40.229 described the national debt not as one single 00:03:40.229 --> 00:03:42.789 thing, but as a chaotic piecemeal arrangement. 00:03:43.129 --> 00:03:44.930 You had different government departments just 00:03:44.930 --> 00:03:46.550 borrowing money on their own terms. So there 00:03:46.550 --> 00:03:49.210 was no central treasury, no single credit card 00:03:49.210 --> 00:03:51.169 statement for the country. Precisely. It was 00:03:51.169 --> 00:03:53.669 total chaos. The Navy would issue these things 00:03:53.669 --> 00:03:56.009 called Navy tickets to sailors instead of cash. 00:03:56.229 --> 00:03:57.710 So you're a sailor, you've been at sea for two 00:03:57.710 --> 00:03:59.409 years, you get back to port, and you're handed 00:03:59.409 --> 00:04:01.650 a piece of paper. An IOU from the government. 00:04:02.139 --> 00:04:05.060 An IOU. And if you need to buy bread or pay your 00:04:05.060 --> 00:04:07.639 rent, you have to sell that ticket to a loan 00:04:07.639 --> 00:04:10.319 shark on the street for maybe half its face value. 00:04:10.759 --> 00:04:12.919 The government's credit was effectively junk. 00:04:13.280 --> 00:04:15.780 So nobody trusts that these IOUs will ever be 00:04:15.780 --> 00:04:18.560 paid in full. Absolutely not. It was a crisis 00:04:18.560 --> 00:04:21.920 of confidence. And in 1710, a man named Robert 00:04:21.920 --> 00:04:24.279 Harley becomes the chancellor of the Exchequer. 00:04:24.379 --> 00:04:26.519 He's the guy in charge of the money. And he looks 00:04:26.519 --> 00:04:30.100 at the books and he realizes they are in a very... 00:04:30.269 --> 00:04:33.110 very deep hole how deep the government owed about 00:04:33.110 --> 00:04:36.050 nine million pounds in this kind of unsecured 00:04:36.050 --> 00:04:39.850 floating debt which in 1710 money is an astronomical 00:04:39.850 --> 00:04:41.970 sum it would be like trillions today it felt 00:04:41.970 --> 00:04:44.149 completely insurmountable it's a huge number 00:04:44.149 --> 00:04:47.629 and the really scary part was there was no income 00:04:47.629 --> 00:04:50.160 allocated to pay it off it was just this Big, 00:04:50.300 --> 00:04:52.579 scary number hanging over the country's head, 00:04:52.680 --> 00:04:54.779 getting bigger all the time. Now, normally, if 00:04:54.779 --> 00:04:56.560 the government needed money or needed to manage 00:04:56.560 --> 00:04:58.360 its finances, they would go to the Bank of England, 00:04:58.459 --> 00:05:00.300 right? You'd think so. The Bank of England was 00:05:00.300 --> 00:05:02.480 already around at this point. Yeah, it was established 00:05:02.480 --> 00:05:05.560 about 16 years prior in 1694. But here's where 00:05:05.560 --> 00:05:07.439 the political friction comes in. And this is 00:05:07.439 --> 00:05:09.839 so crucial to why the South Sea Company even 00:05:09.839 --> 00:05:12.319 exists. Right. It's not just a financial story. 00:05:12.399 --> 00:05:14.500 It's a political one. The Bank of England was 00:05:14.500 --> 00:05:17.040 a Whig institution. The Whigs were one of the 00:05:17.040 --> 00:05:20.069 two main political parties. Robert Harley, our 00:05:20.069 --> 00:05:23.709 new chancellor, he was a Tory. Ah, so you have 00:05:23.709 --> 00:05:27.230 this intense political rivalry baked into the 00:05:27.230 --> 00:05:30.170 financial crisis. It's a perfect storm. Harley 00:05:30.170 --> 00:05:32.910 cannot go cap in hand to the Bank of England 00:05:32.910 --> 00:05:34.930 because he doesn't want to give his political 00:05:34.930 --> 00:05:37.769 enemies more power, more leverage over the government. 00:05:37.850 --> 00:05:40.009 They would have him over a barrel. So he needs 00:05:40.009 --> 00:05:42.509 an alternative. He needs a Tory bank, a financial 00:05:42.509 --> 00:05:45.110 institution that is loyal to his party and his 00:05:45.110 --> 00:05:46.790 government. He needs to create a counterweight. 00:05:47.019 --> 00:05:49.680 a new way to fund this debt that completely bypasses 00:05:49.680 --> 00:05:51.500 the Whigs, and that's where the schemers come 00:05:51.500 --> 00:05:55.000 in. Enter John Blunt. Now, Blunt is a fascinating 00:05:55.000 --> 00:05:57.259 character. He isn't some highborn aristocrat. 00:05:57.259 --> 00:06:00.500 He's a scrivener, a professional writer, a dealer 00:06:00.500 --> 00:06:03.259 in financial paper. He was a director of a very 00:06:03.259 --> 00:06:06.000 ominously named outfit called the Hollow Sword 00:06:06.000 --> 00:06:08.459 Blade Company. The Hollow Swordblade Company. 00:06:08.639 --> 00:06:10.699 That sounds like a front for a pirate crew or 00:06:10.699 --> 00:06:13.740 an assassin's guild. It sounds incredibly ominous, 00:06:13.740 --> 00:06:15.740 doesn't it? And it sort of was. It was originally 00:06:15.740 --> 00:06:18.680 a company that, yes, made swordblades. But by 00:06:18.680 --> 00:06:22.300 this time, under Blunt's guidance, it had pivoted. 00:06:22.399 --> 00:06:24.920 It had effectively become an unofficial bank. 00:06:25.120 --> 00:06:27.779 A shadow bank, really. A bit of a rogue operation. 00:06:28.240 --> 00:06:31.019 Very much so. Blunt was a financial engineer. 00:06:31.180 --> 00:06:33.579 He was one of those guys who understood how to 00:06:33.579 --> 00:06:36.420 move paper around to create value or at least 00:06:36.420 --> 00:06:38.279 the appearance of value. He was a master of the 00:06:38.279 --> 00:06:40.980 game. So Harley, the politician, and Blunt, the 00:06:40.980 --> 00:06:43.879 financier, get together. They look at this nine 00:06:43.879 --> 00:06:47.019 million pound debt mountain. What is their big 00:06:47.019 --> 00:06:50.220 idea? The idea is what we now call a debt for 00:06:50.220 --> 00:06:53.139 equity swap. This is the core mechanic you absolutely 00:06:53.139 --> 00:06:54.939 have to understand to get the South Sea bubble. 00:06:55.519 --> 00:06:57.939 It sounds technical, but it's actually a brilliant 00:06:57.939 --> 00:06:59.860 piece of financial sleight of hand. OK, let's 00:06:59.860 --> 00:07:01.660 unpack this. Break it down for us. How does it 00:07:01.660 --> 00:07:06.220 work? OK, so imagine you are a creditor. You're 00:07:06.220 --> 00:07:08.259 holding one of those government IOUs, one of 00:07:08.259 --> 00:07:10.339 those Navy tickets. The government owes you 100 00:07:10.339 --> 00:07:13.160 pounds. But because everyone knows the government 00:07:13.160 --> 00:07:15.620 is broke, if you tried to sell that IOU on the 00:07:15.620 --> 00:07:18.199 street, maybe you'd only get 55 pounds for it. 00:07:18.540 --> 00:07:20.860 It's trading at a huge discount. Because nobody 00:07:20.860 --> 00:07:22.819 thinks I'm actually getting my full 100 pounds 00:07:22.819 --> 00:07:25.220 back. I'm holding a toxic asset. You're nervous. 00:07:25.360 --> 00:07:27.660 You'll never see the full amount. So Harley and 00:07:27.660 --> 00:07:30.379 Blunt come to you and say, tell you what. Turn 00:07:30.379 --> 00:07:32.699 in that IOU to our new company, the South Sea 00:07:32.699 --> 00:07:34.839 Company. We will take that dodgy debt off your 00:07:34.839 --> 00:07:38.000 hands. Okay. In exchange, they say, we will give 00:07:38.000 --> 00:07:40.220 you shares in our brand new South Sea Company, 00:07:40.360 --> 00:07:43.459 and we will value your debt at the full 100 pounds. 