Historian Reacts - South Sea Bubble - Buying Out Britain - Extra History - #3 

Are we sure John Blunt made swords? Because the man seems to be a master at making time bombs.

It's not like a Ponzi Scheme, it is a Ponzi Scheme. The problem is that this is so early into the era of modern economics that people didn't have a proper understanding of bubbles and how they worked nor how you'd reasonably do an analysis of a corporation's value.

One thing I just remembered on rewatching the series, the last episode (titled It Was Walpole), has a little tag piece after the end credits to give one last piece of information about what happened to one of the people involved after everything went down. I watched the series at least six full times before I saw that because I usually stopped before the end credits finished, so I thought you should know. If it's not already too late.

One thing you have to keep in mind when watching this series (and apologies if it's been mentioned in previous episodes' comments sections) is that this is the early 18th century. This is before Marx, Engels and Comte. Hell, this is before Adam Smith (Wealth of Nations) and Thomas Malthus. People back then, both upper and lower class, viewed "The Economy"™ differently than we view it today. PS: If you enjoyed this one I recommend EC's History of Paper Money after this one.

7:45 - Just a clarification - the President of the US is under no obligation to place anything in a blind trust.

I think it is very telling the fact Robert Walpole almost reinvested and went bankrupt. He was an intelligent person and deep into the political system. Yet he didn't know this would ruin him. That tells me that the politicians didn't fully understand the gravity of this and the potential fall out. It would have taken the investors and financial experts to see it coming instead.

“Listen to that again: the company’s only source of revenue.” Video: “…was an increasing share price” The timing with which you skipped back 10 seconds while making that point was exquisite lol

There was one who saw what was happening, but he wasn't screaming from the rafters because he could create a very powerful office for himself if this blew up in the right way, and even he didn't realize what was happening until almost too late.

31 million pounds. And that's before inflation. Just.... insane. And yes, Blunt was a genius. This scheme came long before the founding of modern Wall Street, but you can see echoes of what would come. He was centuries ahead of the curve.

This is such a strange but incredibly fascinating topic. Love it when odd events of history come out of the woodwork like this!

Blunt is really a Karma Houdini of the grandest scale. A man who got off with way too less than what he would've deserved.

So excited to see your reaction to how insane this story gets. It's 2:30 in Australia but sleep can wait 15 for this

13:40 I was checking some of the math on this. according to UK inflation records. 1 pound in 1751 is equivalent to 251 pounds today. This means that the value of 1 share of the SSC today would be valued at 208,330 pounds, 324,599 CAD, or 251,670 USD.

To answer the question of why didn't anyone in Britain say this was a horrible idea, let me give you a quote from the Hank Paulson character in the movie too big to fail "Its because we were making so much money."

I can't help but admire blunt's craftiness. What he's doing is horrible and has terrible repercussions, but it is genius. Especially since hes making this all up on the fly without previous models to base things on.

Since we’re on the topic of economic history, you should watch Extra Credits videos of the history of paper money when you get the chance.

I can't believe you have watched so many ExtraHistory episodes, and only NOW you are talking about Walpole.

Can’t tell ya how much I love this channel. As somehow who has always loved history this is great!

I would love to see a reaction to the remaining episodes of The Napoleonic Wars by Epic History TV, including the Napoleon's Marshals series. Chris only watched the first half and left us hanging. Attempt #7

For reference. £830 in 1720, is equal to £119,742 in 2021 (using the most recent inflation data).

I would highly recommend that you react to the English Civil War by Kings and Generals.Of course after this series is done.It's brilliant

As a wise man once said: "twice the pride double the fall." I feel like they thaught they can grow forever like idiots

Apple's worth has increased so much since this video came out lol

For this episode in particular, but throughout the entire series in general, I’ve found the Bank of England’s inflation tool super helpful. It helps you understand the £31 million debt in 2023 would be £5 billion (with a B) and just jump in stock price from £360 to £550 would be a jump from £59k to £90k, which just makes you want to hit everyone involved even more!

I'm glad I watched this series prior to my own ventures into the Stock Market. It really enforces the "golden rule" of stocks, always understand how the money is made. If the means in which the company makes money is complicated, convuluted, or overstated, that presents an immense danger to the perceived value of the stock.

Great reaction and insight as always. Was just wondering if u were going to continue the Historia Civilis series for Caesar.

Was it Walpole?

This is such a great series!

I legit just finished the second video and was excited for the next one and then this popped up

I’m so excited to see your reaction. It’s so fun to see🥹😃

One note to the 'ban' to hold stock eg in congress. An investigation found that members of high level gov insitutions, if they have these stocks, beat the market by up to 30% in revenue. So it's likely there is something going on behind the scenes, this also is currently investigated.

