Chapter 122: Capital’s Game (Up)
Chapter 122 – The Game of Capital (Up)
Lionel smiled as he sat on the sofa and inquired, “I wonder if you have some basic knowledge of the stock and bond markets?”
Arthur recalled that when he first arrived in London from the Yorkshire countryside, his first stop was straight to the London Stock Exchange, the world’s financial center in the 19th century.
Only his luck wasn’t so good, or maybe he was just too lucky, and he witnessed the second major collapse of the London Stock Exchange since its formation, and its previous collapse had to be traced back to the South Sea Company Bubble case of 1720 which took place in the previous century.
In 1720, the South Sea Company, which monopolized the trade of British colonies in South America with Spain, relied on a variety of dazzling investment and trade plans as well as a variety of half-truths and half-false so-called insider information, which pushed the trading enthusiasm of the London Stock Exchange up continuously.
When the directors of the South Sea Company realized that it was much easier to earn money from the stock market than to sell black slaves, they felt as if they had opened the door to a new world.
From April 1720 onwards, the South Sea Company began to release various plans to the public and trumpeted the company’s great blueprints in the newspapers.
According to the statistics after the fact, the board of directors of the South Sea Company announced 11 fishery plans, 10 insurance plans one after another during that time, as well as 2 international exchange companies that would be set up in the future, 12 American colonial or trading companies, 20 real estate and construction companies, 8 companies specializing in the supply of London’s coal, livestock, fodder, and the construction of roads, bridges, and canals, 12 silk, linen, hemp, mulberry, and other textile companies, 15 mining companies, as well as more than 60 inexplicable enterprises, and had the gall to announce that the South Sea Company would pay a 60% dividend on Christmas Day.
Yet it was precisely these visions, which a normal person would have known to be implausible, that fooled the shrewdest minds in the whole of Great Britain.
In the eyes of those investors, the South Sea Company had been formed to create a giant monopoly for the purpose of developing trade in the South Atlantic, and to that end, it had taken on about 10 million pounds of liquid public debt from the British government.
This was a giant company with the backing of the British government, so how could they deceive investors with their promises?
Thus, the investors who were mesmerized by the huge interests completely lost their rationality and judgment ability, and they frantically snapped up the shares of the company, which eventually made the share price of the South Sea Company rapidly rise from 120 pounds to 1,020 pounds in three months.
However, it was not long before the myth of the wealth of the South Sea Company came to an end.
At the end of July, companies began to take Southsea to court, accusing them of serious debt default.
And other companies with the South China Sea company debt relationship also gradually found out that something is wrong, when everyone passes the gas between each other, they finally realized, fuck, the original gang of grandchildren in the game of empty glove white wolf.
In order to stop the loss in time, they finally decided to write a letter to the Parliament, and asked the British Ministry of Finance and the Supreme Court to intervene in the auditing and investigation of the accounts of the South Sea Company.
As soon as the news of the South Sea Company’s suspected falsification of accounts came out, from the opening of the London Stock Exchange on August 25, 1720, the South Sea Company’s share price plummeted all the way to 190 pounds in just one month’s time, their stock price fell from the highest level of 1,020 pounds.
Countless investors went bankrupt as a result, and almost overnight the roofs of London were filled with South Sea Company shareholders.
The South Sea Company fraud also directly caused political unrest in London.
King George I issued several Orders in Council demanding a thorough investigation of the South Sea Company.
Parliament arrested all the members of the South Sea Company’s board of directors and confiscated all their properties almost immediately, and imprisoned George Carswell, the South Sea Company’s director who was directly responsible, in the Tower of London, and then urgently passed the Bubble Company Suppression Act, and set up a 13-member special committee to investigate the South Sea Company’s bankruptcy.
Regardless, the South Sea Company bankruptcy still caused huge losses of millions of pounds and left the London Stock Exchange in a permanent depression for decades to come.
One of its few positive effects may have been the birth of Britain’s first substantive Prime Minister, Robert Walpole, then First Lord of the Treasury, who, thanks to his handling of the South Sea Company case, secured the head of the Cabinet and established the British tradition of the First Lord of the Treasury leading the Cabinet.
Arthur’s encounter was the Bankruptcy Crisis of 1825-1826.
The cause of this crisis is very simple, and even the South Sea Company case from the essence of no difference.
To put it plainly, before the enactment of the Banking Act of 1826, all banks established in England were free to issue bank notes.
The so-called bank notes were in fact pounds sterling, and any depositor could go to the bank with the face value of the bank notes and ask to exchange them for the equivalent in gold.
However, in the 19th century, the amount of gold mining is far less than the increase in the amount of wealth in Britain, so this also led directly to the large and small banks in order to seize the bank occupancy, in the absence of sufficient reserves of gold, the indiscriminate printing of banknotes occurred repeatedly.