00:07:43.699 --> 00:07:46.120 So I trade my dodgy government debt, which is 00:07:46.120 --> 00:07:49.060 worth maybe 55 quid, for 100 pounds worth of 00:07:49.060 --> 00:07:51.860 stock in this new shiny corporation. On paper, 00:07:52.019 --> 00:07:55.540 I've just doubled my money. Exactly. And what 00:07:55.540 --> 00:07:57.180 happens on the government side is that instead 00:07:57.180 --> 00:07:59.540 of owing money to thousands of angry individual 00:07:59.540 --> 00:08:02.420 creditors like you, the government now owes all 00:08:02.420 --> 00:08:05.220 that money, the whole $9 million to one single 00:08:05.220 --> 00:08:08.480 entity, the South Sea Company. It consolidates 00:08:08.480 --> 00:08:10.180 the debt. It's much cleaner for the government 00:08:10.180 --> 00:08:12.480 to manage. Much cleaner. And the government agrees 00:08:12.480 --> 00:08:15.000 to pay the company a fixed interest rate on that 00:08:15.000 --> 00:08:18.519 total debt every single year. They promise them... 00:08:20.360 --> 00:08:24.180 568 ,279 town annually, which works out to 6 00:08:24.180 --> 00:08:26.620 % interest plus a little extra for expenses. 00:08:26.980 --> 00:08:30.139 Okay, so the company gets this steady, reliable 00:08:30.139 --> 00:08:31.839 stream of income from the government, basically 00:08:31.839 --> 00:08:34.399 from tax revenue, which they can then use to 00:08:34.399 --> 00:08:36.820 pay dividends to their new shareholders. Correct. 00:08:36.940 --> 00:08:39.700 It's a beautiful solution in theory. It takes 00:08:39.700 --> 00:08:41.940 thousands of angry creditors and turns them into 00:08:41.940 --> 00:08:44.620 happy shareholders in a patriotic new venture. 00:08:45.079 --> 00:08:47.440 For the government, it locks in the debt at a 00:08:47.440 --> 00:08:49.519 manageable interest rate. It cleans up the books. 00:08:49.679 --> 00:08:52.440 But 6 % isn't exactly a get -rich -quick scheme. 00:08:52.539 --> 00:08:54.820 That's just a bond yield to create excitement, 00:08:54.919 --> 00:08:56.940 to get people to actually hand over their debt, 00:08:56.980 --> 00:08:59.679 to create a bubble. You need a story. You need 00:08:59.679 --> 00:09:02.580 a kicker. And that is where the South Sea part 00:09:02.580 --> 00:09:04.500 of the name comes in. That was the genius of 00:09:04.500 --> 00:09:07.169 the marketing. To make these shares irresistible, 00:09:07.190 --> 00:09:09.289 the government granted this new company a monopoly 00:09:09.289 --> 00:09:12.549 on all trade with the South Seas. The South Seas, 00:09:12.549 --> 00:09:14.950 which at the time meant South America. All of 00:09:14.950 --> 00:09:17.889 it. The entire Spanish Empire in the Americas. 00:09:18.070 --> 00:09:20.889 The land of gold, silver, the Incas. El Dorado. 00:09:21.029 --> 00:09:24.610 Exactly. Potosi, the Silver Mountains. In the 00:09:24.610 --> 00:09:27.490 popular British imagination, South America was 00:09:27.490 --> 00:09:30.539 just a treasure chest waiting to be opened. The 00:09:30.539 --> 00:09:33.200 public looked at the Spanish Empire and thought, 00:09:33.279 --> 00:09:36.379 if we can just get a piece of that action, we 00:09:36.379 --> 00:09:38.720 will all be millionaires. It's a fantastic story, 00:09:38.899 --> 00:09:41.019 but there was a catch, a pretty significant catch. 00:09:41.200 --> 00:09:43.519 A massive, glaring catch that somehow everyone 00:09:43.519 --> 00:09:46.220 decided to ignore. Who controlled South America 00:09:46.220 --> 00:09:50.220 in 1711? Spain and Portugal. And who was Britain 00:09:50.220 --> 00:09:53.559 in the middle of a brutal, expensive war with? 00:09:54.049 --> 00:09:56.730 Spain. There you go. So the government is granting 00:09:56.730 --> 00:09:59.570 a monopoly on trade with a continent that is 00:09:59.570 --> 00:10:01.750 entirely controlled by an enemy nation that you 00:10:01.750 --> 00:10:04.009 are currently fighting a war against. So the 00:10:04.009 --> 00:10:07.009 actual realistic prospect of any trade happening 00:10:07.009 --> 00:10:10.190 was zero. In the immediate term, absolutely zero. 00:10:10.649 --> 00:10:12.850 The founders, Harley and Blunt and the rest, 00:10:12.950 --> 00:10:15.149 they knew this perfectly well. The source material 00:10:15.149 --> 00:10:17.049 is very clear on this. They knew there was no 00:10:17.049 --> 00:10:18.769 money for trade. They knew the ships couldn't 00:10:18.769 --> 00:10:21.279 sail. So what was the point? The objective was 00:10:21.279 --> 00:10:24.340 never really about trade, not at first. The objective 00:10:24.340 --> 00:10:26.720 was to consolidate the debt, make the founders 00:10:26.720 --> 00:10:29.080 wealthy through fees and their own stock holdings, 00:10:29.080 --> 00:10:31.519 and secure a powerful position with the government. 00:10:32.019 --> 00:10:34.940 The trade with South America part was just the 00:10:34.940 --> 00:10:37.620 shiny object, the marketing hook to dangle in 00:10:37.620 --> 00:10:39.620 front of the public. It's the wrapper on the 00:10:39.620 --> 00:10:42.320 product, the sizzle, not the steak. It's pure 00:10:42.320 --> 00:10:44.919 marketing. But you know what? People bought it. 00:10:44.960 --> 00:10:46.860 They were willing to suspend their disbelief. 00:10:46.860 --> 00:10:48.659 They thought, well, the war has to end eventually. 00:10:48.820 --> 00:10:51.919 And when it does, we have the monopoly. They 00:10:51.919 --> 00:10:54.100 were buying the future potential, not the present 00:10:54.100 --> 00:10:57.879 reality. And to be fair, the war did end. The 00:10:57.879 --> 00:11:00.340 Treaty of Utrecht was signed in 1713. It did. 00:11:00.519 --> 00:11:03.019 Peace broke out. So now the South Sea Company 00:11:03.019 --> 00:11:06.659 says, OK. Time to cash in on our monopoly. And 00:11:06.659 --> 00:11:08.539 this is where we get into the grim reality of 00:11:08.539 --> 00:11:11.059 what this business actually was. Because when 00:11:11.059 --> 00:11:13.080 they finally got permission to trade, the big 00:11:13.080 --> 00:11:16.220 prize wasn't for gold or silver or tobacco. No. 00:11:16.740 --> 00:11:19.360 And this is the dark heart of the story that 00:11:19.360 --> 00:11:21.879 often gets glazed over when people talk about 00:11:21.879 --> 00:11:24.840 the financial side of it. The main prize that 00:11:24.840 --> 00:11:27.159 Britain won in the peace treaty, which was then 00:11:27.159 --> 00:11:29.759 handed directly to the South Sea Company, was 00:11:29.759 --> 00:11:32.360 the Asiento de Negros. The Asiento. The Asiento, 00:11:32.500 --> 00:11:35.970 which was a contract. a 30 -year monopoly contract 00:11:35.970 --> 00:11:38.629 that gave the South Sea Company the exclusive 00:11:38.629 --> 00:11:41.870 right to supply enslaved African people to the 00:11:41.870 --> 00:11:44.429 Spanish colonies. We really need to pause on 00:11:44.429 --> 00:11:46.389 this because often when we talk about financial 00:11:46.389 --> 00:11:48.590 bubbles, it's about abstract things, you know, 00:11:48.590 --> 00:11:51.570 tulips or dot coms or cryptocurrencies. This 00:11:51.570 --> 00:11:54.870 bubble at its core was built on the back of the 00:11:54.870 --> 00:11:57.289 transatlantic slave trade. Absolutely. That was 00:11:57.289 --> 00:11:59.330 the business model. The contract allowed them 00:11:59.330 --> 00:12:02.169 to supply 4 ,800 enslaved people per year. That 00:12:02.169 --> 00:12:04.889 was their quota. That was the asset that underpinned 00:12:04.889 --> 00:12:07.370 the company's value. And were they expected to 00:12:07.370 --> 00:12:09.230 just ship them and sell them? Was that the whole 00:12:09.230 --> 00:12:11.509 deal? That was the main part. They were also 00:12:11.509 --> 00:12:13.990 allowed to send one ship, just one per year, 00:12:14.110 --> 00:12:16.590 which was called the annual ship. It was initially 00:12:16.590 --> 00:12:20.750 500 tons, later upgraded to 650. And that ship 00:12:20.750 --> 00:12:23.620 could trade general goods, you know. British 00:12:23.620 --> 00:12:27.159 wool and cloth at the big trade fairs in Portobello 00:12:27.159 --> 00:12:30.720 and Veracruz. So to be clear, the entire legal 00:12:30.720 --> 00:12:33.419 business foundation for what becomes this massive 00:12:33.419 --> 00:12:36.799 bubble is