and continually checked by the convertibility of the paper into the precious metals, the mistake which the public commit when they lend themselves to any systems of credit which require the slightest assistance from authority; which connect, in the way of mutual assistance, the great commercial and banking concerns of individuals with the government of a country and the finances of a state; the probability there is that men will outstep the proper bounds even of justice and honesty, much more of general prudence, when they can make, as they suppose, money at pleasure. It is lessons of this sort that ought also to be drawn from these transactions, because they are lessons of still greater importance to commercial nations, and because all such communities are far more likely to be ignorant and transgress in these points, than in speculations and stockjobbing, not to say that the consequences are far more extensively and irretrievably

ruinous.

The infatuation that was exhibited through the whole of the transactions in which Law was concerned was by no means confined to the French nation. By a coincidence singular enough, the year 1720 was marked in our own history by the folly of what was called the South Sea Bubble. This subject I conceive also to be deserving of your consideration. I will make a few remarks, and leave it to your examination.

There is an account of it, as there is of the French Mississippi Scheme, in Anderson's History of Commerce; but you will better understand it by a reference to Coxe's History of Sir Robert Walpole. You may read his narrative and explanation in two chapters of the first volume, and then the letters from Mr. Thomas Broderick in his second volume. The observations of Stuart, in his Political Economy, must by all means be referred to, and then Cobbett's Parliamentary History will do more than supply the rest. There are a few observations in Sinclair's History of the Revenue which should be read.

The South Sea Company owed its origin to Harley. He incorporated the national creditors into a company; the debts due to them by the state became their stock, about ten millions; and he appropriated certain duties to the payment of their interest. He allured them into this arrangement by

giving them an exclusive trade to the South Sea or the coast of Spanish America.

The South Sea bubble was but a preposterous extension some years afterwards, and a sort of caricature of the scheme and bargain now described. The debts of the nation were in the year 1719 at a greater than the current interest of the time. Some of the debts were redeemable; that is, might be discharged by paying the principal; others were irredeemable, or could not be paid off without the consent of the creditors. The scheme, therefore, of the ministers and the company was this. (I will express myself not in technical, but in the most popular terms I can find.) That the company should have an exclusive trade to the South Sea, and therefore be enabled to get rich, and to pay large dividends on their shares ; that the national creditor should be thus induced to change his security, give up his claim on the public, and with it buy one of the company's shares; the company was to pay a certain interest on their stock, besides the occasional profits on their shares, and the nation was to pay the company a certain sum to enable them to pay this interest and all expenses.

Of this arrangement the advantages to the nation were to be, that the whole debt, redeemable and irredeemable, was to be put into a new state-a redeemable state; that is, a state in which it might be at length paid off, and in the mean time, the interest paid was to be at a more easy rate than the original bargain admitted of.

Another advantage was to be this: the nation were to receive from the South Sea Company a douceur for allowing them to make this new bargain; more than seven millions, for instance, was to be received.

The original national creditor was to have his advantage in becoming a proprietor of the South Sea stock, and in sharing all the profits which were to result from their exclusive trade, the management of their concerns, &c.

It is more difficult to understand what was in the mean time to be the advantage of the company itself. It was of this nature:-Government was to pay them five per cent. for seven years at a time, when money was not worth so much, and when, therefore, the company could not be under the necessity of paying so much to their own creditors, the dif

ference would be so much positive gain. An allowance was to be made them for the management of the new stock, which, in consequence of the bargain, was now to be added to their old original stock; and finally, great profits were expected to arise from their exclusive trade. Such were to be the advantages of the company; but it must be observed that the stock of the company was itself expected to rise; and it did rise, so high, for instance, as to three hundred pounds per cent.; that is, a person was to give the company three hundred pounds money before he could be rated a proprietor of one hundred pounds in their books; that is, a holder of one hundred pounds stock.

A national creditor therefore brought his claim for three hundred pounds on the nation to the company, and was in return constituted the owner only of one hundred pounds of their stock; that is, the company accounted with him on the supposition of owing him only one hundred pounds; but in the mean time they accounted with the nation as having paid off, on the part of the nation, a debt to their creditors of three hundred pounds; the difference was to be their profit, a difference that depended on the rate at which the South Sea stock sold.

