palaces, and refused to let them come back to live under the same roof with him. He gave them leave to see the three princesses when they liked, but he refused to part with them, and the Ministers conveniently ignored the payment of the Prince's debts, which indeed were not settled until he came to the throne. All that the Prince and Princess regained were the royal guards and the honours paid officially to the Prince and Princess of Wales, the leave to come to court when they wished, and permission to retain the members of their household, which at one time the King had threatened to discharge en bloc. But the great gain to the Government, and to the House of Hanover, was that a formal notification of the reconciliation was sent to foreign courts, and a domestic quarrel, which had become a public scandal, and threatened to become a public danger, was officially at an end.

CHAPTER X.

THE SOUTH SEA BUBBLE.

1720.

IN June, soon after the reconciliation, the King, attended by Stanhope, set out for Hanover. He had intended to make a longer stay than usual, for everything appeared prosperous and peaceful when he left England. The Ministry was in the plenitude of its power, the Whigs were reconciled, the wound in the Royal Family was healed, or at least skinned over, and the Jacobites were in despair. But this proved to be merely the calm before the storm. a few months the storm burst with unprecedented violence, and the King's visit was cut short by an urgent summons from the Government, who, like the nation, were plunged into panic and dismay by the collapse of the South Sea Bubble.

In

The South Sea Bubble was one of the most glittering bubbles that ever dazzled the eyes of speculators. The South Sea Company had been established by Harley, Lord Oxford, in 1711, to relieve taxation. The floating debts at that time amounted to nearly ten millions, and the Lord Treasurer wished to establish a fund to pay off that sum. The interest was secured by making permanent the duties on wine, vinegar, tobacco, and certain other commodities; and creditors were attracted by the promise of a monopoly of trade with the Spanish coasts of America. This scheme was regarded by friends

of the Government as a masterpiece of finance, and it was sanctioned both by Royal Charter and Act of Parliament. The leading merchants thought highly of the scheme, and the nation saw in it an El Dorado. People recalled the discoveries of Drake and Raleigh, and spoke of the Spanish coasts of America as though they were strewn with gold and gems. The Peace of Utrecht ought to have done something to destroy these illusions, for instead of England being granted free trade with the Spanish colonies in America, Spain only gave England the Asiento treaty, or contract for supplying negro slaves, the privilege of annually sending one ship of less than five hundred tons to the South Sea, and establishing certain factories. The first ship of the South Sea Company, the Royal Prince, did not sail until 1717, and the next year war broke out with Spain, and all British goods and vessels in Spanish ports were seized. Nevertheless, the South Sea Company flourished; its funds were high, and it was regarded as a sort of rival to the Bank of England.

At the close of 1719 Stanhope's Administration was anxious to buy up and diminish the irredeemable annuities granted in the last two reigns, and amounting to £800,000 per annum. Competing schemes to effect this were sent in by the South Sea Company and the Bank of England, and the two corporations tried to outbid one another; they went on increasing their offers until at last the South Sea Company offered the enormous sum of £7,500,000, which the Government accepted. The South Sea Company had the right of paying off the annuitants, who accepted South Sea stock in lieu of Government stock, and two-thirds of them agreed to the offer of eight and a quarter years' purchase. There seemed no shadow of doubt in any quarter that this was a most satisfactory solution

of the difficulty. The South Sea Company was everywhere regarded as prosperous.

Throughout the summer of this year, 1720, speculation was in the air. The example of John Law's Mississippi scheme in Paris had created a rage for it. Law was a Scottish adventurer, who had some years before established a bank in Paris, and afterwards proceeded to form a West Indian company, which was to have the sole privilege of trading with the Mississippi. It was at first an enormous success, and Law was one of the most courted men in Europe. "I have seen him come to court," says Voltaire, "followed humbly by dukes, by marshals and by bishops." He became so arrogant that he quarrelled with Lord Stair, the English ambassador, and the fact that Lord Stair was recalled shows how great was the financier's power. A great number of Frenchmen amassed large fortunes, and Law's office in the Rue Quincampoix was thronged from daybreak to night with enormous crowds. One little hunchback in the street was said to have earned no less than 50,000 francs by allowing eager speculators to use his hump as their desk!

As soon as the South Sea Bill had received the royal assent in Parliament, the South Sea Company opened large subscriptions; which were filled up directly. For no reason whatever, its trade, which did not exist, was regarded as a certain road to fortune. The whole of London went mad on the South Sea, and in August the stock, which had been quoted at 130 in the winter, rose to 1,000. Third and fourth subscriptions were opened, the directors pledging themselves that, after Christmas, their dividends should not be less than 50 per cent. Nothing was talked of but the South Sea, and it was gratefully remembered that Oxford, the fallen Minister, had started it. “You will remember when the South Sea was said to

be Lord Oxford's bride," wrote the Duchess of Ormonde to Swift. "Now the King has adopted it and calls it his beloved child, though perhaps you may say, that if he loves it no better than his son, it may not be saying much."1

If operations had been confined to the South Sea Company ruin might have been averted, or at least postponed, but the town was seized with the lust for speculation. A variety of other bubbles were started simultaneously, and so great was the infatuation that they were seized upon by an eager public. To give the Government its due, it had striven to prohibit such undertakings, describing them in a proclamation as "mischievous and dangerous". But the proclamation was not worth the paper it was written on, and immediately after the King's departure for Hanover, the Prince of Wales himself lent his name as governor of a Welsh copper company. "It is no use trying to persuade him," declared Walpole, whose own hands were far from clean, "that he will be attacked in Parliament, and the Prince of Wales's Bubble' will be cried in 'Change Alley." The Prince eventually withdrew, but not until the company was threatened with prosecution, and he had netted a profit of £40,000. The Duchess of Kendal and Lady Darlington were also deeply pledged, and with the examples of such exalted personages before them, the greed of the people at large cannot be wondered at. 'Change Alley repeated the scene in the Rue Quincampoix; it was crowded from morning to night, and so great was the throng that the clerks had to set up tables in the streets. The whole town seemed to turn into 'Change Alley. In the mad eagerness for speculation all barriers were broken down; Tories, Whigs and Jacobites, Roman

1 The Duchess of Ormonde to Swift, 18th August, 1720.