the trafficking of 4 ,800 human beings 00:12:36.799 --> 00:12:40.059 and one ship of textiles per year. That's it. 00:12:40.200 --> 00:12:42.460 That's the whole thing. And even that business 00:12:42.460 --> 00:12:44.580 was a logistical and financial nightmare for 00:12:44.580 --> 00:12:47.139 them. The company had set up these trading posts, 00:12:47.340 --> 00:12:49.240 which they called factories, which were really 00:12:49.240 --> 00:12:51.360 holding prisons in places like Cartagena, Panama 00:12:51.360 --> 00:12:53.100 and Buenos Aires. And they had to source the 00:12:53.100 --> 00:12:55.139 people themselves. No, they contracted that out. 00:12:55.220 --> 00:12:57.460 They made a deal with the Royal African Company, 00:12:57.659 --> 00:12:59.899 which was the main British entity involved in 00:12:59.899 --> 00:13:02.320 the slave trade on the African coast, to actually 00:13:02.320 --> 00:13:04.700 source the enslaved people for them. And the 00:13:04.700 --> 00:13:07.159 source material we have mentions the human cost 00:13:07.159 --> 00:13:10.000 here pretty starkly. It does. It gives the cold, 00:13:10.059 --> 00:13:12.600 hard numbers. It estimates that over the course 00:13:12.600 --> 00:13:15.360 of roughly 25 years, the company transported 00:13:15.360 --> 00:13:18.279 somewhere in the region of 34 ,000 people. 34 00:13:18.279 --> 00:13:21.460 ,000. And of those 34 ,000 who were forced onto 00:13:21.460 --> 00:13:24.840 the ships, about 30 ,000 survived the voyage. 00:13:25.139 --> 00:13:28.039 So 4 ,000 people died on the ships, a mortality 00:13:28.039 --> 00:13:32.940 rate over 10%. Yes, an 11 % mortality rate. The 00:13:32.940 --> 00:13:35.120 source notes in a really chilling phrase that 00:13:35.120 --> 00:13:37.879 this was considered relatively low for the middle 00:13:37.879 --> 00:13:40.259 passage at the time, which is a horrific statistic 00:13:40.259 --> 00:13:42.840 in itself. Right. But it represents thousands 00:13:42.840 --> 00:13:46.240 of lives lost, treated as nothing more than inventory 00:13:46.240 --> 00:13:49.259 spoilage on a corporate balance sheet. And from 00:13:49.259 --> 00:13:51.440 that cold, hard business perspective, which is 00:13:51.440 --> 00:13:53.850 how these directors were looking at it. Was it 00:13:53.850 --> 00:13:56.330 at least profitable? Were they making money from 00:13:56.330 --> 00:13:58.570 this horrific trade? This is one of the great 00:13:58.570 --> 00:14:01.110 ironies of the entire story. No. It wasn't. For 00:14:01.110 --> 00:14:02.970 the most part, it was largely unprofitable. They 00:14:02.970 --> 00:14:04.710 were committing these atrocities, and they weren't 00:14:04.710 --> 00:14:06.750 even making good money on it. How is that possible? 00:14:06.909 --> 00:14:08.669 If they had a monopoly, where did all the money 00:14:08.669 --> 00:14:11.909 go? Friction. And a terrible deal structure. 00:14:12.549 --> 00:14:14.750 First, the Spanish authorities on the ground 00:14:14.750 --> 00:14:17.629 hated them. Remember, Britain and Spain were 00:14:17.629 --> 00:14:21.129 bitter enemies five minutes ago. Now these British 00:14:21.129 --> 00:14:23.509 traders are showing up in their ports, so the 00:14:23.509 --> 00:14:26.750 Spanish impose heavy import duties. The company 00:14:26.750 --> 00:14:29.210 had to pay a tax on every single slave they brought 00:14:29.210 --> 00:14:31.370 in. Okay, so that eats into the margins. Big 00:14:31.370 --> 00:14:34.250 time. Plus, the ownership structure of the Asiento 00:14:34.250 --> 00:14:36.549 contract itself was terrible for the company. 00:14:36.730 --> 00:14:39.570 Who else was involved? Well, under the terms 00:14:39.570 --> 00:14:42.289 of the treaty, they had to give 25 % of all their 00:14:42.289 --> 00:14:44.669 profits to the King of Spain. The King of Spain 00:14:44.669 --> 00:14:47.110 was a business partner. He was a silent partner. 00:14:47.250 --> 00:14:49.570 And originally, Queen Anne of Britain also took 00:14:49.570 --> 00:14:51.450 a quarter share, though she later renounced hers 00:14:51.450 --> 00:14:54.129 and gave it back to the company. But when you 00:14:54.129 --> 00:14:56.990 add up the taxes to the Spanish crown, the bribes 00:14:56.990 --> 00:14:59.049 to local officials, the high mortality rates, 00:14:59.169 --> 00:15:02.889 and the sheer logistical cost, the margins were 00:15:02.889 --> 00:15:05.830 either razor thin or just plain negative. Unbelievable. 00:15:05.830 --> 00:15:08.409 So if the slave trade wasn't making money, what 00:15:08.409 --> 00:15:10.929 about that annual ship? The one ship a year with 00:15:10.929 --> 00:15:13.809 all the goods. Ah. Now, that was where the real 00:15:13.809 --> 00:15:17.169 money was, but not legally. The annual ship was 00:15:17.169 --> 00:15:20.429 basically a cover for a massive smuggling operation, 00:15:20.690 --> 00:15:24.210 industrial -scale contraband. The treaty said 00:15:24.210 --> 00:15:27.850 one ship, 500 tons. But what they would do is 00:15:27.850 --> 00:15:30.490 they would pack that ship to the gills with way 00:15:30.490 --> 00:15:33.490 more than they allowed quota. And once it docked 00:15:33.490 --> 00:15:36.789 in Portobello or Veracruz at night, smaller support 00:15:36.789 --> 00:15:39.049 ships would sail in from British -held Jamaica 00:15:39.049 --> 00:15:41.899 and secretly reload it. So they were basically 00:15:41.899 --> 00:15:44.580 selling the same ship's capacity 10 times over 00:15:44.580 --> 00:15:47.200 tax free. Exactly. They were just flooding the 00:15:47.200 --> 00:15:49.440 Spanish colonies with British manufactured goods, 00:15:49.580 --> 00:15:51.480 completely undercutting the official Spanish 00:15:51.480 --> 00:15:53.500 merchants. Which I assume the Spanish government 00:15:53.500 --> 00:15:55.500 didn't particularly appreciate. They were absolutely 00:15:55.500 --> 00:15:57.460 furious. It was a constant source of diplomatic 00:15:57.460 --> 00:16:00.259 tension. The company would often refuse to present 00:16:00.259 --> 00:16:02.519 its accounts to the Spanish king because obviously 00:16:02.519 --> 00:16:04.559 the books would show they were cheating him out 00:16:04.559 --> 00:16:06.600 of his share of the profits. This tension just 00:16:06.600 --> 00:16:09.200 got worse and worse and actually was a major 00:16:09.200 --> 00:16:11.419 contributing factor to another war later on, 00:16:11.480 --> 00:16:14.519 the wonderfully named War of Jenkins' Year in 00:16:14.519 --> 00:16:18.100 1739. So let's just summarize the business reality, 00:16:18.240 --> 00:16:22.500 say, around 1718. You have a deeply unprofitable, 00:16:22.539 --> 00:16:26.059 morally bankrupt sleer of trade, a side hustle 00:16:26.059 --> 00:16:28.360 and smuggling that's causing endless diplomatic 00:16:28.360 --> 00:16:32.580 headaches, and that's it. This is not a company 00:16:32.580 --> 00:16:34.759 that should be the darling of the London Stock 00:16:34.759 --> 00:16:37.080 Exchange. Not at all. It was a mediocre business 00:16:37.080 --> 00:16:39.779 at best. It was basically a government bond wrapper 00:16:39.779 --> 00:16:43.059 with a smuggling problem. But you have to remember, 00:16:43.220 --> 00:16:45.899 the stock price isn't always about the business 00:16:45.899 --> 00:16:48.740 reality. It's about the story. It's about the 00:16:48.740 --> 00:16:51.559 hype. And the story gets a massive turbo boost 00:16:51.559 --> 00:16:55.039 in 1719. Yes. And for that, we have to look across 00:16:55.039 --> 00:16:57.340 the English Channel to France. What's happening 00:16:57.340 --> 00:17:00.269 in France? A man named John Law. He was a Scottish 00:17:00.269 --> 00:17:02.570 economist, a convicted murderer, a gambler, a 00:17:02.570 --> 00:17:05.289 duelist, a real larger -than -life character. 