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Briefly describe the South Sea Company financial modus and operandi. Why was it financially unsound?
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Briefly describe the South Sea Company financial modus and operandi. Why was it financially unsound? On 10th September 1711 the Chancellor at the time, Robert Harley alongside John Blunt, formed the South Sea Company. His aim was to offer government's creditors to exchange money they were owed for shares in the new company. By doing so, he "intended to rival the Bank of England and the East India Company"1. The structure and operations of the company will now be explained and by doing so, it will become apparent why it was financially unsound. This company was set up to trade with the rest of the world, in particular, South America. Furthermore, Harley also wanted to use it to create peace with France and Spain. In fact, in March 1713 a peace deal was signed with Utrecht which allowed the Company to set up seven ports in the South Seas. By, 1714 trading...
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