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

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#History #reaction

[@forgottenfamily]

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.

[@martingriff101]

Exactly an early Ponzi Scheme, Pyramid Scheme

[@Souledex]

The one that’s slightly more like modern market collapses is the Dutch tulips bubble.

[@jkjkrandom]

@@Souledex that one was only kind of a bubble tho

[@moviefan005]

@@Souledex and doubtful if it is serious as South Sea bubble.

[@Souledex]

@@moviefan005 It was way bigger than you are thinking if you know nothing about it. The only less important thing about it was it didn't have a Walpole becoming prime minister out of it. But it massively effected the wars and economics around it too. It really was the Crypto/NFT craze of it's era, except bigger.

[@YukoValis]

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

[@anderskorsback4104]

Looking at his modus operandi, I wouldn't be surprised if he instead issued sword options, sword futures and other complex sword derivatives.

[@bthsr7113]

@@anderskorsback4104 Given time and more attention span, and I can see him ruining the company's viable model with crazy shceming.

[@Great_Olaf5]

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.

[@notzaran5977]

what? I have to check it out then

[@yochitoranaga]

@@notzaran5977 it started a tradition of pointing out to something related to Walpole on every series' "lies" after that for some time.. I think that stopped as Dan left his narrator role of the seires (I haven't heard a "Walpole" segment in a while, but the dude or his descendants had a lot of surprising impacts around the world.)

[@victornunes9845]

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.

[@macaylacayton2915]

very true

[@Donut-fr7is]

very true

[@connorlee9007]

Lol at listing Marx and Engels as though either was slightly intelligent

[@greatsageequaltoheaven8115]

@@connorlee9007 Much more than Adam Smith imao.

[@fraelikkriil830]

@@connorlee9007 ignoring their influence on economics just because their ultimate conclusions offend your delicate sensibilities is not a good look friend

[@barbaros99]

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

[@jameskarg3240]

And none to be transparent on it either

[@papageno88]

As the most recent ex president let us know.

[@stephenjenkins7971]

Indeed, that's only for Congress.

[@Mikcha212]

@@papageno88 but he did still lose money instead of becoming richer like every other president.

[@YukoValis]

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.

[@timothystamm3200]

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.

[@wikiuser92]

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.

[@Mikebumpful]

Having read quite a bit of Eastern literature lately, I've started to get a bit annoyed at how we Westerners borrow and use the term “karma” from Hinduism and Buddhism. “Karma” does NOT mean that you will “get what you deserve” within your lifetime. Rather the opposite, the term is used to justify why the world can often seem unfair. It's a lot like the Christian idom “God works in mysterious ways”!

[@wikiuser92]

@@Mikebumpful Maybe. But Karma Houdini is a real name of a trope that refers to a bad guy not getting punished at all or enough.

[@Mikebumpful]

@@wikiuser92 Yes, I'm aware of the trope. Sorry for the tangent!

[@wikiuser92]

@@Mikebumpful Gotcha.

[@mr.watson3237]

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

[@kevin9863]

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."

[@Swarm66]

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.

[@331coolguy]

Wow , just wow.

[@prestonjones1653]

Jeff Bezos is hyperventilating somewhere

[@bfure1]

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

[@lieutenantpliskin]

Lmfao always worth it lmao

[@Briosification]

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.

[@joshuahunt3032]

“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

[@johnmichaelchance1151]

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.

[@DonJuan911]

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

[@dinamosflams]

the concept of stock market was just born the previous century and capitalism as a whole in practice was just a couple decades old at rhis point. they probably thought it was magic. but unfortunately for them, no, no matter how complicated one makes the finantial system it is still not magic and money just has as much vallues as it is vallue for it be traded for, in goods, work and services.

[@bthsr7113]

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.

[@Bigdog5400]

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

[@GageEakins]

Yeah though even that conversation is a bit difficult to do when you are on time scales that large. Mainly, the currency at that time was not a fiat currency and was instead on the gold or silver standard, I don't quite remember what Britain was using at the time. This throws all currencies conversations by inflation off.

[@renatotobar8012]

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

[@Budgettechbro]

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

[@abdulahhotic1957]

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

[@adamrousek2200]

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

[@jeffredfern3744]

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.

[@GageEakins]

Indeed. Presidents have been doing it since Raegan I believe but Donald Trump showed how flimsy norms can be. Also members of Congress rarely do so and a law preventing Congress from trading stock is stalled in the House and would likely never survive a filibuster in the Senate.

[@amyparnell3325]

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!

[@matthewy2j]

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.

[@bthsr7113]

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.

[@DreckbobBratpfanne]

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.

[@prestonjones1653]

I can only imagine that the results of those investigations will wipe out any kind of insider trading and will do everything it can to expose corruption and bribery within the congress. /s

[@DreckbobBratpfanne]

@@prestonjones1653 Oh yeah absolutely. /s There was actually a new bill I heard off which tried to deal with it... By making the process of hiding such trades much easier. Surely that's gonna work out great.

[@papageno88]

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.

[@Ledbottom86]

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

[@rossjohnstone4689]

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

[@kokocrazy2590]

This is such a great series!

[@gunner38ED]

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

[@notzaran5977]

Was it Walpole?

[@Domesthenes]

It's ALWAYS Walpole.

[@goli8699]

It was Walpole

[@toniyami]

It's always Walpole

[@EC23331]

I believe it was Walpole?