00:17:05.509 --> 00:17:07.750 He'd fled Britain after killing a man in a duel 00:17:07.750 --> 00:17:09.869 and somehow managed to become the financial wizard 00:17:09.869 --> 00:17:12.569 of France. Okay. And Law had started something 00:17:12.569 --> 00:17:14.470 called the Mississippi Company. The Mississippi 00:17:14.470 --> 00:17:16.450 Company. I've definitely heard of this. Another 00:17:16.450 --> 00:17:18.970 famous bubble. It was the mirror image, the French 00:17:18.970 --> 00:17:22.359 equivalent of the South Sea Company. He had consolidated 00:17:22.359 --> 00:17:25.480 France's massive national debt into this company, 00:17:25.640 --> 00:17:28.660 which supposedly held a monopoly on trade with 00:17:28.660 --> 00:17:31.500 the French territory of Louisiana. And the share 00:17:31.500 --> 00:17:33.859 price in Paris was going vertical. People were 00:17:33.859 --> 00:17:35.940 becoming millionaires overnight. And the British 00:17:35.940 --> 00:17:37.839 are watching this from across the water. They 00:17:37.839 --> 00:17:40.160 are watching with extreme jealousy. I mean, deep 00:17:40.160 --> 00:17:43.220 national envy. They are seeing their old rivals, 00:17:43.339 --> 00:17:46.400 the French, seemingly getting rich beyond their 00:17:46.400 --> 00:17:48.960 wildest dreams and solving their national debt 00:17:48.960 --> 00:17:51.890 problem at the same time. And the South Sea directors, 00:17:52.089 --> 00:17:54.589 John Blunt and his crew, they think we can do 00:17:54.589 --> 00:17:57.410 that. We can do that, but bigger and better. 00:17:57.549 --> 00:18:00.470 So this jealousy, this sense of competition leads 00:18:00.470 --> 00:18:03.630 to the grand scheme of 1720. The takeover of 00:18:03.630 --> 00:18:05.869 the entire British national debt. Right, because 00:18:05.869 --> 00:18:08.130 up to this point, they only managed that initial 00:18:08.130 --> 00:18:11.109 nine million chunk. Now they want it all. They 00:18:11.109 --> 00:18:13.049 go to Parliament and they propose taking over 00:18:13.049 --> 00:18:16.190 all the unconsolidated national debt, about 30 00:18:16.190 --> 00:18:18.450 million more. That is a staggering amount of 00:18:18.450 --> 00:18:21.089 money for the 18th century. It's a huge percentage 00:18:21.089 --> 00:18:23.430 of the entire national economy. It's the whole 00:18:23.430 --> 00:18:26.289 shooting match. And the Bank of England, the 00:18:26.289 --> 00:18:29.309 old Whig institution, sees this happening and 00:18:29.309 --> 00:18:32.289 gets very, very nervous. They realize if the 00:18:32.289 --> 00:18:34.730 South Sea Company pulls this off, they become 00:18:34.730 --> 00:18:37.789 the dominant financial power, not just in Britain, 00:18:37.890 --> 00:18:40.190 but maybe in the world. The Bank of England would 00:18:40.190 --> 00:18:43.490 become irrelevant. A footnote. So the bank decides 00:18:43.490 --> 00:18:46.250 to fight back. They'd try to outbid them. A bidding 00:18:46.250 --> 00:18:48.509 war for the right to manage the government's 00:18:48.509 --> 00:18:51.250 debt. It was intense. The Bank of England went 00:18:51.250 --> 00:18:53.329 to Parliament and offered a huge payment to the 00:18:53.329 --> 00:18:55.650 government to win the contract. But the South 00:18:55.650 --> 00:18:58.490 Sea Company came back over the top. They offered 00:18:58.490 --> 00:19:01.329 what was effectively a bribe well, a payment 00:19:01.329 --> 00:19:05.309 to the public purse of 7 .5 million pounds. Wait, 00:19:05.369 --> 00:19:07.859 hold on. They offered to pay the government $7 00:19:07.859 --> 00:19:10.559 .5 million just for the privilege of taking on 00:19:10.559 --> 00:19:13.140 all this debt. Yes. How on earth can they possibly 00:19:13.140 --> 00:19:15.359 afford that if their actual business in South 00:19:15.359 --> 00:19:17.859 America wasn't making any money? That is the 00:19:17.859 --> 00:19:20.319 magic question. And the answer is the key to 00:19:20.319 --> 00:19:22.599 the whole bubble. The only way they could afford 00:19:22.599 --> 00:19:25.779 to pay the government $7 .5 million was if their 00:19:25.779 --> 00:19:28.619 stock price went up. Way, way up. Okay, walk 00:19:28.619 --> 00:19:30.039 me through the math on that. How does that work? 00:19:30.240 --> 00:19:32.819 Okay, so think of it this way. The company needs 00:19:32.819 --> 00:19:35.500 to issue new shares to give to the holders of 00:19:35.500 --> 00:19:38.579 government debt. If the stock price is low, say, 00:19:38.700 --> 00:19:42.319 100 pounds per share, they have to issue a lot 00:19:42.319 --> 00:19:44.819 of shares to cover that 30 million and debt. 00:19:45.000 --> 00:19:47.660 Right. A lot of paper. But. If they can get the 00:19:47.660 --> 00:19:50.140 stock price high, say 500 pounds or 800 pounds 00:19:50.140 --> 00:19:52.519 a share, they only have to issue a relatively 00:19:52.519 --> 00:19:55.519 small number of shares to buy up that same 30 00:19:55.519 --> 00:19:57.500 million of debt. So they have leftover shares. 00:19:57.779 --> 00:20:00.380 Exactly. That leaves them with millions of pounds 00:20:00.380 --> 00:20:02.920 worth of extra authorized shares that they don't 00:20:02.920 --> 00:20:05.380 need for the debt swap. They can then sell those 00:20:05.380 --> 00:20:08.740 extra shares on the open market for cash. And 00:20:08.740 --> 00:20:11.380 that cash is what they used to pay the $7 .5 00:20:11.380 --> 00:20:13.859 million to the government. So the entire scheme, 00:20:13.980 --> 00:20:16.380 the whole financial model, was explicitly designed 00:20:16.380 --> 00:20:19.160 to create a bubble. It relied on the stock price 00:20:19.160 --> 00:20:21.440 skyrocketing. It's an engineered bubble from 00:20:21.440 --> 00:20:24.119 day one. They needed a mania. If the stock price 00:20:24.119 --> 00:20:26.579 stayed flat, the company was instantly bankrupt 00:20:26.579 --> 00:20:27.839 because they couldn't make their payment to the 00:20:27.839 --> 00:20:29.200 government. The whole thing is a self -fulfilling 00:20:29.200 --> 00:20:31.920 prophecy or it was nothing. But to get this deal 00:20:31.920 --> 00:20:34.180 approved, they needed Parliament to say yes. 00:20:34.789 --> 00:20:37.470 And you'd think some MPs would look at this and 00:20:37.470 --> 00:20:39.970 say, hang on, this seems incredibly risky. This 00:20:39.970 --> 00:20:42.430 whole thing is built on thin air. Which is why 00:20:42.430 --> 00:20:45.089 they didn't just rely on clever financial arguments. 00:20:45.230 --> 00:20:47.789 They relied on good old fashioned corruption, 00:20:47.990 --> 00:20:51.569 massive systemic top to bottom corruption. The 00:20:51.569 --> 00:20:53.990 sources mentioned these things called bribe shares. 00:20:54.230 --> 00:20:56.390 How did that work? This is devilishly clever. 00:20:56.710 --> 00:20:58.589 If you just walk up to a politician and hand 00:20:58.589 --> 00:21:00.769 him a bag of gold. Yeah. That's bribery. Yeah. 00:21:00.849 --> 00:21:03.640 It's illegal. It's risky. It leaves a paper trail. 00:21:03.779 --> 00:21:06.700 All right. It's crude. Very. So Blunt and his 00:21:06.700 --> 00:21:09.240 team did something much more sophisticated. They 00:21:09.240 --> 00:21:11.460 would go to a powerful member of parliament or 00:21:11.460 --> 00:21:13.740 a government minister and say, I'm going to put 00:21:13.740 --> 00:21:16.440 your name down in my secret ledger for, say, 00:21:16.680 --> 00:21:19.720 5 ,000 pounds worth of South Sea stock. You don't 00:21:19.720 --> 00:21:21.599 have to pay for it now. We'll just hold it for 00:21:21.599 --> 00:21:24.740 you on credit. So they have zero risk. No skin 00:21:24.740 --> 00:21:27.289 in the game. Zero risk. Then they'd say. Later, 00:21:27.369 --> 00:21:29.049 when the stock price goes up, you can sell it 00:21:29.049 --> 00:21:31.190 back to us at the new higher price and you just 00:21:31.190 --> 00:21:33.450 keep the profit. It's a risk -free bet. If the 00:21:33.450 --> 00:21:35.450 stock goes up, they get a pile of free money. 