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Politics : Foreign Affairs Discussion Group -- Ignore unavailable to you. Want to Upgrade?

To: Nadine Carroll who wrote (261057)	4/9/2008 1:04:28 AM
From: c.hinton	Respond to of 281500

Nadine, thats not new technology. ps look to John Law and see why.....

To: Nadine Carroll who wrote (261057)	4/9/2008 1:07:17 AM
From: c.hinton	Respond to of 281500

south sea bubble Initial stages The company, established in 1711 by the Lord Treasurer, Robert Harley, was granted exclusive trading rights in Spanish South America. (The British at that time applied the term "South Seas" to South America and surrounding waters, not to the South Pacific, an area that was still mostly unknown to Europeans.) The trading rights were pre-supposed on the successful conclusion of the War of the Spanish Succession, which did not end until 1713, and the actual granted treaty rights were not as comprehensive as Harley had originally hoped. Harley needed to provide a mechanism for funding government debt incurred in the course of that war. However, he could not establish a bank, because the charter of the Bank of England made it the only joint stock bank. He therefore established what, on its face, was a trading company, though its main activity was in fact the funding of government debt. In return for its exclusive trading rights the government saw an opportunity for a profitable trade-off. The government and the company convinced the holders of around £10 million of short-term government debt to exchange it with a new issue of stock in the company. In exchange, the government granted the company a perpetual annuity from the government paying £576,534 annually on the company's books, or a perpetual loan of £10 million paying 6%. This guaranteed the new equity owners a steady stream of earnings to this new venture. The government thought it was in a win-win situation because it would fund the interest payment by placing a tarrif on the goods brought from South America The Treaty of Utrecht of 1713 granted the company the right to send one trading ship per year (though this was in practice accompanied by two 'tenders') and the 'Asiento', the contract to supply the Spanish colonies with slaves. The company did not undertake a trading voyage to South America until 1717 and made little actual profit. Furthermore, when ties between Spain and Britain deteriorated in 1718 the short-term prospects of the company were very poor. Nonetheless, the company continued to argue that its longer-term future would be extremely profitable. [edit]Debt for equity