The president, vice president, and all members of Congress are explicitly and specifically exempted from the blind trust statutes and regulatory mandates. 18 U.S.C. 202(c). They only have to sign a disclosure agreement legally. Some still do put assets in a blind trust for political goodwill, but it's in no way required.

this really does have soany parallel to the crash of the 30s and as series continues, you'll draw more and more similarities.

History has shown us what happens when there isn't even adequate enforced government regulation, and I read about that before I watched the applicable videos by Extra Credits about the Triangle Fire, trust busting, and the battle of Blair Mountain. We are lacking adequate regulation and enforcement for corporations today in my book.

Headed to my home state of Maryland! Make sure to pick up some crabs and old bay while you're here, always love the content!

So the series (as well as politicians at the time) emphasized the issuing of too many shares as the central problem with the South Sea Company. However, that's really not the case. In modern times, a corporation can issue as many shares as it states in it's charter, which it may later amend to authorize more shares with a shareholder vote. The main reason to have a shareholder vote on the number of authorized shares is actually to prevent the dilution of shareholder wealth. The actual problem is that management was taking shareholder investments to pay themselves (and bribes). So, even though capital was constantly being infused into the company, the company's assets were not increasing because management was just making off with the company's money. The modern regulatory agency that would prevent this is the Securities and Exchange Commission, which requires companies selling stock on the public market to make financial disclosures. In the case of the South Sea Company, those disclosures would show (a) the company wasn't generating any revenue, but just selling stock, and (b) the company's money was being spent on paying management. The result would be the stock price tanking after the first quarter and everyone involved suing the pants off of management. Also, terminological bone to pick with EH on this series: "revenue" means money generated during the course of business (selling goods and services, making money from investments, etc.). Selling your own stock does not generate revenue. It is infuses capital.

I really recommend you the video "How one man stole a central bank" by Sidequest. It has a similar ring to this story.

Yes there were people who called it out and gave the right value of the company. Unfortunately some people were fooled, not all got bitten. Amazing how many survived this financial event.

Great video

Yay part 3

Did you bring your chair with you on your trip just for continuity?!?!?! Jfc that’s dedication to the channel. Props good sir

Great goal in the Baggies game today

Ooooooh....first Fredericksburg and now Antietam...you're back in my neck of the woods.

I want to suggest reacting to the Ned Kelly series by extra credits, it’s really interesting. Great videos btw

I wonder how many investors made serious money by selling at the right time and not reinvesting.

Nice video

About the lending people money to buy your stock, there is a parallel there to the 1929 Wall Street Crash. Then it was buying stocks on margin, i.e. banks would lend you money to buy stock using some of your own money and some of the borrowed money. Which pumped massive amounts of (borrowed) money into stocks, blowing up the bubble further. When the crash came, people would not just lose their invested money but even be left with debt for the stocks bought on margin.

11:49 it is like a pyramid scheme. I remember in the context of Enron a quote that went along the lines of " if you cannot explain your business model in one sentence or less, it's criminal activity."

Chris really went to travel and left us on a cliffhanger… jk enjoy Antietam! Looking forward to the next part of this story and original content! (:

I would like to request for the next series: more Bazbattles or extra credits, whatever video You like.

Can't wait to see your reaction to the next parts. SPOILER ALERT Consequences for Blunt are nowhere near as severe as one would've thought. In the end he's still better off than when he began.

This is like an English Wolf of Wall Street story.

Next time, the running gag begins.

You might be interested in EH's series on the history of paper money.

It was Walpole

Man, this guy makes Madoff look like a kindergarten but oh man, get ready for the rollercoaster ride to come

7:10 it even better then that, Blunt is getting paid by the people he is bribing as those members of parliament still have to pay the principle amount.

"Is there no one who understands what's going on here". Yes. It was Walpole.

I love how his plan became loan money to people to buy his own stock. Hilariously genuis!!! :D

Oh that look on your face. Priceless (so to speak)

Congress members actually can hold stock and this does influence the way many of them vote. It's a big problem on both sides of the aisle.

If they had stopped before things got TOO bad and instead invested the profits into other ventures, they could have set up their descendants to be the richest people in the world for generations to come.

Ohh watch till the end of the last video it has something extra

The South Sea Bubble: The Original Ponzi Scheme!