00:21:35.549 --> 00:21:38.089 If the stock goes down, they lose nothing because 00:21:38.089 --> 00:21:40.650 they never paid for it in the first place. Precisely. 00:21:41.009 --> 00:21:43.710 But what this really does, the genius of it, 00:21:43.809 --> 00:21:46.589 is it perfectly aligns the politician's personal 00:21:46.589 --> 00:21:49.109 financial interest with the success of the bubble. 00:21:49.769 --> 00:21:52.230 Now that politician wants the stock to go up, 00:21:52.329 --> 00:21:55.140 he will vote for the bill. He will talk up the 00:21:55.140 --> 00:21:57.099 company's prospects to his friends. It turned 00:21:57.099 --> 00:21:59.079 the government into a hype machine for the company. 00:21:59.220 --> 00:22:02.000 It did. And they gave these bribe shares to everyone 00:22:02.000 --> 00:22:04.599 who mattered. The chancellor of the Exchequer 00:22:04.599 --> 00:22:07.519 himself, John Aislabie, got a huge junk. The 00:22:07.519 --> 00:22:09.720 postmaster general, key members of the House 00:22:09.720 --> 00:22:11.720 of Lords. They even gave them to King George 00:22:11.720 --> 00:22:14.619 I's mistresses. The king's mistresses? Seriously? 00:22:14.720 --> 00:22:18.059 Oh, yes. The Duchess of Kendal and the Countess 00:22:18.059 --> 00:22:20.279 of Platten. They were nicknamed the Elephant 00:22:20.279 --> 00:22:22.519 and Castle. These were the German mythresses 00:22:22.519 --> 00:22:25.079 of King George I, and they had immense influence 00:22:25.079 --> 00:22:26.980 at court. You couldn't get to the king without 00:22:26.980 --> 00:22:29.059 going through them. Giving them shares was a 00:22:29.059 --> 00:22:31.380 direct line to the throne. So the fix was well 00:22:31.380 --> 00:22:34.420 and truly in. The fix was in. The bill passed 00:22:34.420 --> 00:22:37.539 Parliament. The South Sea Company won the contract. 00:22:38.099 --> 00:22:41.809 And then the real marketing began. The mania. 00:22:41.809 --> 00:22:44.369 This is section four of our story. The mania. 00:22:44.369 --> 00:22:47.670 The spring and summer of 1720. The moment the 00:22:47.670 --> 00:22:49.710 madness took hold. So give me the numbers. Where 00:22:49.710 --> 00:22:52.009 did the stock price start in 1720 and where did 00:22:52.009 --> 00:22:55.509 it go? Okay, so in January 1720. Before the big 00:22:55.509 --> 00:22:57.710 scheme was approved, the stop was trading around 00:22:57.710 --> 00:23:00.690 128 pounds per share. OK, respectable price. 00:23:00.930 --> 00:23:03.289 By February, as the bill was being debated, it 00:23:03.289 --> 00:23:07.009 hit 175 pounds. Once the bill passed in March, 00:23:07.210 --> 00:23:10.170 it jumped to 330 pounds. It's more than doubled 00:23:10.170 --> 00:23:12.230 in two months. And it's just getting started. 00:23:12.410 --> 00:23:15.190 By May, it's at 550 pounds. And what's driving 00:23:15.190 --> 00:23:17.369 this? Is there any actual good news coming from 00:23:17.369 --> 00:23:19.809 South America? Did they announce, oh, we finally 00:23:19.809 --> 00:23:22.890 signed a new trade deal with Spain? No. That's 00:23:22.890 --> 00:23:24.890 the incredible thing. There was zero positive 00:23:24.890 --> 00:23:27.089 news from the actual business. It was all rumors. 00:23:27.769 --> 00:23:29.890 Extravagant rumors, the source calls them. The 00:23:29.890 --> 00:23:32.230 company directors would deliberately plant whispers 00:23:32.230 --> 00:23:34.470 in the coffee houses of London. What kind of 00:23:34.470 --> 00:23:37.029 things? Things like, a treaty is about to be 00:23:37.029 --> 00:23:39.369 signed with Spain that will give us free and 00:23:39.369 --> 00:23:43.599 unlimited trade. Or... my favorite, they whispered 00:23:43.599 --> 00:23:46.380 that Britain was going to trade the Rock of Gibraltar 00:23:46.380 --> 00:23:49.180 to Spain in exchange for gold mines in Peru, 00:23:49.359 --> 00:23:51.440 which would be handed over to the company. And 00:23:51.440 --> 00:23:53.700 none of it was true. Not a word of it. It was 00:23:53.700 --> 00:23:57.680 cure fiction. But the public ate it up. A frenzy 00:23:57.680 --> 00:24:00.200 gripped the nation. And it wasn't just the rich 00:24:00.200 --> 00:24:04.170 elite in London. It was everyone. Peasants, lords, 00:24:04.269 --> 00:24:07.609 merchants, scientists, widows. Everyone was trying 00:24:07.609 --> 00:24:09.490 to get a piece of the action. It's the fear of 00:24:09.490 --> 00:24:12.089 missing out. 300 years before we had an acronym 00:24:12.089 --> 00:24:15.190 for it. It really was. You would see crowds of 00:24:15.190 --> 00:24:18.089 people in Exchange Alley in London, just desperate 00:24:18.089 --> 00:24:21.430 to buy shares. And this incredible success spawned 00:24:21.430 --> 00:24:23.329 hundreds of copycats. This is one of my favorite 00:24:23.329 --> 00:24:24.930 parts of the story. These are the other famous 00:24:24.930 --> 00:24:26.869 bubbles, right? The really absurd ones. The most 00:24:26.869 --> 00:24:29.089 ridiculous business proposals you can imagine. 00:24:29.740 --> 00:24:32.000 Because the South Sea Company was making so much 00:24:32.000 --> 00:24:35.140 money on paper, hundreds of other bubble companies 00:24:35.140 --> 00:24:37.579 popped up to try and catch the wave. Give me 00:24:37.579 --> 00:24:40.019 some examples. There were companies formed for 00:24:40.019 --> 00:24:43.259 turning quicksilver into a malleable metal. There 00:24:43.259 --> 00:24:46.119 was one for importing jackasses from Spain. Wait, 00:24:46.180 --> 00:24:49.400 literally importing jackasses, as in donkeys? 00:24:49.579 --> 00:24:52.700 Literally donkeys. And people bought stock in 00:24:52.700 --> 00:24:55.839 it. There was a company for a wheel for perpetual 00:24:55.839 --> 00:24:59.440 motion. There was one for improving the art of 00:24:59.440 --> 00:25:01.880 making soap. And people were just throwing their 00:25:01.880 --> 00:25:04.240 money at these things. They were lining up. But 00:25:04.240 --> 00:25:06.720 the most famous one, the one that perfectly captures 00:25:06.720 --> 00:25:10.059 the madness, was a company described in its prospectus 00:25:10.059 --> 00:25:13.119 as being for carrying out an undertaking of great 00:25:13.119 --> 00:25:15.980 advantage, but nobody to know what it is. Give 00:25:15.980 --> 00:25:17.519 us your money. We won't tell you what we're doing 00:25:17.519 --> 00:25:20.339 with it, but trust us, it'll be great. And the 00:25:20.339 --> 00:25:22.279 promoter opened the subscription list in the 00:25:22.279 --> 00:25:24.660 morning. took in 2 ,000 pounds of fortune at 00:25:24.660 --> 00:25:26.819 the time, and reportedly fled for the continent 00:25:26.819 --> 00:25:29.980 by that afternoon with the cash. That is absolutely 00:25:29.980 --> 00:25:32.640 incredible. But here's the twist, isn't it? The 00:25:32.640 --> 00:25:34.880 South Sea Company, the mother of all these bubbles, 00:25:35.079 --> 00:25:36.839 looks at all these little bubbles popping up 00:25:36.839 --> 00:25:39.519 around it and gets annoyed. They did. They got 00:25:39.519 --> 00:25:41.759 very territorial. They saw these other companies 00:25:41.759 --> 00:25:45.279 as competitors for capital. Every pound that 00:25:45.279 --> 00:25:48.039 an investor put into a jackass import company 00:25:48.039 --> 00:25:50.700 was a pound that wasn't being used to bid up 00:25:50.700 --> 00:25:52.930 the price of South Sea stock. So what did they 00:25:52.930 --> 00:25:54.890 do about it? They used their political influence. 