[@someguyfromfinlandtj125]

Perhaps it was Walpole?

[@catherinewilkins2760]

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.

[@rashi8215]

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

[@dalemayfield6098]

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

[@sayainbeast6081]

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

[@anderskorsback4104]

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.

[@Kuronosa]

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

[@stegotops7415]

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!

[@David-fm6go]

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."

[@xMarble]

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

[@williamcross210]

Great goal in the Baggies game today

[@FSUFAN-gr2vp]

This is like an English Wolf of Wall Street story.

[@ShivamR34440]

Great video

[@Alexwav]

Yay part 3

[@SpottedHares]

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.

[@alejandrocarrillo5447]

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

[@TerminalSports45]

Next time, the running gag begins.

[@ridleycrouch]

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.

[@recklssabndon]

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

[@florianlipp5452]

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).

[@florianlipp5452]

And by the way: it's really fascinating how financially savvy all the women in Pride and Prejudice are. They all know the current interest rate for government bonds by heart and easily calculate in their head what annual income they would get from the interest on a certain amount of wealth. Clearly, they know this, because it is highly relevant to their lives: Either you marry a wealthy man. Or you must support yourself by the money you might inherit. And in that case, you better know how to calculate interest rates.

[@fenrirofink8039]

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

[@Oleksandr.Derkach]

It was Walpole

[@jacobcoady8852]

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

[@kolosmenus]

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.

[@Moardieb]

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.

[@ltpinecone]

The South Sea Bubble: The Original Ponzi Scheme!

[@katiemalone3632]

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

[@xjp1998]

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

[@ryantannar5301]

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.

[@chameleon9717]

Nice video

[@litostv1324]

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! (:

[@VloggingThroughHistory]

Sorry! The day I meant to record the last two episodes got away from me so I didnt do them yet.

[@ScotsmanDougal]

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

[@hobs1466]

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

[@bendi3768]

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

[@niceguyofgames9490]

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.

[@JABRIEL251]

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

[@marthdaeglin]

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

[@connorlee9007]

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!

[@marryof995]

The U.S. would be happy with that i think. Isn't the national debt around 30 trillion $ currently ?

[@connorlee9007]

@@marryof995 wait seriously? Blimey

[@GageEakins]

@@connorlee9007 Not in foreign investors, which is important. The national debit is about 28T. But between the Federal Reserve, the US's national bank, and other domestic public institutions, 75% of the debt is held domestically. So the real debt is about 8T or so held in the hands of foreign investors. Also the US as the world reserve currency, can hold a lot more debt than a normal country can.

[@marryof995]

@@GageEakins Cheers for the explanation, this is not my forte. Just saw the number in the comment and thought i remebered that the national debt for the U.S. was much higher actually.

[@GageEakins]

@@marryof995 Don't worry about it. There is a lot of hemming and hawing about the debt when it isn't really a problem.

[@badcornflakes6374]

Great Britain means business

[@eknapp49]

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

[@willster8759]

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

[@dustdreamer673]

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

[@isthatakingfisher2931]

Where’s the final episode??!!

[@Conjuringvariety]

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

[@vernonn_]

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

[@TheFrugalVideoGamer]

"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.

[@crimsonfucker4167]

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.

[@TheMasonK]

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.

[@jacobnugent8159]

Ill gotten gain never lasts

[@maximilianbeyer5642]

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

[@David-fm6go]

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.

[@gonnaenodaethat6198]

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

[@drewpamon]

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

[@TheArtistKnownAsNooblet]

Okay so first off 1700's England was not well regulated so... no. I mean they still have a proper king at this point and a country can't be well regulated and have a person with absolute control over it. Also the problem here is government corporate cooperation not regulation after all what caused the problem was consolidating the national debt with a corporation instead of the bank of England. Which while not quite a public entity, as the state didn't really represent the people it governed over at this point, would have been have been the better less corrupt decision. The shutting down of other publicly traded companies was really the only example of misuse of regulations and that only happened after the value of the company had ballooned so much the entire economy of England could start failing to support it

[@bengalspro8965]

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

[@oyundarigalsandorj310]

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

[@karmenfriesen2681]

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

[@DDlambchop43]

well, I'd say it's close.

[@jameskelly131]

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.

[@rreif5934]

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.

[@GageEakins]

The courts may have helped but the problem was at this time, the monarchy actually still had so much power that laws didn't really matter to them unless they caused pain for other powerful people. So at this time in History, likely nothing would have changed what happened unless someone had the foresight to realize what this whole thing would cause. With our modern judicial review, laws do stop things like this from occurring. The problem is that companies have gotten a lot more clever in how they can stretch those laws and the laws we do have have been weakened over time.

[@EmpressMermaid]

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.

[@benjaminlanham9454]

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.

[@VloggingThroughHistory]

Yep my air BnB is very close to Nutters. Will definitely check it out when I get into town tomorrow.

[@timmyturner327]

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

[@tabathacarruthers5122]

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

[@zachknox23]

Did South Sea even actually go to sea?

[@LightxHeaven]

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

[@dgriffinctc3834]

You say "this is why some regulations are needed" but it's not a good example at all. Government involvement is the ONLY reason this bubble rose. In general, government is behind nearly every bubble in history. South Sea was only able to inflate based on the government playing shell games with its own debt that could not happen in regular business.

[@gonnaenodaethat6198]

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

[@dr.jex___]

The Egyptians weren't the only ones good at building pyramids eh?

[@Arricide]

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