Where’s the final episode??!!

one thing to keep in mind here: there was a real NEED for stock investments at the time. Particularly for women (which were allowed to invest in stocks - but not in land). Think about it: Let's say you are a widow of the landed gentry. Your husband has died and all the land he owned has gone to some nephew of his (because women weren't allowed to own land). But you did inherit some money with which to support your life. How do you invest that money? you can't invest it in land (see above). But you are allowed to invest it in goverment bonds and in company shares. So there is a real need for company shares to invest in. But there are hardly any respectable publcly traded companies yet. The East India Company and the Hudson Bay Company were two of the few. And everyone knew what a good investments they turned out to be. So is it really that surprising that a company which promises to do the same kind of trading businesses as these two successful companies but in would be viewed as a great investment opportunity? (In the novel "Pride and Prejudice" this financial predicament of women is a major plot point. A man has 5 daughters but no son. He can afford his family a comfortable life style. But they all dread the day when he dies - because almost all his wealth will go to some distant male relative. He only has discretion over that part of his wealth which is not held in land - and that's not a lot).

Great Britain means business

The government should regulate as little as possible. The corollary being that the government should regulate as much as necessary.

A small correction, Presidents in the US do not HAVE to surrender their businesses or investments into a blind trust, Trump famously refused to do so upon taking office, its just like releasing ones tax information when running for the office, it is not necessary, but it is an established tradition and most Presidents/candidates does it.

This is literally a Ponzi Scheme a century and a half before Ponzi was born!

The Bank of England has a fantastic website where you can use its inflation calculator to work out what X amount in a year gone by would be today going all the way back to 1209!. So that £31mil would be worth £4.8BILLION in 2021s money, or about $6bil Adjusted for inflation the economy was ~£10bil in today's money, so essentially the debt was ~50% of the economy. That would be like if the US today, which has an economy of about $20 trillion, had debt of $10 trillion!

I would love to see the reaction to Epic History 1848 Year of Revolutions it was a great video😅

These guys would get on well with our (UK) current government.

To answer the question of “was anyone able to see what was coming?” The answer is simple: anyone who could was either in the minority or bribed with piles of money.

Definitely need a government to regulate businesses like this that are backed by the government. Wait.

Seems a little too circular right off the bat o.O

5:25 Regulations don't matter dirt if the ones in charge of it are corrupt, which due to the nature of the position they most always are.

Hope you're enjoying the West Brom/Watford game tonight! ⚽️

Will you be reacting to Epic History’s Napoleon series anytime soon?

Ill gotten gain never lasts

The issue of the conflict of interests from a president owning stocks is the kind of issue that is holding south america poor. I'll give you a quick example from Uruguay's healthcare reform. If "free" public healthcare is overcrowded and the wait time for your procedure exceeds a certain threshold, you're redirected to a private health institution and the state makes a direct transfer to the private health institution. What's the profession of the president leading the reform: oncologist doctor, owner of cancer treatment private institutions with the best available treatments at very expensive rates. Now the president is having cancer patientes without money treated by his expensive clinics and getting cold cash from the state's reserves. I'm not complaining about paying my taxes to help a poor person struggling with cancer, but the fact that the former president made a fortune out of it is morally questionable at least

Not very topic related but there’s a new Netflix docu-series on DB cooper if you’re interested

If your at sharpsburg md, then you need to go to this corner ice cream shop called "nutters". It is by far the best ice cream (non ben and Jerry's) I've had. When I was at shepherd university it was the place of celebration after midterms.

Unfortunately, congresspeople in the US can still trade stocks. Which they definitely shouldn’t

"There's only so much money to go around!" A lesson I really, *really* wish our modern stock market would learn, as it seems the expectation is, quite literally, infinite profitability. It's just not possible.

Something extremely similar is happening right now with China’s housing market. It’s a massive bubble that will make the 2008 Recession in America seem small by comparison.

While all this is going on, the same thing is happening in France involving Louisiana. Edit: Correction it was hundred years later now that I think about it.

Would this be similar to the GameStop thing? I can’t say I’m super knowledgeable about finances

Wait i thougth that this was story about rise and fall of Bitcoin 🤣

Did South Sea even actually go to sea?

Would you be willing to react to the video series The Haitian Revolution by Extra History? I think that you would be interested in the content.

How would regulations have helped? It was people IN the government that were involved. The only thing that would have prevented it was stopping the government from accumulating that kind of debt.

It's important to remember that it was government regulation that allowed this scheme to take place. It never could have grown to the levels it did without government regulation and promotion

Is it too late to invest in the South Sea Company?

A good general rule of going after a "hot" investment is that if you hear folks talking about the huge amount of money they made, you're already too late.

Apple has reached over 1 trillion dollar in valuation these days.

The 1st pyramid scheme. Were they doing any trading?

I hesitate to ask because it is political. But isn't the whole Presidential blind trust thing more of a tradition/act of good faith and not necessarily required?

Yep turns out having value dependent stock itself create value for itself is bad. It is a pyramid scheme...BTdubs if a pyramid scheme is such for having circular returns, then why didn't we call them sphere schemes? XD

Your tongue is red!