00:25:55.170 --> 00:25:57.490 Remember, they basically owned the government 00:25:57.490 --> 00:25:59.710 at this point to get Parliament to pass a new 00:25:59.710 --> 00:26:03.170 law, the Bubble Act of June 1720. The Bubble 00:26:03.170 --> 00:26:06.490 Act. This law essentially forbade the creation 00:26:06.490 --> 00:26:09.410 of new joint stock companies without a royal 00:26:09.410 --> 00:26:12.859 charter. Basically, it made it illegal to start 00:26:12.859 --> 00:26:14.599 one of these new public companies unless you 00:26:14.599 --> 00:26:17.380 had explicit and very hard to get permission 00:26:17.380 --> 00:26:19.599 from the king. So they were trying to legislate 00:26:19.599 --> 00:26:21.380 their competition out of existence. They were 00:26:21.380 --> 00:26:23.740 trying to clear the field so that all the speculative 00:26:23.740 --> 00:26:25.599 money in the country would have only one place 00:26:25.599 --> 00:26:29.160 to go into their stock. And did it work? It worked 00:26:29.160 --> 00:26:31.700 too well. And this is the great, beautiful irony 00:26:31.700 --> 00:26:34.519 of the whole story. This is the real aha moment 00:26:34.519 --> 00:26:36.779 for the listener. OK, unpack it for me. When 00:26:36.779 --> 00:26:39.250 the Bubble Act passed. It caused a panic among 00:26:39.250 --> 00:26:41.069 investors who had put their money into those 00:26:41.069 --> 00:26:44.210 smaller, now illegal companies. They all tried 00:26:44.210 --> 00:26:46.450 to sell their shares at once to get their cash 00:26:46.450 --> 00:26:48.890 out. And the prices of those small bubbles collapsed. 00:26:49.470 --> 00:26:52.849 Instantly. But here's the thing. Many of these 00:26:52.849 --> 00:26:54.910 investors had bought those shares on credit. 00:26:54.990 --> 00:26:57.690 They had borrowed money to speculate. When the 00:26:57.690 --> 00:26:59.990 small bubbles popped, they were suddenly facing 00:26:59.990 --> 00:27:02.880 margin calls. They needed cash, and they needed 00:27:02.880 --> 00:27:05.519 it fast to pay their debts. They had a liquidity 00:27:05.519 --> 00:27:08.019 crisis. Exactly. And where was most of their 00:27:08.019 --> 00:27:11.220 remaining cash tied up? In South Sea stock. Precisely. 00:27:11.420 --> 00:27:13.519 So to cover their losses in the small bubbles, 00:27:13.740 --> 00:27:15.960 they were forced to sell their South Sea shares. 00:27:16.579 --> 00:27:19.039 So by popping all the little bubbles, the South 00:27:19.039 --> 00:27:21.259 Sea company accidentally triggered a massive 00:27:21.259 --> 00:27:23.920 wave of selling in its own stock. They pricked 00:27:23.920 --> 00:27:26.539 the pin that popped their own balloon. That's 00:27:26.539 --> 00:27:29.220 almost poetic justice. It's a perfect lesson 00:27:29.220 --> 00:27:32.220 in unintended consequences. You can't just destroy 00:27:32.220 --> 00:27:34.799 confidence in one part of the market and expect 00:27:34.799 --> 00:27:37.299 it not to bleed over into the rest. Confidence 00:27:37.299 --> 00:27:40.160 is contagious, but so is fear. So we hit the 00:27:40.160 --> 00:27:44.660 peak. Early August 1720. The stock price touches 00:27:44.660 --> 00:27:47.640 1 ,000 pounds a share. And even 1 ,000 pounds. 00:27:48.180 --> 00:27:51.019 At that price, the company is valued at more 00:27:51.019 --> 00:27:53.220 than twice the value of all the land in England. 00:27:53.849 --> 00:27:56.569 It's a valuation completely disconnected from 00:27:56.569 --> 00:27:59.569 any possible reality. And then the selling starts. 00:27:59.710 --> 00:28:02.849 The selling that their own act triggered. It 00:28:02.849 --> 00:28:05.450 starts slow at first. Just a trickle. But then 00:28:05.450 --> 00:28:08.170 it cascades. The price falls. People who borrowed 00:28:08.170 --> 00:28:10.849 money to buy shares get margin calls, forcing 00:28:10.849 --> 00:28:13.269 them to sell, which pushes the price down further, 00:28:13.430 --> 00:28:16.349 which triggers more margin calls. It's a death 00:28:16.349 --> 00:28:17.970 spiral. What were the numbers on the way down? 00:28:18.150 --> 00:28:20.829 From 1 ,000 pounds in early August, it was down 00:28:20.829 --> 00:28:22.930 to 700 pounds by the end of the month. By the 00:28:22.930 --> 00:28:25.269 end of September, it was back down to 150 pounds. 00:28:25.430 --> 00:28:27.849 From 1 ,000 pounds to 150 pounds in about two 00:28:27.849 --> 00:28:30.109 months. A complete and total collapse. And because 00:28:30.109 --> 00:28:31.950 the company itself had been lending money to 00:28:31.950 --> 00:28:33.589 people to buy its own shares, this was another 00:28:33.589 --> 00:28:36.250 one of John Blood's genius ideas, the company 00:28:36.250 --> 00:28:38.450 was destroyed along with the shareholders. Explain 00:28:38.450 --> 00:28:41.230 that loan scheme. That seems insane. It was. 00:28:41.650 --> 00:28:44.109 To keep the price rising over the summer, the 00:28:44.109 --> 00:28:46.210 South Sea Company let you borrow money directly 00:28:46.210 --> 00:28:49.009 from them to buy their stock. So you could buy 00:28:49.009 --> 00:28:52.130 a share for, say, 500 pounds. But you only had 00:28:52.130 --> 00:28:55.089 to put 50 pounds down and the company would lend 00:28:55.089 --> 00:28:57.849 you the other 450 pounds. But the collateral 00:28:57.849 --> 00:29:00.849 for that loan is the share itself. Exactly. So 00:29:00.849 --> 00:29:03.569 when the stock price drops from 500 pounds down 00:29:03.569 --> 00:29:06.009 to 300 pounds, the collateral is now worth less 00:29:06.009 --> 00:29:09.750 than the loan. The borrower defaults. The company 00:29:09.750 --> 00:29:12.150 doesn't get its money back. The borrower loses 00:29:12.150 --> 00:29:14.829 their deposit. Everyone goes broke simultaneously. 00:29:15.289 --> 00:29:18.849 It was financial dynamite. Banks failed. Goldsmiths 00:29:18.849 --> 00:29:21.490 who acted as proto -banks failed. Thousands and 00:29:21.490 --> 00:29:23.450 thousands of people were utterly ruined. The 00:29:23.450 --> 00:29:25.690 sources talk about suicides, people fleeing the 00:29:25.690 --> 00:29:27.910 country. It was a national trauma on a scale 00:29:27.910 --> 00:29:29.890 that's hard to imagine. And this brings us back 00:29:29.890 --> 00:29:32.930 to Sir Isaac Newton. Poor Isaac. A genius in 00:29:32.930 --> 00:29:35.250 physics, but not in market timing. He was actually 00:29:35.250 --> 00:29:36.670 in early, wasn't he? He was one of the smart 00:29:36.670 --> 00:29:38.970 ones. He was. The story goes that he bought in 00:29:38.970 --> 00:29:40.930 early in the year, made a very handsome profit 00:29:40.930 --> 00:29:43.910 of about 7 ,000 pounds, and sold out. He cashed 00:29:43.910 --> 00:29:46.049 in his chips. But then he had to sit and watch 00:29:46.049 --> 00:29:49.089 as the price kept going up and up and up. He 00:29:49.089 --> 00:29:51.710 watched his friends and his colleagues, people 00:29:51.710 --> 00:29:54.329 he considered not nearly as smart as him, making 00:29:54.329 --> 00:29:57.609 absolute fortunes. And the FOMO, the psychological 00:29:57.609 --> 00:30:00.009 pressure, it just broke him. He couldn't stand 00:30:00.009 --> 00:30:02.630 it. He jumped back in near the top. Oh, no. And 00:30:02.630 --> 00:30:03.990 he wrote it all the way down. He lost something 00:30:03.990 --> 00:30:06.630 like 20 ,000 pounds. Which in today's money is 00:30:06.630 --> 00:30:09.990 millions. A huge portion of his personal wealth 00:30:09.990 --> 00:30:13.170 wiped out. And that's when he supposedly made 00:30:13.170 --> 00:30:16.230 that famous quote. I can calculate the movement 00:30:16.230 --> 00:30:19.490 of the stars, but not the madness of men. It 00:30:19.490 --> 00:30:21.970 just shows you, doesn't it? Raw intelligence 00:30:21.970 --> 00:30:24.769 is no defense against the psychology of a mania. 