In "The Intelligent Investor," Graham shared the cautionary tale of Sir Isaac Newton and the South Sea Company
investment bubble and bust in the early 1700s.
"That story, told to the world, was actually a cunning subterfuge, and the true nature of the endeavour was an altogether more sinister exercise which, if followed to its beginnings, went back to the days of King Henry VIII, then Queen Elizabeth I, and ended-up with the monumental collapse of the South Sea Company
in the 1700s.
In 1720, he invested in the South Sea Company
, the hottest stock in England.
Historians generally know little about the South Sea Company
beyond the economic fiasco of the South Sea Company
1720: The South Sea "Bubble" speculation fever began: unsustainable rises in shares of the South Sea Company
itself would be followed by frantic investment in dubious or completely bogus companies, including one described only as "for carrying out an undertaking of great advantage, but nobody to know what it is".
- Sir Isaac Newton The above quote, attributed to Issac Newton, came in the wake of the great scientist losing a large sum of money speculating in shares of the South Sea Company
in the early 1700s, the financial bubble of his day.
The South Sea company
was a British joint-stock company founded in 1711 created as a public private partnership to reduce national debt.
The craze for bitcoin most readily brings to mind the great South Sea Bubble of 1720, which as the name of the South Sea Company
suggests, was founded to trade-in South America and was furnished with a monopoly to do so.
The South Sea Company
operated the British asiento (1713-1739), and like its predecessors, the company emphasized transshipment (except when supplying Buenos Aires).
There are eight undated government bonds outstanding, including one issued by William Gladstone to consolidate, among other things, the capital stock of the South Sea Company
, which had collapsed in 1720.
In the middle third of A New Voyage, Defoe imagines an economic basis for the kinds of fantastic profits promised by the South Sea Company
before it collapsed in 1721.
Britain's most celebrated scientist, Sir Isc Newton, was not immune to the monetary charms of the South Sea Company
, and in early 1720 he profited handsomely from his stake.