And the consequences of indiscriminate printing of empty banknotes is also obvious, when the customer took bundles of bank notes before going to ask to retrieve the gold, the bank teller can only and his wide-eyed stare.
And this kind of news out, but also naturally triggered the British people’s run frenzy, everyone is scrambling to take the banknotes to ask the bank to cash as soon as possible, the threshold of the major banks are going to be stepped on by them.
In the face of this situation, 70 banks with insufficient gold reserves had to announce that they would stop making payments.
The government also had to urgently order the deployment of military police to maintain order everywhere, to prevent riots from occurring everywhere. In order to fill this hole, Great Britain’s first big bank Bank of England had to call their own gold reserves to help them fill the hole, but not help okay, this help, the results of the Bank of England almost put themselves into.
In the emergency, the Bank of England’s partners are close to directly to Nathan Rothschild and Alexander Baring, the two master of a large number of gold London big bankers on their knees.
At the time of the crisis, the Rothschild Bank and the Bank of Bahrain in Lord Liverpool, the Duke of Wellington and Sir Peel and other Tory bigwigs to persuade, finally decided to urgently deploy most of the gold reserves in their possession to hand over to the Bank of England.
As the Duke of Wellington’s money bag of the Rothschild family in order to show loyalty to the Tory party, but also used them in Paris, Naples, Frankfurt and Vienna, four major branches of almost all the gold reserves, but also through their own relations from the hands of the Russians spent a large price to get a part of the gold reserves, which is only tightly put together the value of 11 million pounds of gold barely for the Bank of England to plug the holes.
But this crisis, although the wobbly through, but afterwards, there are still as many as 70 banks announced from the London Stock Exchange bankruptcy delisting.
In this way, the London Stock Exchange, which had hardly come out from the shadow of the South Sea Company case, fell into the doldrums again.
Arthur at that time is a poor boy just down from the countryside, but even so, he looked at the London Stock Exchange, a capitalist bigwigs such as the expression of death, still can not help but shout in the heart of the great joy.
Tens of millions of pounds a minute, although it is losing money, but still enjoyable.
If the loss is not his, it would be even more enjoyable.
Arthur picked up his teacup, pondered for a while, and said with a sparing hand, “I do have some doubts about stock trading.”
The words weren’t long, but they were enough for Lionel to understand Arthur’s euphemistic feelings of resistance.
Lionel smiled and said, “It’s nothing, if you don’t intend to invest in stocks, I still have a lot of options for you to choose from. Let’s do it this way, I will first list the advantages and disadvantages of several asset configurations for you, real estate, bonds, stocks, in the end which one is more suitable for you, you can judge for yourself.
And stocks are actually not as scary as the public of Great Britain would like to think, according to our analytical judgment, the London Stock Exchange is at its lowest point in recent years, and may rebound upwards at any time, and it really won’t be any lower than this in the future.”
Arthur couldn’t help but frown slightly when he heard this.
How did he hear this, he felt that it sounded familiar.
The Red Devil on the side saw that he was still hesitating and couldn’t help but urge him, “Arthur, don’t hesitate! Mammon is beckoning you, take the plunge, give me a hard plunge!”
Hearing this, Arthur finally understood where the keyword was.
His mind could not help but rise a plain doubt – the leeks of the 19th century and the 21st century than, in the end, which crop is greener?
But Lionel was so enthusiastic that he came to be slightly interested.
He asked, “So what direction do you think is better to invest in at this time?”
Lionel saw Arthur finally loosen his tongue, the smile on his face became even more intense as he opened his mouth and returned.
“You can rest assured that you are not the first client to use Rothschild’s private financial services. Although we usually do not divulge our clients’ private information, but given that this matter is not a secret anymore, I can tell you openly: the Duke of Wellington is also one of our key clients, and your superior, the Minister of the Interior, Sir Peel, likewise has a portion of his funds being taken care of by us.”
When Lionel said this, Arthur was not yet moved, but Dumas could not stand it.
He asked, “Then I wonder just how much personal money is required for the private financial services of the Rothschild Bank?”
Lionel smiled and said, “I think it depends largely on whether or not a good trading relationship exists between us and our clients, and personal funds will always be considered secondarily by us. But if you are a friend of Mr. Hastings, I think £1000 would be sufficient.”
Dumas sniffed and took stock, the fat Frenchman gritted his teeth and spoke, “You wait, I’ll try.”
Hearing this, Lionel couldn’t help but smile and ask towards Arthur, “So, Mr. Hastings, may I start the introduction?”
Arthur nodded and said, “Of course, after you.”
Three shifts of highs and lows tonight, got a little irritated writing this chapter, readers wait for me
(End of chapter)