00:30:24.829 --> 00:30:27.670 None whatsoever. So the bubble has burst. The 00:30:27.670 --> 00:30:30.150 country is in financial ruins. The public is 00:30:30.150 --> 00:30:32.569 furious. They want heads to roll. They want blood. 00:30:32.750 --> 00:30:35.430 They want scapegoats. Parliament is recalled 00:30:35.430 --> 00:30:38.369 in December, and the investigation begins. And 00:30:38.369 --> 00:30:40.890 this is where all the skullduggery, as the sources 00:30:40.890 --> 00:30:43.500 call it, starts to come to light. Because the 00:30:43.500 --> 00:30:45.559 directors of the company didn't just lose money 00:30:45.559 --> 00:30:47.579 like everyone else. They had been selling, hadn't 00:30:47.579 --> 00:30:51.299 they? Oh, of course they had. The insiders, Blunt 00:30:51.299 --> 00:30:53.740 and his cronies, had been quietly cashing out 00:30:53.740 --> 00:30:56.380 at the top all summer. But the problem for the 00:30:56.380 --> 00:30:58.799 investigators was proving it and finding the 00:30:58.799 --> 00:31:01.900 evidence of the bribes. The key was the company 00:31:01.900 --> 00:31:04.859 cashier, a man named Robert Knight. He was the 00:31:04.859 --> 00:31:06.799 one who kept the books. Kept the famous green 00:31:06.799 --> 00:31:10.170 book. a secret ledger that had the names of all 00:31:10.170 --> 00:31:12.049 the politicians who had been given the bribe 00:31:12.049 --> 00:31:14.930 shares. It was the smoking gun. The evidence. 00:31:15.170 --> 00:31:17.809 The absolute proof. So Parliament summons Knight. 00:31:17.930 --> 00:31:20.529 They want to see the book. Knight flees the country. 00:31:20.690 --> 00:31:23.109 He grabs the green book, escapes to the continent, 00:31:23.230 --> 00:31:26.349 and disappears. It's widely believed he was tipped 00:31:26.349 --> 00:31:29.109 off and allowed to escape by powerful figures 00:31:29.109 --> 00:31:31.230 in the government, because if he had testified, 00:31:31.569 --> 00:31:34.549 he would have implicated the king, the mistresses, 00:31:34.569 --> 00:31:37.660 half the cabinet. the scandal would have brought 00:31:37.660 --> 00:31:39.759 down the entire establishment. So he was the 00:31:39.759 --> 00:31:42.500 fall guy, but he was allowed to get away to protect 00:31:42.500 --> 00:31:45.720 the people at the very top. Exactly. But others 00:31:45.720 --> 00:31:49.059 weren't so lucky. John Aselby, the chancellor 00:31:49.059 --> 00:31:51.400 of the Exchequer, the man in charge of the nation's 00:31:51.400 --> 00:31:54.680 finances, was found guilty of corruption. He 00:31:54.680 --> 00:31:57.799 was impeached, stripped of his assets, and locked 00:31:57.799 --> 00:32:01.920 up in the Tower of London. Wow. Imprisoned. James 00:32:01.920 --> 00:32:03.759 Craggs the Elder, he was the postmaster general 00:32:03.759 --> 00:32:06.259 and another key player, he conveniently died, 00:32:06.440 --> 00:32:09.440 supposedly of apoplexy, right before he was due 00:32:09.440 --> 00:32:12.259 to be questioned. It's widely suspected he took 00:32:12.259 --> 00:32:15.400 poison. His son, James Craggs the Younger, who 00:32:15.400 --> 00:32:17.440 was also implicated, died of smallpox around 00:32:17.440 --> 00:32:19.779 the same time. A lot of very convenient deaths. 00:32:20.140 --> 00:32:22.980 And the company directors, the businessmen behind 00:32:22.980 --> 00:32:25.180 the scheme. They were rounded up and stripped 00:32:25.180 --> 00:32:27.410 of their wealth. Parliament passed a specialized 00:32:27.410 --> 00:32:29.750 act just for them. They went through their finances 00:32:29.750 --> 00:32:31.970 with a fine -tooth comb and confiscated their 00:32:31.970 --> 00:32:34.450 estates. On average, the directors were forced 00:32:34.450 --> 00:32:37.430 to give up 82 % of their total net worth to create 00:32:37.430 --> 00:32:39.509 a fund to help repay the victims. That's actually 00:32:39.509 --> 00:32:41.710 a surprisingly harsh punishment compared to how 00:32:41.710 --> 00:32:43.869 we often treat financial criminals today. It 00:32:43.869 --> 00:32:46.410 was brutal. They were publicly shamed and left 00:32:46.410 --> 00:32:48.289 with just enough to live on, a few hundred pounds 00:32:48.289 --> 00:32:50.549 a year, but their fortunes were completely wiped 00:32:50.549 --> 00:32:53.589 out. But someone had to clean this mess up. The 00:32:53.589 --> 00:32:56.289 entire British financial system was on the brink 00:32:56.289 --> 00:32:59.450 of collapse. Enter Robert Walpole. Walpole, a 00:32:59.450 --> 00:33:02.529 huge figure. He is a giant of British history. 00:33:02.710 --> 00:33:05.349 He is widely considered to be the first de facto 00:33:05.349 --> 00:33:07.289 prime minister, though the title wasn't official 00:33:07.289 --> 00:33:09.990 yet. He had been a critic of the South Sea scheme, 00:33:10.109 --> 00:33:12.569 so he had clean hands. He was brought in as the 00:33:12.569 --> 00:33:14.650 first lord of the treasury to fix the crash. 00:33:15.009 --> 00:33:17.349 He was the ultimate fixer. The ultimate political 00:33:17.349 --> 00:33:20.980 operator. His job was twofold. First, restore 00:33:20.980 --> 00:33:23.460 confidence in the economy and prevent a total 00:33:23.460 --> 00:33:26.240 meltdown. Second, and maybe more importantly, 00:33:26.460 --> 00:33:28.859 screen the king and the royal court from the 00:33:28.859 --> 00:33:31.019 scandal. Because if the public found out the 00:33:31.019 --> 00:33:33.559 king and his mistresses were personally profiting 00:33:33.559 --> 00:33:35.660 while they were being ruined. It could have been 00:33:35.660 --> 00:33:37.980 the end of the monarchy. You have to remember, 00:33:38.140 --> 00:33:40.619 the Hanoverian dynasty of King George III was 00:33:40.619 --> 00:33:44.019 new and not very popular. The Jacobites, who 00:33:44.019 --> 00:33:46.500 supported the old Stuart line of kings, were 00:33:46.500 --> 00:33:49.269 still a major threat. A massive royal scandal 00:33:49.269 --> 00:33:51.289 could have easily tipped the country into civil 00:33:51.289 --> 00:33:54.150 war or revolution. So Walpole had to perform 00:33:54.150 --> 00:33:57.430 this incredible balancing act, bury the evidence 00:33:57.430 --> 00:33:59.609 against the king while still looking like he 00:33:59.609 --> 00:34:02.089 was punishing the guilty directors. Exactly. 00:34:02.089 --> 00:34:05.329 He screened the king, as they called it. He masterfully 00:34:05.329 --> 00:34:07.529 managed the parliamentary inquiry so it didn't 00:34:07.529 --> 00:34:09.769 look too high up the chain of command. And he 00:34:09.769 --> 00:34:11.889 restored financial confidence by coming up with 00:34:11.889 --> 00:34:14.030 a plan to divide the South Sea Company's stock 00:34:14.030 --> 00:34:16.849 between the Bank of England and the East India 00:34:16.849 --> 00:34:19.889 Company. He stabilized the market. And in doing 00:34:19.889 --> 00:34:22.409 so, he made himself the most powerful and indispensable 00:34:22.409 --> 00:34:25.289 man in the country. He did. He essentially ruled 00:34:25.289 --> 00:34:28.269 Britain for the next 20 years. The South Sea 00:34:28.269 --> 00:34:30.510 bubble, in a strange way, created the office 00:34:30.510 --> 00:34:32.769 of the prime minister as we know it today. Now, 00:34:32.809 --> 00:34:35.349 here's the part that completely blew my mind 00:34:35.349 --> 00:34:38.449 when I was reading the source material. You would 00:34:38.449 --> 00:34:41.650 think, after all this, the fraud, the collapse, 00:34:41.809 --> 00:34:45.050 the suicides, the imprisonment, that the South 00:34:45.050 --> 00:34:48.599 Sea Company would be dissolved. just burned to 00:34:48.599 --> 00:34:50.880 the ground and its name erased from history. 