My hearers will now comprehend the manner in which the national creditor might give, in the progress of these transactions, not only his three hundred pounds (national debt) for one hundred pounds South Sea stock, but his one thousand pounds national debt for one hundred pound stock, if the stock ever rose, as in reality it did, to one thousand pounds per cent.; and will also see, that if the stock did not afterwards pay him the interest which his one thousand pounds before had done, how he might be more or less injured; and if the company's stock, for which he had paid his one thousand pounds, became worth little or nothing, how he might be entirely ruined, losing his national stock, and getting nothing in return. You will now also see what buying and selling might ensue, while the stock was varying, and how all the later holders, when the stock began to fall, would be the sufferers; and again, that if the original holders of the South Sea stock (the directors and others) sold out stock while it was rising, they, and afterwards even those they sold

to, might become rich; and if they made use of any arts or deception to raise the stock, for the purpose of selling it, such as promising a great dividend, &c. &c., they then cheated those to whom they sold their stock.

The next point to be considered is this; the manner in which the bargain was made with the company by the nation, and the terms agreed upon. The ministers originally intended to have given the South Sea company a good bargain; it had even been settled that particular persons were to be considered as holders of stock beforehand. The stock, it was foreseen, would soon rise, and the holders were to receive the difference on the sale of it. If the stock did not rise, the whole was to be considered as a nullity; and in this manner distinguished personages in the state were engaged to forward the scheme from the prospect of this probable advantage.

This was the first piece of iniquity, and indeed the most striking, that was afterwards proved.

But unfortunately it happened, that when the minister brought forward the plan in the House of Commons, having made his speech and been duly seconded, in the midst of a long pause, which he seems very unskilfully to have suffered to take place, Mr. Broderick rose, and most unexpectedly proposed that the nation should offer the scheme to the Bank of England as well as to the South Sea company, and have the benefit of the competition. The minister stood pale and puzzled, and it was found in vain to resist so equitable a proposition.

The result was that the two companies, the Bank and the South Sea, proceeded to bid against each other, and the South Sea company at last succeeded, by undertaking the scheme on terms most preposterously disadvantageous to themselves; disadvantageous to a degree that could not but cause the ruin of those who were ultimately to abide by them. The present is a very remarkable instance of the manner in which a competition may be sometimes carried to extremes. Sir Robert Walpole, who seems almost the only man left in possession of his understanding on this occasion, in vain remonstrated against the project, and declared the whole to be founded on mistake and delusion. Such proved to be the fact. The profits of the South Sea trade never enabled the

directors to pay such profits on the shares, that is, such dividends as were expected. The value of the shares at last fell almost to nothing.

But, in the mean time, the first and most obvious lesson that is afforded by these transactions is no doubt the excess to which the passions of avarice and hope may be carried, the extraordinary effects of sympathy on large bodies of mankind, the inaccessible blindness in which the understanding may be left when exposed to such powerful principles in our nature as these undoubtedly are. The whole scheme failed, because there neither was nor could be any trade to the South Sea, or to any sea, sufficient to pay adequate dividends on a stock purchased so dearly.

Among reasoners of a certain description, Swift and Mandeville, for instance, it is a very favourite fancy to throw mankind into two grand divisions, the knaves and the fools, on the right and on the left-themselves, no doubt, standing at a due distance in the middle. On this particular occasion, Sir Robert Walpole and a few others might have been not a little justified in some sweeping arrangement of the kind; and there are particulars appearing even on the face of history which may afford the most captivating entertainment to all such reasoners as I have mentioned, the scoffers and satirists of mankind, the insulters and deriders of our imperfect nature.

In Anderson's History of Commerce, and in Cobbett's Parliamentary History, may be seen a long list of schemes which were offered to the public by different projectors, some of them ridiculous enough, and forming altogether a striking specimen of the nature of the times. Look at them; they will entertain, and ought to instruct you. I will mention one of them. A proposal, after many others, at last appeared "for carrying on an undertaking of great advantage, but nobody to know what it was." The scheme was for half a million, and every subscriber, upon first paying two guineas, as a deposit, was to have one hundred pounds per annum for every one hundred pounds subscribed. It was declared that in a month the particulars were to be laid open, and the remainder of the subscription money was then to be paid in. A more complete specimen of impudence than this can scarcely be conceived.