00:34:51.039 --> 00:34:53.099 You would absolutely think so. It was a national 00:34:53.099 --> 00:34:55.900 disgrace. But it wasn't. No. And it survived. 00:34:56.360 --> 00:34:59.139 How is that even possible? Because it still held 00:34:59.139 --> 00:35:01.880 all that government debt. The fundamental financial 00:35:01.880 --> 00:35:04.900 structure that Harley created in 1711 was still 00:35:04.900 --> 00:35:07.320 there. The company was still the legal entity 00:35:07.320 --> 00:35:09.480 to which the government owed tens of millions 00:35:09.480 --> 00:35:12.559 of pounds. Walpole just restructured it. He cleaned 00:35:12.559 --> 00:35:15.079 house, put in new management, and the company 00:35:15.079 --> 00:35:17.719 became a kind of glorified semi -public management 00:35:17.719 --> 00:35:20.659 firm for government bonds. So its main job was 00:35:20.659 --> 00:35:22.559 just collecting interest from the government 00:35:22.559 --> 00:35:24.960 and paying it out as dividends. Did they still 00:35:24.960 --> 00:35:27.480 try to do any actual trade? They did. And this 00:35:27.480 --> 00:35:29.599 is the tragic comedy of the afterlife section 00:35:29.599 --> 00:35:36.980 of the company. Wailing. From South American 00:35:36.980 --> 00:35:39.099 slaves to Arctic whales. That's quite a pivot. 00:35:39.260 --> 00:35:41.380 A big pivot. They just couldn't give up the dream 00:35:41.380 --> 00:35:44.780 of being a trading company. It seems not. They 00:35:44.780 --> 00:35:46.739 built a fleet of 12 state -of -the -art whaling 00:35:46.739 --> 00:35:50.320 ships, later expanded it to 25. They sent them 00:35:50.320 --> 00:35:53.360 up to Greenland to hunt whales. And how did that 00:35:53.360 --> 00:35:55.880 go? Let me guess. It was a complete and utter 00:35:55.880 --> 00:35:58.780 disaster. It turned out Britain had no experienced 00:35:58.780 --> 00:36:02.019 whalers. The company had to hire expensive Dutch 00:36:02.019 --> 00:36:04.599 and Danish captains and crews to even man the 00:36:04.599 --> 00:36:07.099 ships. And they caught no whales. They caught 00:36:07.099 --> 00:36:10.059 very few whales. And the same culture of mismanagement 00:36:10.059 --> 00:36:12.320 and corruption that defined the company in 1720 00:36:12.320 --> 00:36:15.000 was still there. The costs were out of control. 00:36:15.260 --> 00:36:18.039 Over eight years, they accumulated a net loss 00:36:18.039 --> 00:36:21.440 of over 177 ,000 pounds on their whaling venture. 00:36:21.920 --> 00:36:24.119 Even with government subsidies. They just could 00:36:24.119 --> 00:36:26.280 not get it right. They were fundamentally incompetent 00:36:26.280 --> 00:36:28.099 at actually running a business. They finally 00:36:28.099 --> 00:36:31.380 gave up on whaling in 1732. But the company itself, 00:36:31.739 --> 00:36:34.659 the shell of it, the debt management part, it 00:36:34.659 --> 00:36:37.840 just kept going and going and going until 1853. 00:36:38.420 --> 00:36:41.260 1853. That's Victorian England. That's Charles 00:36:41.260 --> 00:36:43.400 Dickens time. We're talking steam trains and 00:36:43.400 --> 00:36:46.250 factories. In fact, Dickens actually mentions 00:36:46.250 --> 00:36:49.110 the South Sea House in his essays. He describes 00:36:49.110 --> 00:36:52.550 it as this sleepy, dusty old office in the city 00:36:52.550 --> 00:36:55.489 of London where a few ancient clerks sat around 00:36:55.489 --> 00:36:59.389 doing basically nothing, managing the last remnants 00:36:59.389 --> 00:37:01.489 of this hundred -year -old debt. So the ghost 00:37:01.489 --> 00:37:04.289 of the bubble literally haunted London for more 00:37:04.289 --> 00:37:07.369 than a century. It did. A strange long afterlife. 00:37:08.010 --> 00:37:10.250 So bringing it all together, what's the big takeaway 00:37:10.250 --> 00:37:12.550 here? When we look back at the South Sea bubble 00:37:12.550 --> 00:37:15.230 from the 21st century, what should we learn? 00:37:15.389 --> 00:37:17.989 I think there are three really big things. First, 00:37:18.150 --> 00:37:20.530 it created the template for almost every modern 00:37:20.530 --> 00:37:23.769 financial bubble since. The hype, the use of 00:37:23.769 --> 00:37:26.949 leverage, the insider trading, the talk of a... 00:37:27.159 --> 00:37:29.760 new paradigm that turns out to be a lie. It's 00:37:29.760 --> 00:37:32.300 all there in 1720. It's the same script, just 00:37:32.300 --> 00:37:34.079 with different costumes and different technology. 00:37:34.239 --> 00:37:36.800 Exactly. Second, the political impact was immense. 00:37:37.079 --> 00:37:39.179 It cemented the power of the Bank of England 00:37:39.179 --> 00:37:41.360 as the government's lender of last resort, and 00:37:41.360 --> 00:37:43.059 it created the position of the prime minister. 00:37:43.239 --> 00:37:46.000 It literally shaped the modern British state. 00:37:46.179 --> 00:37:48.460 And the third. The unintended consequences of 00:37:48.460 --> 00:37:52.059 regulation. That bubble act. A law passed by 00:37:52.059 --> 00:37:54.599 the company to protect its own monopoly ended 00:37:54.599 --> 00:37:57.000 up being the very thing that destroyed it. It's 00:37:57.000 --> 00:37:59.480 a timeless lesson that trying to rig the market 00:37:59.480 --> 00:38:01.719 often blows up in your face in ways you can't 00:38:01.719 --> 00:38:04.719 predict. And there is one final really provocative 00:38:04.719 --> 00:38:06.619 thought from the source material that I want 00:38:06.619 --> 00:38:08.559 to leave our listeners with. The connection to 00:38:08.559 --> 00:38:11.960 America. Yes. The source mentions that the public 00:38:11.960 --> 00:38:15.119 outrage over the corruption, the anger at the 00:38:15.119 --> 00:38:17.860 king's ministers, the bribery, the self -dealing 00:38:17.860 --> 00:38:20.679 it, inspired a series of hugely popular essays 00:38:20.679 --> 00:38:23.360 called Cato's Letters. Cato's Letters were written 00:38:23.360 --> 00:38:25.699 by two radicals, John Trencher and Thomas Gordon. 00:38:26.019 --> 00:38:28.880 They were these fierce anonymous attacks on corruption 00:38:28.880 --> 00:38:31.519 and government tyranny written directly in response 00:38:31.519 --> 00:38:33.780 to the South Sea Bubble scandal. And who were 00:38:33.780 --> 00:38:36.340 the biggest fans of Cato's Letters? The American 00:38:36.340 --> 00:38:39.480 founding fathers. Benjamin Franklin, Thomas Jefferson, 00:38:39.679 --> 00:38:42.880 John Adams. Those letters were incredibly popular 00:38:42.880 --> 00:38:45.559 and influential in the American colonies. They 00:38:45.559 --> 00:38:47.900 became a kind of foundational text for the arguments 00:38:47.900 --> 00:38:50.400 against British tyranny and for Republican government. 00:38:50.750 --> 00:38:54.789 So in a weird, winding, historical way, a fraudulent 00:38:54.789 --> 00:38:57.989 stock market scheme in London in 1720 helped 00:38:57.989 --> 00:39:00.210 to plant the intellectual seeds for the American 00:39:00.210 --> 00:39:03.650 Revolution in 1776. It's the butterfly effect 00:39:03.650 --> 00:39:06.210 of history, isn't it? The greed of a few men 00:39:06.210 --> 00:39:08.550 in Exchange Alley may have inadvertently helped 00:39:08.550 --> 00:39:10.829 to inspire the creation of the United States 00:39:10.829 --> 00:39:13.949 and cost Britain its American empire. That is 00:39:13.949 --> 00:39:16.670 a lot to process, from debt schemes and royal 00:39:16.670 --> 00:39:18.969 mistresses all the way to the Declaration of 00:39:18.969 --> 00:39:20.940 Independence. It's quite a... story yeah one 00:39:20.940 --> 00:39:22.840 that just keeps on giving thank you for taking 00:39:22.840 --> 00:39:24.619 us through it and thank you all for listening 00:39:24.619 --> 00:39:26.480 to the deep dive we'll catch you on the next 00:39:26.480 --> 00:39:26.659 one